This is driving me crazy. I thought I understood what fractional reserve banking was, but now I am not so sure. Here’s how I thought it worked:
Joe deposits 100 ounces of gold in newly created Bank A. Bank A now has 100 ounces maximum available to loan out, although that would be reckless because Joe may want his gold. However I see nothing wrong with this as long as Joe understands that he may not get his gold immediately. He may have to wait until the bank loans are repaid.
According to this video the government allows Bank A to loan out MORE than 100 ounces of gold, using paper claims. This is obviously fraudulent since the bank does not HAVE the gold. It would be like selling parcels of land that does not exist in the hope that the purchaser will never actually discover that the land is phony. The video claims that this is fractional reserve banking.
I’m confused! If this is true then our banking system is even more screwed up than I thought. It’s bad enough to have paper claims falsely backed by gold, but now we have electronic claims falsely backed by paper currency which is itself worthless.
Watch these videos. They’re a lot better than that “Money and Debt” video.
Let’s assume that the bank lends out 90 ounces of gold to fund a project. Later, other people then deposit that 90 ounces at the same bank in their demand deposits. The bank lends out 81 ounces of gold to other people. Those people then return the money onto the bank, making it available to be lent out again. And so on. During this process, alot more than 100 ounces is “created”.
FRB (Fractional Reserve Banking) is any instance where a depository institution (one that claims to have something available on demand) for money holds less money than is required to fulfill all outstanding claims. They can lend out the money that’s been deposited or create new claims that cause their total claims to exceed money held on hand. It’s virtually the same thing.
ounces is created. None Some are out multiple just times lent
are created. just is ounces None multiple times lent Some out
are just are just is ounces is ounces None multiple None multiple ounces None
are created. just is ounces None multiple times lent Some out
ounces is created. None Some are out multiple just times lent
That’s how it’s meant to be. Fraud relies on obfuscation.
So the whole concept is flawed. Joe puts money in the bank and is led to believe that he can use the money whenever he wants. But the money has been lent out, so it’s not available on demand.
Well, it’s obvious that the dollar is a pure fiat currency - everything is paper claims.
That’s exactly what FRB is. And the amount of counterfeited titles is determined by the amount of corruption and intervention in the market.
It is. Under a gold standard the fraud was a bit more limited. Under a paper standard and central banking fraud is much more widespread. Just compare the value of the dollar prior to 1913 to the value of the dollar today.
