Fractional Reserve Banking

Fractional Reserve Banking?

Simple really and profitable if you can get into it.

Imagine you have a $100 bill and you march of to your favorite Banking institution and deposit it into you account. From that moment until you withdrawn some or all of it, that money is in your account for you to oogle over and have.

Well, according to our courts the bank now has possession of it, and can do as they please with it, all the while you have it in your account (really)

Now Banks are not know for swashbuckling adventure, So they would never foolishly offer that capital just to make a high return, unless they had some one insure their mistakes (FDIC) LOL

The FED or Federal Reserve System, mandates that the banks have some amount of that capital on hand, think “It’s a Wonderful Life” and Jimmy Stewart saying” Now Sam how much do you really need?” So you can withdraw dollar bills. On average 10% of their deposits , will be on hand (some more, some less). What happens to the other 90%? The bank get to do as they please. So they crack the whip and put it to work, by lending it . Lending it out to any and everybody they think can repay (or are mandated to lend to), the higher the risk of repayment the higher the rate.

So let me get this straight, the bank is charging interest on money they lent and that same money is still in my account? Yep

It gets better, If that loan($90) is to a person who banks with the same bank, and they deposit the money. The bank keeps 10%($9) on hand and lends the other 90%.($81) All the while giving credit to that person for the full deposit on the money that is still in Your account - WHEW. If this keeps going on you can take that measly $100 and turn it into $900 of lendable money for the bank. Or, what they could do is keep the $100 in the vault and just lend out $900 in one swift action, then receive interest payments on money that never existed. What a gig.

Is there a way to borrow money that is not made our of thin air legally and then pay interest on money from thin air? Yep More later….