How Does Fractional Reserve Banking Work?

What if I told you that the entire modern financial system functioned on an infinite money glitch where billions, no trillions of dollars were created out of thin air day after day and at any point the whole system could collapse?

This is how that system works.

[HighRisk_Clips]

This was a very good explanation sir 👏

I study fractional reserve banking for my work, and I can tell you all that this is true.

Money is debt.

What a Great video! 💯

[MUFCXI]

This was posted 5 months ago and SVB was just announced as being dead. This is scary…

[therealcnn]

“Effective March 26, 2020, the Board reduced reserve requirement ratios on all net transaction accounts to zero percent, eliminating reserve requirements for all depository institutions.”

This is terrifying!

[sgtjyf]

Actually, to loan out a significant portion of a deposit isn't what most banks do. What banks do is to quite literally create loans out of thin air, these loan are regarded as assets on their balance sheets. How much andf types loans they can create isn't limited by how much reserved they possess in the Fed/Central Bank. It's limited simply by regulation. For the largest banks in America, this would be the total capital ratio. Based on Basel III, this is set at 8% min.

I'm obviously simplifying this concept significantly and ignore scenarios where the loan could be used to pay another back, or in a case of a case loan - to be converted into paper currency. In those instances, the bank will need sufficient reserves to either pay the other bank or to convert a portion of their reserves in the bank to fiat currency. Even so, most of the time, banks simply borrow from other banks, dealers, funds, their own mothers to pay for it rather then from their own reserves, since it is cheaper.

[Danster]

It almost like focusing on the fractional reserve element hoodwinks people to not see the elephant in the room which is private entity's having the extreme privilege of money creation and receiving the interest payments on that newly created money which of course is the primary cause of inequality and poverty on a global scale.

[RicardaWindsheimer]

Banks are crumbling one after another as a result of the uncontrollable market.. Could there be any potential in the stock market for a boomer like me? I am working on an approximate estimate of $3M for retirement.

[twhelostl]

If at some point this creeps you out, look up Richard Werner. He has been around and knows World wide banking inside and out. Also look up a documentary "Princes of the Yen" based on a book he published about the BOJ after WWII ended. It is mind blowing stuff.

[SDscrch]

a house built on sand -- wait until it all comes tumbling down

[traviswells]

Your video will need to be updated, as of March 2020 Banks have not been required to hold any depositor's money. Lending the money to someone else that is borrow is kinda old school though. When they invest/gamble that money on the stock market etc..

[kylerrrr]

So the best banks ideally hold more cash and have strict loan requirements?

[kimgysen]

They make money through business yes, but they also take and manage risk and sometimes lose money. I don’t know why it’s a glitch. Inflation, the amount of money in circulation and interest rates are managed and monitored at governmental level by specialized institutions. Some banks have gone bankrupt as well.

[XBangkir_Indonesia]

❤Thanks You Brother for your Knowledge, Regards, From Indonesian XBangkir.

[dorianhowell]

Confused how is it 1900 in rotation instead of 900 in roation ?

[jaysant]

2:47 Sooo doesn’t the FDIC in a sense help make it a more fuller reserve system than we give it credit for?

[MainelyMoto]

They loan out 9x what they actually have, not $900 of $1000, but $900 of every $100. This would still be 10% on the books (which is generous, since it's much lower than that). If you deposit $100, they will loan out $900 for a loan, not $90. This allows them to grow more rapidly whereas $90/100 would always keep shrinking. This is what causes inflation, which is why inflation is higher when interest rates are lower. Lower rates=more borrowers=more artificially created money=inflation=Lower dollar value=increase in process to compensate. Inflation is not higher prices, but higher prices are just a result. Don't confuse them, people are told inflation and higher prices are synonymous so they can ignore the manipulation of our money supply with legitimate reasons for price increases based on market conditions. Supply/demand is not inflation.

Don't be fooled.

[SDscrch]

...ensuring bitcoin's ultimate mastery over fiat currency

[cheesescrust]

Nobody borrows money to go stick it into a savings account and pay more borrower’s interest vs interest on their deposit. The system is designed to incentivize spending in the economy

[ethanrtx]

Its not modern the system has been going on since banking was introduced

[sheeptards]

Printing money out of thin air and then charge you tax on it just genius

[LBonani]

AS Muslim i would say thanks a lot for this info