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Debt Relief – Insolvency – Bankruptcy Information » Insolvency » Fractional Reserve Banking — Essential Concepts: Saving Money, Borrowing Money & Systemic Flaws

Fractional Reserve Banking — Essential Concepts: Saving Money, Borrowing Money & Systemic Flaws


Children and teenagers, as well as adults, can quickly understand the concept of fractional reserve banking, with very little more that a basic arithmetic background. This 10 minute video walks step-by-step through fraction reserve banking process. The video details the making of a deposit, the creation of a checking account, the determination of how much money is available for lending, the decision of a borrower to commit to a loan, the loan creation process, the difference between high powered money or currency or M0, and easily spendable money including checkbook money and cash held outside banks normally known as M1. The video concludes with a look at how banks do not have enough cash to cover all of the accounts of the depositors, and how various issues with borrowers can put the banks into bankruptcy and insolvency. An extension of this video would include additional depositors, banks, and borrowers. For elementary school students, some of the steps of account creation can be consolidated. Additional extensions can look at a banking system as a whole, the need for interbank lending, and the purpose of a lender of last resort central bank.

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16 Responses to "Fractional Reserve Banking — Essential Concepts: Saving Money, Borrowing Money & Systemic Flaws"

  1. PositiveMoneyUK says:
    A biggest public campaign has started to end fractional reserve banking, look at the POSITIVE MONEY website and support the campaign …and spread the word.
  2. Francescaalejandro says:
    (continued) the economy is going good or bad you can invest accordingly, and become very very rich and very very powerful. Once you end up buying everything you no longer want 600 million dollar jet planes or $30,000 wine bottles. You want power. So you invest in politics to keep your ponzi scheme going. But meanwhile the companies and people that actually produce something, they get raided and disassemble if the banks so which. This is why fractional reserve banking should be illegal.
  3. Francescaalejandro says:
    This does not explain much. 1) The base money supply amounts to a mere 3% of total money in circulation. 2)This amount of money is insufficient to maintain the economy: There are people hungry, there are fruits on the trees, there are people willing to pick the fruit, but there is no money to carry out commerce. 3) The rest of the 97% of the money in circulation is controlled by decisions in private conference rooms. They can make the economy better or worse. If you know when
  4. oldereb38 says:
    a mathematical analysis of the fed, concluding the Ponzi scheme is destined to destroy the US economy is posted at link not permitted w synaptic sparks RIP OFF BY THE FEDERAL RESERVE message 192.
  5. teddybear35 says:
    great video
  6. LibertaerUeberAlles says:
    @newculture
    But to understand that, you have to un-learn the “history” you’ve learned. When you see the factual evidence of that period — e.g., key details concerning the so-called “holocaust” and allegations about “evil Nazis” — you’ll see that it’s mostly post-war propaganda posing as history.

    Or pre-war propaganda for that matter. To see how FDR deceived America into war, see Web for:

    “Franklin Roosevelt’s ‘Secret Map’ speech”

  7. LibertaerUeberAlles says:
    @newculture
    You’re welcome! The Reich was confronted by the same ‘internationalist’ and Marxist parasites as America was — and still is today.

    The Reich’s manufacturing-, production- and sovereignty-based economic concept competed for preeminence with the Anglo-Dutch piracy-, colonization- and ‘internationalist’ banking-based concept.

    Sadly, thanks to Roosevelt and his pro-Marxist banking cabal, America found itself on the wrong side of the conflict. Should’ve sided with Germany!

  8. newculture says:
    @fruitsofnews I may do some more extensive videos at some point. At the moment, I would recommend the “Money as Debt” and “Money as Debt II: Promises Unleashed”, which provide a lot of good info on money. Also, if you have time, “Khan Academy” has many, many good videos going step by step through banking, although Mr. Khan doesn’t necessarily look at all of the inherent flaws of the system, or inherent instabilities of money itself.
  9. newculture says:
    @LibertaerUeberAlles Thanks for the quote, that is a good one, and I had not seen it before. Germany is certainly an interesting country to keep an eye on as far as money and monetary policy is concerned.
  10. gogolando says:
    you are confused my friend. No one so far has been able to explain just what is going on.
  11. LibertaerUeberAlles says:
    WINSTON CHURCHILL
    “Germany’s unforgivable crime before the second world war,” Churchill said,” was her attempt to extricate her economic power from the world’s trading system and to create her own exchange mechanism which would deny world finance its opportunity to profit.” (Churchill to Lord Robert Boothby, quoted in the Foreword, 2nd Ed. Sydney Rogerson, ‘Propaganda in the Next War’ 2001, orig. 1938.)
  12. fruitsofnews says:
    please go ahead. I have watched all three. The one minute one was perfect and was a homerun. when i discovered the two other ones it was a wrap. I encourage and urge you to continue with your skill. For the sake of your 108 viewers so far. again: thank you.
  13. newculture says:
    Thank you, you might find the 5 minute version interesting as well, as it includes a couple more observations.

    I have taken photos of some of the scenarios as well, and plan on eventually making videos based on those.

  14. fruitsofnews says:
    very very very very well done. merci. I finally truly got it. This understanding is truly settled. Very well done.
  15. newculture says:
    If Mr. Shoe represents ALL the depositors at that bank… then they will practically never use more than $10 in cash… the bigger problem is that the bank has zero cash flow… and little possibility of buying any assets, or finding any more borrowers… with luck, the FDIC will save the day soon… if only the FDIC had any money left…
  16. switchgrassfuel says:
    hope shew doesn’t need his money any time soon.

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