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FalcoFog
Posted 4/15/2019 21:04 (#7441600 - in reply to #7441552)
Subject: RE: all I can say is WOW.......


Minnesota!
And that article does a good job of explaining fractional reserve banking. But nobody uses it today and it has not used it for a long time. I think Singapore or Hong Kong might still use fractional reserve banking but that would just about be it. You could not operate a modern large economy very well using that.

Our system is one where loans create deposits. Banks do not require reserves to lend. When a loan creates a deposit it is creating an asset and liability for itself at the same time and they net to zero. The loan also creates a capital requirement to protect the loan and a reserve requirement to protect the deposit, these are called closing costs.

I could recommend a ton of reading if you really want to learn or just watch these videos:

https://www.youtube.com/watch?v=G7-j3kDvB04

https://www.youtube.com/watch?v=j2HxCst025s
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