Fractional Reserve Banking --

 

 

The different forms of money in government money supply statistics arise from the practice of fractional-reserve banking. <b>Whenever a bank gives out a loan in a fractional-reserve banking system, a new sum of money is <u>created.</u></b> This new type of money is what makes up the non-M0 components in the M1-M3 statistics. In short, there are two types of money in a fractional-reserve banking system:

 

1. <b>central bank money</b> (physical currency, government money)
2. <b>commercial bank money</b> (money created through loans) - sometimes referred to as private money, or checkbook money

 

Reserves are deposits that banks have received but have not loaned out. In the USA, the Federal Reserve regulates the percentage that banks must keep in their reserves before they can make new loans. This percentage is called the minimum reserve. This means that if a person makes a deposit for $1000.00 and the bank reserve mandated by the FED is 10% then the bank must increase its reserves by $100.00 and is able to loan the remaining $900.00. The amount of money the banking system generates with each dollar of reserves is called the money multiplier, and is calculated as the reciprocal of the minimum reserve. For a reserve of 10% the money multiplier, followed by the infinite geometric series formula, is the reciprocal of 10%, which is 10.

 

 

 

Example: Bob has 10 US $100 bills which represents $1000 central bank money.  He then deposits it.  Since the minimum reserve is 10%, the bank will keep $100 in it's reserve, and the remaining $900 can be loaned.

 

When the bank loans the $900, $900 in commercial money has been created.  When that $900 loan is deposited, the bank will have $900 deposit of which $90 must be reserved and $810 can be loaned... and the process will go on until that $1000 becomes $10,000 ....

 

*poof*

 

Debt = money........ and inflation.

 

 

 

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Let's not forget, loans must be paid back -- at interest.

 

But there's only enough money in 'circulation' to cover existing debt -- not the interest it generates as more debt.... so there's never enough money in circulation to cover all debts and more money must be borrowed.... and so the cycle continues.

 

Debt, and inability to pay it are built into the system.

 

We are being scammed.

 

Worse yet, involuntary servitude, is slavery -- even if we're unaware.