

The Great Central Banking Deception - Ascendancy
http://www.glparchives.com/economics/great-central-bank-deception/

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i2pi
Yes. It's called fractional reserve banking. It isn't a secret conspiracy, nor
a deception <http://en.wikipedia.org/wiki/Fractional_reserve_banking> The
alternative is full reserve banking. To the best of my knowledge, there are no
full reserve banks.

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nhashem
>>It is now up to you to demand your deposit back and to challenge the
validity of your “signature” on any alleged bank “loan” agreement or check.

Great. Have fun stashing your cash under your mattress. Or maybe you'd rather
just have gold bars, but I hear those aren't as valuable as they used to be
these days[0].

This is nonsense. Fractional reserve banking[1] has existed for literally
centuries. Based on the concept that "not all depositors need their money at
the same time" and "most creditors pay back their loans," a bank can give out
loans in excess of the cash they have on hand.

Naturally, this isn't full-proof. Banks can make too many loans, and too many
of those loans go bad, and not actually have any money when depositors want
their money back. This possibility used to end up being self-fulfilling -- if
you thought your bank was at risk of not having enough money to repay your
deposits, then you'd immediately withdraw your money, and if everyone did
this, then they really would likely not have enough money to pay back your
deposits.

You'd have fractional reserve banking even if the currency was anchored to
some sort of asset like gold. I'd urge anyone to try and imagine a world where
banks were required to have 100% of what they loaned out backed in full by
deposits. Credit would be extremely tight. Almost any successful business --
internet startup or otherwise -- starts with some credit, and you'd basically
be throwing a huge roadblock into any brilliant but capital-intensive idea.
Did you invent an amazing prototype and now want to get a loan so you can
build a factory and crank out and sell your new invention? Well, guess you
have to wait until a bank has enough in deposits to loan out, of which they'll
probably charge you usurious interest rates, since they can't tolerate any
risk of eventual default because that could bring their below 100% of
deposits.

In lieu of requiring banks to cover 100% of loans with deposits, in the the US
we have things like FDIC insurance, and we _had_ laws like Glass-Steagall, to
minimize the chance of bank runs and bank defaults happening, and to mitigate
the impact when it does. I'm sure all the resident HN Paulbots are already
furiously pounding away at their keyboards ready to blast my naivete about
fiat currency, government manipulation, inflation, Ben Bernanke being the
spawn of Satan, Too Big to Fail, etc. To me, those are separate from the OP's
point, which attacks fractional reserve banking as some sort of Great Lie that
needs to be expunged.

[0] [http://krugman.blogs.nytimes.com/2013/05/20/dead-ingot-
bounc...](http://krugman.blogs.nytimes.com/2013/05/20/dead-ingot-bounce/)

[1] <http://en.wikipedia.org/wiki/Fractional_reserve_banking>

