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This is categorically not like fractional reserve. The whole point of fractional reserve is the bank can lend out a multiple of its deposits- hence fractional.
by Traster 6y ago
This is categorically not like fractional reserve. The whole point of fractional reserve is the bank can lend out a multiple of its deposits- hence fractional. In this situation no one is lending anything they don’t have.
This is just like the difference between GDP and money supply. GDP is the rate at which money is changing hands, which can be many multiples of the money supply for perfectly valid reasons. Similarly this situation did change the actual supply of stock it just increased the rate of movement.
- lupire 6y agoFraction is less than 1. Multiple is more than 1. You are describing negative fractonal reserve.
- Traster 6y agoI wouldn't have thought I would have to explain this on hacker news but if you're lending a multiple of the deposit than you have fractional reserve. (which is not the same thing as lending the actually number of shares you have ownership of)