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You are correct. Fractional reserve banking is a myth . Banks do not lend out deposits. Deposits come from loans. Reserve requirements do exist but they do no l
by bubbleRefuge 12y ago
You are correct. Fractional reserve banking is a myth . Banks do not lend out deposits. Deposits come from loans. Reserve requirements do exist but they do no limit bank lending. Lending is only limited by demand for loans and capital requirements.
Here is a pretty good site which explains how the banking system actually operates in detail.
http://wfhummel.cnchost.com/ http://wfhummel.cnchost.com/
Its a disgrace you are being downvoted.
- jeffreyrogers 12y agoI didn't downvote, but the parent is conflating money with credit. Banks and other lenders create credit. Only the Fed creates money. When credit starts to contract and economic growth isn't strong enough to sustain increased creation of money you get a deleveraging, as we recently experienced. So yes, in one sense banks do create "money", but what you're calling money is actually credit.
- wycx 12y agoFurnish us with your definitions of money and credit
- bubbleRefuge 12y agoBanks create deposits. Deposits are denominated in the unit of account, the dollar.