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They also have enough money to write and influence the rules. It baffles my mind how fractional reserve banking is even legal. They just make up money out of
by bcheung 11y ago
They also have enough money to write and influence the rules. It baffles my mind how fractional reserve banking is even legal. They just make up money out of thin air (ex nihilo) and then loan it to somebody who has to pay it back with actual earned dollars plus interest. Seems like a criminal activity to me but not according to the law. Yet if some other person wants to loan someone money they don't have it's call counterfeiting or writing a bad check.
- mpyne 11y ago> It baffles my mind how fractional reserve banking is even legal. Why? You couldn't let out loans as a bank at all if you had to maintain 100% reserves. Plus how would you possibly enforce that? I can't lend my brother $100 with the promise to pay it back now? Nor do they "make up" money. They have the money when they lend it out, it comes from the "fractional reserve" that they are required to have, or cash assets above and beyond that. Likewise I could personally loan out money up to the amount of money I have, even with fractional banking, but I couldn't loan out money up to my entire net worth, as it's not all liquid.