Quote:
Originally Posted by aka123
No, fractional reserve doesn't mean that.
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Then what does it mean considering it says it right there in it's name "fractional reserve"
Fractional-reserve banking is the practice whereby a bank holds reserves (to satisfy demands for withdrawals) that are less than the amount of its customers' deposits. Reserves are held at the bank as currency, or as deposits in the bank's accounts at the central bank. Because bank deposits are usually considered money in their own right,
fractional-reserve banking permits the money supply to grow beyond the amount of the underlying reserves of base money originally created by the central bank.
http://en.wikipedia.org/wiki/Fractional_reserve_banking
If you take all of the cash you have and put it into the bank that bank gets to multiply that amount by a minumum of 10% and not only lend it to others but it actually lends your money back to you. When you sign a check or use a debit card in reality you are borrowing your money back. Your cash went into their reserves. It use to be set at 10x but since the crisis no one really knows what it is now considering so many were so overleveraged. How in the hell do you think they get to buy the largest building in town?