Quote:
Originally Posted by onwebcam
You my friend are the one who is not getting it. What do you not understand about this "ractional-reserve banking permits the money supply to grow beyond the amount of the underlying reserves of base money originally created by the central bank"
How exactly are they going to grow the money supply if they aren't leveraging their reserves? Do you really think your local banks is backing up your house or car note with cash on hand?
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Okay, here is my very drunken explanation about the subject.
As stated in that wiki, the money amount grows as the deposits too are considered as money.
You deposit 100, bank lends 90 of it, keeps 10. So, your deposit + the loan is 190. There you have it, the amount of money has grown (x1,9 times) as both are considered as money.
I hope that's good enough for you as I can barely write anymore, seriously.