Slashdot is powered by your submissions, so send in your scoop

 



Forgot your password?
typodupeerror
Check out the new SourceForge HTML5 internet speed test! No Flash necessary and runs on all devices. ×

Comment Re:Oh god, another dingbat.. (Score 1) 2369

I suppose I was being a bit too simplistic. The 10 to 1 creation occurs throughout the banking system (see money creation, money multiplier - Wikipedia has a good article on fractional as well as full reserve banking).

At any rate going back to your example - you're incorrect. Lets set X = 100. So if you deposit $100 dollars in to a bank, the modern fractional reserve requirement is $10. Your argument is that the bank will thus keep $10 and loan out $90. What the bank CAN also do thanks to fiat currency and its bank charter is actually keep all $100 in reserve, and CREATE $500 and loan it out.

As Wikipedia notes generally the banks won't do this directly, but rather let it happen organically throughout the system. So the $90 loaned out in your example is redeposited in to another bank which keeps $9 and loans out another $81, etc. Thus expanding money 10 to 1.

I'm not opposed to letting banks loan out money I have on deposit with them, but it would be an investment like any other with RISK and REWARD. I could have some money as "demand" deposits (checking, short term savings) that indeed are not loan-able. However there are plenty of investment opportunities (stock market, bonds, etc) that I could CHOOSE to invest in if I wanted a return on my money.

Without inflation chasing us down I think a lot of people are quite happy to have some portion of their money "merely" safe.

Why do I care that I get 0.2% interest on my checking account when the bank loans it out at 6%?

Slashdot Top Deals

"And remember: Evil will always prevail, because Good is dumb." -- Spaceballs

Working...