Fractional Reserve Banking
BY Herschel Smith
11 hours, 35 minutes ago
Fractional reserve banking also happens when a bank loans money to another bank, and that bank loans it out in smaller chunks, and so on, until a given amount of money is loaned out so many times that it can’t be covered if it defaults. More money has been loaned out than exists in the bank, or the collective banks who have loaned it. To be specific, 10% is cash reserve, or it used to be.
But I’m getting ahead of myself.
James Wesley Rawles at Survival Blog has a very good discussion on fractional reserve banking and how it came to America. It’s worth you time to read it.
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