How can banks be expected to cover the money created by the fractional reserve banking practices? and 2011 World Bank / IMF Spring Meetings: Development Committee Meeting

How can banks be expected to cover the money created by the fractional reserve banking practices?

Lets say I deposit $ 100 dollars and the bank holds 10% as reserves and loans out the $ 90 to someone else. Then the borrower of that $ 90 puts the money into another bank couldn't the second bank loan out money based on that deposit? If so then this seems like an unsustainable cycle of money creation based off a single deposit. If we multiply that out it is mind boggling how much money can be created by fractional reserve banking.


bank best answer:

Answer by Steve B
I'm happy you understand the farce that is Fractional Reserve Banking.

They can do it because of

A. The Federal Reserve
B. The FDIC.

To go into depth would take a lot of time. You can read up on stuff like this at places like Mises.org.

Good OP

bank

2011 World Bank / IMF Spring Meetings: Development Committee Meeting


Image by World Bank Photo Collection
World Bank President Robert B. Zoellick (l.). IMF Managing Director Dominique Strauss-Kahn (r.). 2011 Development Committee Meeting at the 2011 World Bank IMF Spring Meetings on Saturday, April 16 in Washington, D.C. Photo: Ryan Rayburn / World Bank

Photo ID: 041611_DevCom_091_F

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