Is there any proof fractional reserve banking goes on to in the UK or globally - page 2.

jackg

copper member

Activity: 2856

Merit: 3071

https://bit.ly/387FXHi lightning theory

Quote from: nakisama on February 23, 2020, 01:52:24 PM

now put into that mix that both the person who made first deposit and business owner want to withdraw their funds at the same time.

how will the bank manage that ?

By lending from the central bank. Its generally advised you don't store much in bank accounts and banks arent encouraging saving as much anymore now.

nakisama

member

Activity: 205

Merit: 22

now put into that mix that both the person who made first deposit and business owner want to withdraw their funds at the same time.

how will the bank manage that ?

jackg

copper member

Activity: 2856

Merit: 3071

https://bit.ly/387FXHi lightning theory

Just going to use this post to explain what it is so if you have proof feel free to reply without reading this.

As I understand it (not looked at it recently) fractional reserve banking is a system that allows banks more earning power on money you put in while allowing the customer access to some of their funds.

For example (@10% reserve):
If you deposit $3000 into a bank account, the bank is able to lend out $2700 and keep $300 of your original $3000.
If this $2700 is then lent out to someone who wants to buy a new kitchen for example, they pay the cashier and the business owner receives the funds in their account. Now of this $2700 the bank is able to lend out $2430 and store $270 of the original funds as the reserve and this can continue on...

This often gets explained as a "concept" or "theory" but does this actually happen?

Since the commonly used example allows $1000 to become $9000 (I may update this if I get libre running). Edit: spreadsheet says $2912.37 as a floor of the number of new money produced with a 10% reserve).

Topic: Is there any proof fractional reserve banking goes on to in the UK or globally - page 2. (Read 230 times)