Topic: Why Bitcoin is ultimately doomed to fail (not today or tomorrow) - page 13. (Read 40866 times)

Are you denying that you're not very good at writing in English? Do you deny that many of your sentences are grammatically incorrect?

And if you open up a typical Economics textbook used at the college/university level in the United States, you'll probably see something similar as well.

If it's all wrong, I'd be interested in hearing about that.

Yeah, I suspect we're mostly just having translation issues. I'll try to be more aware of this in the future. Hopefully you will as well.

Yeah, I suspect we're mostly just having translation issues. I'll try to be more aware of this in the future. Hopefully you will as well.

I guess Wikipedia actually got something right for a change.

I didn't plagiarize my answer from Wikipedia, if that's what you're suggesting.

[This was added later.]


I think the link I gave explained it better than I can, but basically the issue is that M1 includes both physical money and checking balances (a couple other things too but they can be left out for this simple explanation). When banks do not hold 100% reserves for their checking balances but instead lend out checking deposits they've received, this is called fractional reserve banking. This causes M1 to be bigger than M0, which is called money multiplication. What happens is that A puts money into her checking account and then the bank lends it to B. B usually either deposits the money or spends it, and generally someone down the line deposits the money, usually most or all of it. In the case where the banks all hold reserves of 1/X, and all of the non-bank participants spend or deposit their money, the result is a geometric series, which approaches a limit where M1 adds up to X times that of M0. X is called the money multiplier. In practice the money multiplier is always less than X, and potentially can be significantly less than X if non-bank participants hold significant assets in cash. If banks keep too little in reserves this can cause insolvency and bank failures and runs on the bank and recessions, which in turn can cause non-bank participants to lose trust in the banks and hold their assets in cash.

This is, of course, a greatly oversimplified model of what happens in practice. I hope you don't expect me to write a whole textbook on the topic.

If we're going to start demanding answers of each other, then you'll note that I asked first, and you haven't answered my question yet.

That question doesn't make sense.

Are you suggesting that it's possible to run a bank, and accept demand deposits, without keeping any reserves?

Where do you get that idea from?