A bank offers valuable lending and borrowing services. They lend out 90% of what they borrow and keep 10% in reserve. No money (euro/dollars) is created out of thin air. But a lot of credit can be created, not out of thin air, but based on how much deposits they get. This credit is then also used to make payments (using bank accounts, you don't pay with money, you pay with credit that you have at the bank). So credit is used as currency in our society. But currency is not money.
you're quoting what they are legally allowed to lend out but it was found that banks have been lending way more for eg. Goldman Sachs lent over 300 times their deposits. oh and it is created out of thin air - there are no funds 'moved' into a borrowers account.
This is a misunderstanding of how banking works. When people say a bank lends out 300 times their deposits, what they mean to say is that the leverage of that bank is 300. This means that the own capital the bank has, is 300 times less than the amount of depositis and loans it has outstanding. And indeed, this is extremely thin, means their own capital is only 0.3% of their loans outstanding. Regulations dictate that they should have a lot more own capital but indeed, regulations are just that, rules that can be avoided. And even the regulations, like basel norms, dictate they should only have somewhere around 5 to 10% own capital. That is still a levarage of 10 to 20 on their own capital.
A commercial bank cannot lend out what it does not have. Everything you borrow from a bank is real. You get indeed real fiat and the proof of that is that you can convert the loan into real fiat. This real fiat the bank has to give you and the bank is incapable of printing fiat out of thin air. So they must have gotten that fiat from someone else, ie: a depositor.
Fractional reserve banking is widely misunderstood I believe. And in doing so commercial banks are blamed for the crimes politicians and their central printers are doing: printing money out of thin air and stealing from everybody that holds fiat.
Fractional reserve lending means that they can't lend out all deposits that they get. So they still have 10% deposits available to pay out people that withdraw their deposit. The small fraud is that they say to everyone that they can withdraw their deposits at any time, but in reality they can only pay 10% of deposits at any time. So if a bank run occurs they suddenly have to liquidate long term loans they made at a discount making loses. However, to keep this lie standing, central printers were created and they were called intitially 'lenders of last resort'. This central printer would simply print money and give it to commercial banks if a bank run occurs so that the commercial bank does not need to liquidate long term loans at discount. So commercial banks were happy with the service central printers offered. But ofcourse, this service of central printers is not small fraud but big fraud, it is counterfitting money.
Fractional reserve lending has also nothing to do with the banks own capital and is something very different. Banks promise depositors that they will take the loses of their loans themselves, paying them with their own capital. This is not the 10% of deposits that is kept in reserve from the fractional reserve lending, but the actual own capital of the bank that is initially provided by the ones starting the bank. This indeed is what is refered to as the 'leverage of 300'. Management has emptied almost all own capital, and so if a downturn comes, the bank goes broke immediately and needs to have new capital. This is what all the bailouts are about.
