Fractional reserve banking

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	Fractional-reserve banking - Wikipedia, the free encyclopedia
		In economics, particularly in financial economics, fractional-reserve banking is the near-universal practice of banks retaining only a fraction of their clients' deposits and notes as reserves to satisfy demands for withdrawals, investing the remainder in loans to generate income.
		The reserve ratio should not be confused with the capital ratio, which is the ratio of the bank's capital to its assets.
		Banking has been subject to generally a greater extent of government regulation and controls than other forms of business, and banking law has in many countries been the subject of extensive political debate, along side of the mono-metallic gold standard versus the bi-metallic gold or silver standard debate.
	en.wikipedia.org /wiki/Fractional-reserve_banking (2241 words)

	Fractional Reserve Banking Revisited
		While fractional reserve banking per se is not the cause of credit collapse that is threatening the world, the banks will have earned such a bad reputation for betraying the public trust that, after they have self-destructed as part of the coming monetary Armageddon, reconstruction may be easier if their resuscitation is side-stepped.
		The paradise of fractional reserve banking was lost, and the gates of hell of the boom-bust cycle and credit collapse were thrown open, when banks yielded to the temptation and started sheltering fraudulent bills in their portfolio.
		Fractional reserve banking merely streamlined spontaneous bill circulation which had existed, and would exist, independently of the existence of banks.
	www.freebuck.com /articles/afekete/040420afekete.htm (4253 words)

	Fractional Reserve Banking
		The banking system's (or monopoly bank's) gross profit from the original $100 cash deposit is the difference between the interest received on loans of $900 (newly created money) and interest paid on the original $100 cash deposit.
		The fraction of total demand deposits that must be held as reserves is set by law, currently less than 10% on average.
		Banks are legally required to hold reserves against their demand deposits.
	www.greatchange.org /sc-fractional_reserve_banking.html (492 words)

	DESCENT FROM GOLD TO FIAT - Gold & Silver Forum
		It is this central bank's counterfeiting that is the cancer that is causing inflation and boom-and-bust cycles; fractional reserve banking is not the source.
		The central banking system inherited fractional reserve banking from the free banking system, and is utilizing it as an instrument of control, because it is a superb instrument of control, after all, it was capable to enforce gold discipline entirely on its own.
		When central bank will be erased overnight, as proposed in http://www.gold-eagle.com/editorials...aga112801.html no attempt should be made to erase fractional reserve banking.
	goldismoney.info /forums/showthread.php?t=17488 (3147 words)

	Fractional Reserve Banking
		In order to minimize variations in total banking system reserves due to its own spending, the Treasury targets a fixed balance of $5 billion at the Fed by transferring funds as required from its Treasury Tax and Loan accounts at commercial banks.
		Federal Reserve notes are prized as a store of value and used as a medium of exchange in those countries where the local currency is not trusted.
		A bank may hold its reserves in any combination of vault cash and deposits at the Fed. As profit-seeking enterprises, banks try to keep their reserves close to the required minimum, since they earn no interest.
	wfhummel.cnchost.com /bankreserves.html (863 words)

	Anti-State.com : The Libertarian Case Against Fractional-Reserve Banking, by Gene Callahan
		On the other hand, in a society where almost all banking was fractional-reserve and most people were quite familiar with the practice, it might be taken as a matter of course that banknotes were claims on fractional reserves.
		It may be that bank customers would reject fractional-reserve banks if fully informed about their operation—although, again, I doubt that is true—but that is only an argument for full disclosure, not for banning the practice.
		One-hundred-percent reserve banks must charge depositors for safekeeping their gold, since they earn nothing from note issuance, while bearing the costs of printing the notes, redeeming them, and storing the gold.
	www.anti-state.com /article.php?article_id=416 (2245 words)

	Fractional Reserve Banking [Free Republic]
		Of course it is. The point isn't that fractional banking isn't present, rather it is that the neo-keynsian nonsense that accompiniad it during the 60's and 70's is gone.
		Central Banking began with the Bank of England in the 1690s, spread to the rest of the Western world in the eighteenth and nineteenth centuries, and finally was imposed upon the United States by banking cartelists via the Federal Reserve System of 1913.
		The problem is that, emboldened at this massive bailout, the depositors would promptly redeposit the new $1,600 billion into the banks, increasing the total bank reserves by $1,600 billion, thus permitting an immediate expansion of the money supply by the banks by tenfold, increasing the total stock of bank money by $16 trillion.
	www.freerepublic.com /forum/a3a2c50933514.htm (6822 words)

	Fractional-reserve banking - Wikipedia, the free encyclopedia
		In economics, particularly in financial economics, fractional-reserve banking is the near-universal practice of banks of retaining only a fraction of their deposits and notes as reserves to satisfy demands for withdrawals, investing the remainder at interest to obtain income that can be used to pay interest to depositors and provide profits for the banks' owners.
		The key financial ratio used to analyse fractional-reserve banks is the reserve ratio, which is the ratio of reserves to demand deposits and notes.
		The 'reserve ratio' should not be confused with the 'capital ratio', which is the ratio of the bank's capital to its assets.
	en.wikipedia.org /wiki/Fractional-reserve_banking (1977 words)

	FRACTIONAL RESERVE BANKING SYSTEM
		Fractional Reserve Banking System: A system in which depository institutions hold reserves that are less than the amount of total deposits.
		Currency in circulation is outside the banking system and cannot be held by banks as reserves from which to make loans.
		Required Reserve Ratio: The percentage of total reserves that the Fed requires depository institutions to hold in the form of legal reserves.
	global.cscc.edu /econ/240/chapter15notes.htm (614 words)

	__________________________________________
		Vieira's purpose is to present an analysis of the Federal Reserve System, its fiat paper currency, and "fractional-reserve" banking that infrequently, if ever, appears in the popular press, in the media, in the discourse of legislators or political candidates, or (worse yet) in the nation's schools.
		The FRS was the response of bankers and their political cronies to decades of failures in the fractional-reserve banking system at the local and regional levels throughout the United States.
		Under fractional-reserve banking, the bank always issues more units of fiduciary money, supposedly "payable on demand", than it has units of commodity money available for redemption, counting on the unlikelihood that the majority of its customers will ever seek redemption at one time.
	home.hiwaay.net /~becraft/VieiraMono4.htm (4762 words)

	Ashish's Niti: Fractional Reserve Banking
		If competition is allowed in issuing of fractional and full-reserve notes as long as notes themselves clearly mention the fractional system of the issuing bank then buyers and sellers can negotiate among themselves based on notes used in the transactions.
		Now, the bank is allowed to loan, say, 90% of that amount (10% fractional reserve requirement) to another customer (let's call him B).
		Now, B has $90 in his bank with the bank's total reserves held at the central bank to be $190.
	ashish.typepad.com /ashishs_niti/2004/08/fractional_rese.html (711 words)

	Fractional Reserve Banking is a Tontine Policy
		The Formula of the Federal Reserve is as follows: Fractional Reserve Banking is a Tontine policy, re-insured by a credit policy in the form of ex-chequer annuitie bills generating an over insurance, which is split with the Class "A" stockholders of the Federal Reserve and the United States Treasury.
		An interesting fact, as a result of the Tontine (Federal Reserve), HJR 192 and the Erie Railroad decision is this: there is no longer an immovable law (Common Law) of the world to guide commerce.
		The cunning plot to reinstitute the Tontine scheme at the Federal level in the name of the Federal Reserve is by all means cunning and despicable.
	www.worldnewsstand.net /law/Tontines.htm (1863 words)

	Mises Economics Blog: Fractional Reserve Banking - Pro and Con
		Some economists suggest that because fractional-reserve banking is the rule in Western banking systems today, it has passed the "market test," whereas the alternative arrangement of 100 percent reserves for money titles has not.
		In reality, the present-day dominance of fractional-reserve banking is not a matter of having passed the market test but of legal restrictions that have hindered product differentiation in banking.
		Mises Institute scholar Guido Hülsmann on fractional reserve banking versus 100% redeemeable gold in the&; Independent Institute's excellent journal The Independent Review.
	blog.mises.org /archives/000793.asp (182 words)

	EconPapers: Fractional Reserve Banking as Economic Parasitism: A Scientific, Mathematical & Historical Expose, Critique, and Manifesto
		From the hypotheses a major (admittedly radical) conclusion is that the modern international ``fractional reserve banking system'' is actually equivalent to ``legalized economic parasitism by private bankers.'' This is the case because, contrary to conventional wisdom, the proceeds of inflation are not actually spendable by the state.
		Fractional Reserve Banking as Economic Parasitism: A Scientific, Mathematical & Historical Expose, Critique, and Manifesto
		EconPapers: Fractional Reserve Banking as Economic Parasitism: A Scientific, Mathematical & Historical Expose, Critique, and Manifesto
	econpapers.repec.org /paper/wpawuwpma/0203005.htm (331 words)

	THE FEDERAL RESERVE Fractional Reserve Lending (Banking 101)
		Reserve requirements are imposed on all depository institutions – which include commercial banks, savings banks, savings and loan associations, and credit unions – as well as U.S. branches and agencies of foreign banks and other domestic banking entities that engage in international transactions.
		Fractional reserve lending insures and guarantees that banks cannot possibly be liquid.
		Fractional Reserves refers to monetary reserves required to be on deposit in banks.
	www.freerepublic.com /focus/f-news/1530731/posts (8446 words)

	Sep 20, 2005 Is Fractional-Reserve Banking Fraudulent? Nelson Hultberg 321gold . . . Inc
		If the bankers wish to hold only 50% gold coin reserves behind their purchase of merchants' real bills because they know from hundreds of years of experience that such a reserve is more than sufficient to handle redemption requests, it is not fraud.
		So the key is to divorce banking totally from the government control and intervention that is corrupting it, and it would police itself as far as quality and liquidity are concerned through natural market forces.
		It is fraud for banks to be able to suspend specie payment and still operate, and it is fraud for banks to hide their portfolios from the public.
	www.321gold.com /editorials/hultberg/hultberg092005.html (2335 words)

	A 100 Percent Reserve System
		In a 100 percent reserve system, except for the depository role, the distinction between banks and non-banks disappears.
		The deposits at the CB can be roughly estimated as the current amount of transaction deposits, eurodollars, bank reserves, and perhaps half of savings deposits in both banks and thrifts, for a total of about $1,930 billion.
		Banks would probably hold two accounts at the CB, one which backs customer deposits and varies with their checking activity, and another which is available for lending by the bank.
	wfhummel.cnchost.com /altmoney.html (1676 words)

	Mises on Money, Part IV
		Fractional reserve banking under a gold standard, as Mises defined it, is a system of lending wherein a bank issues receipts for money metals supposedly held in reserve, which it does not have in reserve.
		Banking in Spain during the sixteenth century adopted fractional reserves, and a series of banking house bankruptcies in second half of the century proved it.
		The bank account depositor in a non-fiduciary, 100% reserves bank transaction surrenders the use of his money for the duration of the loan: a specified period.
	www.lewrockwell.com /north/north86.html (7492 words)

	Banking / Federal Reserve
		In 1781, the Continental Congress was desperate for fundsand met at Independance Hall to appoint their Financial Superintendant Robert Morris, to head the "Bank of North America", which was closely modeled after the Bank of England and was allowed to practice "Fractional Reserve Banking".
		(Fractional Reserve Banking, again.) They would loan the politicians as much money as they wanted, but they had to secure the debt by the "direct taxation" on the people.
		As a matter of fact, shares in the Bank of England were purchased with a tallystick, by at least one of it's shareholders.
	www.freedomdomain.com /bankfed.htm (6770 words)

	fractional reserve banking Definition
		A banking system in which only a fraction of the total deposits managed by a bank must be kept in reserve.
		The amount of the deposits equals the amount of the reserves times the deposit multiplier.
		Learn about the basics of banking, as well as alternatives to banks, such as credit unions, brokerages and mutual funds.
	www.investorwords.com /5581/fractional_reserve_banking.html (230 words)

	Money supply - Wikipedia, the free encyclopedia
		One of the principal jobs of central banks (such as the US Federal Reserve, the Bank of England and the European Central Bank) is to keep money supply growth in line with real GDP growth.
		The operative notion of easy money is that the Fed creates new bank reserves (also known as "federal funds", trades in the "money market"), which let the banks lend out more money.
		Of the money in a bank deposit, depending on reserve requirements, either the whole sum or some fraction of it can immediately be lent out.
	en.wikipedia.org /wiki/Money_supply (1968 words)

	Fractional Reserve Banking
		In order to minimize variations in total banking system reserves due to its own spending, the Treasury targets a fixed balance of $5 billion at the Fed by transferring funds as required from its Treasury Tax and Loan accounts at commercial banks.
		Drawing down those balances increases aggregate banking system reserves since it results in a transfer of funds to the banking system.
		A bank may hold its reserves in any combination of vault cash and deposits at the Fed. As profit-seeking enterprises, banks try to keep their reserves close to the required minimum, since they earn no interest.
	wfhummel.cnchost.com /bankreserves.html (863 words)

	Fractional Reserve Banking
		Central Banking began with the Bank of England in the 1690s, spread to the rest of the Western world in the eighteenth and nineteenth centuries, and finally was imposed upon the United States by banking cartelists via the Federal Reserve System of 1913.
		Banking is a particularly arcane part of the economic system; one of the problems is that the word "bank" covers many different activities, with very different implications.
		The problem is that, emboldened at this massive bailout, the depositors would promptly redeposit the new $1,600 billion into the banks, increasing the total bank reserves by $1,600 billion, thus permitting an immediate expansion of the money supply by the banks by tenfold, increasing the total stock of bank money by $16 trillion.
	www.lewrockwell.com /rothbard/frb.html (2121 words)

	Fractional Reserve Banking as Economic Parasitism: A Scientific,Mathemat
		From the hypotheses a major (admittedly radical) conclusion is that the modern international ``fractional reserve banking system'' is actually equivalent to ``legalized economic parasitism by private bankers.'' This is the case because, contrary to conventional wisdom, the proceeds of inflation are not actually spendable by the state.
		I recently worked about 6 weeks on a complicated and comprehensive paper entitled Fractional Reserve Banking as Economic Parasitism: A Scientific, Mathematical and Historical Expose, Critique, and Manifesto download it in PDF from the economics papers archive: http://econwpa.wustl.edu/eprints/mac/papers/0203/0203005.abs would be interested in any feedback.
		Fractional Reserve Banking as Economic Parasitism: A Scientific,Mathematical and Historical Expose, Critique, and Manifesto
	www.mail-archive.com /pen-l@galaxy.csuchico.edu/msg67514.html (1162 words)

	MACOUT14S.doc
		However, a fractional reserve banking system is subject to runs on banks and bank panics, therefore, this is a highly regulated industry, including federal deposit insurance.
		The fractional reserve banking system means that banks have only as fraction of the funds/money supply on hand as reserves.
		When a check is drawn against one bank and deposited in another, collection of the check will __________ both the reserves and the checkable deposits of the bank on which the check was drawn.
	www.ualr.edu /~mhwitkowski/MACOUT14S.doc (836 words)

	Governments And The Central Banking System
		But, once the bank is "loaned up," that is to say, once it has already loaned $9 for every $1 it holds in reserve, it must stop and wait for some of the old loans to be paid back before it can issue new ones.
		As I outlined, this "marriage" between government and the central banking system, seems unbreakable - a water-tight union between two "partners" - and unlike other unions where divorce is a way out, is most unlikely to ever be torn asunder.
		Thus, do not even think of paying your government debt [principal]; but only the interest, otherwise, by paying the principal, you would destroy "reserves" in the bank and, consequently, there would not be a cent in circulation.
	www.rense.com /general54/governmentsandthe.htm (1651 words)

	Fractional Reserve Banking Prevents Gold Standard
		Fractional Reserve Banking is nothing more than the ability to artificially inflate the money supply; commercial banks do so by printing and lending money, which a bank does not have in safe storage.
		The fee collected from storage could be lent out for borrowing purposes by the bank if the management felt it was making a wise financial business choice for its shareholder interest; this eliminates fractional reserve banking.
		Banking should be treated as any other segment of the economy in a capitalist system, and face competition.
	www.halifaxlive.com /fractional_reserve_08302004_0390.php (1619 words)

	A Privatised Money Supply: Modern Banking and the Fractional Reserve System
		Banking was conceived in iniquity and born in sin...
		I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the Government at defiance. The issuing power should be taken from the banks and restored to the people to whom it properly belongs.
		But for all existing bank credit to be paid without anyone defaulting on their loans, the economy must expand by 2.9 percent ($28 billion of interest divided by the GDP, $953 billion).
	www.basicincome.com /basic_banks.htm (578 words)

	Shut-Down of Banking System
		Therefore the system relies on universal public and depositor confidence and faith they will have access to their savings, as it would take a mere 5% (or less) to deplete all reserves.
		Since this is an international system, the failure of off-shore financial institutions threatens the functioning of domestic banks.
		There comes a time when propagation of bugs in the system become so pervasive that the flow of money/funds/data no longer be processed, as the time expended to hand check for corrupted data exceeds the capacity and ability to do so in a manual fashion.
	www.angelfire.com /or/truthfinder/banking.html (1124 words)

	SparkNotes: Banking: Central Banking System
		The next part of the US banking system is the Fed. The Fed buys and se lls government bonds, changes the federal funds interest rate, and changes the reserve requirements.
		The interdependent hierarchy that is established through the central banking system in the US allo ws the money supply and inflation to be carefully controlled, as well as the fiat money to maintain value over time.
		We learned in the section on the purpose of banks that banks make deposits, withdrawals, and loans from banks' banks that are usually branches of the Fed. When a bank makes many loans, its reserves get d epleted to near the absolute required minimum.
	www.sparknotes.com /economics/macro/banking/section2.rhtml (1140 words)

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In the News (Fri 5 Dec 08)