Saturday, 12 June 2010

Modern money mechanics

This is a reference work that crops up in most Zeitgeist Movement presentations. It contains an explanation of deposit expansion that is so crucial to the fractional reserve banking system.

The FRBS, simplified, is the system by which a bank can lend out more money than it has as deposits - typically it has to have 10% of the value of its loans as deposits, but that 10% can be a loan from another bank, and thus under the FRBS itself.

Not a very good simplification - Google it - but you get the point.

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