$1000 originally printed up and then deposited by Toddster.
Since the Bank only has to keep $100 on tap, but still tell everybody they have $1000 deposited, the $900 bones can be lent out again. JOAT gets a 900 dollar loan and buys a crapmobile off Craigslist to drive to work.
Said Crapmobile seller deposits his 900 bucks into 1st Bank.
The Bank can now loan out 810 bucks to little Sarah who wants to fix up her bathroom. Now the Bank really only has $190 on deposit but tells everyone they have $1900. So in just two lending cycles, Toddster's original money nearly doubles on 1st Bank's books. After the next lending cycle, 1st Bank books show they have $2710 deposited in the bank, but in reality the only have $271.
(Pretty sweet gig if you can get it.)
We can keep going, but it's obvious 1st Bank has @$$loads more 'deposits' than it really has.
Oh sure, that's what built our economy. Fake money. Easy to get fake money. The problem starts when people start to lose confidence in the arrangement, like what is happening now.
Since everything is predicated on 'full faith and credit' when faith fades the economy stutters.
So yeah Toddster, the bank has way more money than is deposited, but technically it doesn't because it "only lends out 90% of its deposits."
Of course those 'deposits' are fake but they can technically say they have the 10% required to keep them liquid.
Of course MOST of those dollars moving around have never come off a printing press. They exist only as ciphers in a computer, which 1st Bank created, not the FED.
So if you want to stand on semantics, fine. The reality is the bank creates deposits for itself which did not exist before or come from the Federal Reserve. It ends up with substantially more dollars than were deposited by Toddster, the original 1000. JOAT and Sarah and all the others merely 'deposited' spinoffs of that thousand clams most of which never existed in the first place.
The bank has $1900 in deposits, loaned out $1710 and has $190 in reserves.
(Pretty sweet gig if you can get it.)
I know. Lending out less than your deposits, crazy!
We can keep going, but it's obvious 1st Bank has @$$loads more 'deposits' than it really has.
More deposits than loans or reserves.
it isn’t “fake money” insofar as I gotta work for it. there is a vaporware aspect to it but what do you suggest as an alternative? notice that everyone who laments the system in published form oftentimes are reneging on their debts!