Fractional Banking or Good Business?

Fractional banking is one of the biggest money frauds ever perpetuated on the American people!  The U.S. government allows banks to take your hard-earned money and create their own money out of thin air.  When you make a deposit into your bank, the bank does not put that down on their books as a liability (which it should be), but as a asset.  They take that same money (your money) and give it out the next day as a loan (another asset) to a customer, while charging 5-6% interest or more.  If all the customers wanted their money at one time (“run on the bank”), the bank could not meets its obligations and would go into default.  My contention is that any monies lent to bank customers should be monies that the bank owns, not their customer’s money.  Your money stays in the bank and is there when you need it!!  Not only would this make the bank honest, but would give your money more stability.  If banks make bad investment decisions or have a poor business model, then they fail like any other business.  Why does the U.S. government insure banks?  Answer: the bank doesn’t have the money to pay its liabilities.  I’m not against any business making money, but don’t do it at the expense of your customers or the American taxpayer!  The next time you go to your bank to deposit money into your savings account, know that it’s not staying in the bank!  Of course, the FED is a party to this!  Your thoughts/comments??

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5 comments on “Fractional Banking or Good Business?
  1. nagalman says:

    Fractional banking is very important to investment in our country. That 10% fractional reserve allows the banking institution to lend money out as loans. These are the same loans that power car loans, mortgages, business loans, construction projects, etc.

    If the banking institutions were required to keep all deposited money, then the amount and availability of loans would decrease significantly. People would then have a hard time buying cars, homes, or investing in new capital in businesses. It would significantly slow down our economy.

    Khan Academy has a great series of video on fractional banking and banking in general:

    If you have a big issue with a financial institution making large profits off of your deposited money, I suggest you invest your money in a credit union. Credit unions are essentially non profit banks that are owned entirely by their members.

  2. jmccarthy says:

    As always, there are two sides to every story and I appreciate nagalman’s comments. I can see how fractional banking helps with loans etc, but have a tough time understanding that my hard-earned money is being “used” as an advantage for the banks. Banks should not be in the business of creating money out of thin air as in the case of fractional banking. As stated in our Constitution, Congress should create the conditions i.e. coin the money that creates loans etc. Refer to the above Lincoln quote . . . it says it all!! Also, Joe Taxpayer should not be liable when a bank doesn’t have the money on hand or when they go belly-up and don’t have the resources to meet their commitments. Great discussion!! Would like to hear more about the pros and cons of Fractional Banking and how it hurts or helps our economy. It might provide loans, but the banker uses our labor to enrich himself and folks that is a fact!!I

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