[kybernetikos]

> That isn’t how fractional reserve lending works.

I'm not sure which part of the GP you're disagreeing with.

Fractional reserve is exactly that banks lend out a fraction of the deposits that they take in (the rest is kept in reserve).

The only reason it looks like money is created is because people (and economists) think of 'money in their account' as real money, when in fact it's just a IOU from the bank to you (possibly guaranteed by the government).

If you think of money-in-your-account as actually a debt the bank owes you, then it becomes quite clear that banks don't create money any more than lending money to a friend creates money. And there is a sense in which it does - lending money to a friend results in your friend having money and you having an asset (an IOU from your friend) that you expect to be able to use at some point in the future, so there is a sense in which the sum total of wealth has increased by the value of the IOU.

[kybernetikos]

According to wikipedia, Standard and Poors, and the Bank of England the view I give above is considered outdated and wrong. Oh well.

https://en.wikipedia.org/wiki/Money_creation#Credit_theory_o...

http://www.kreditordnung.info/docs/S_and_P__Repeat_After_Me_...

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

[spdionis]

> Fractional reserve is exactly that banks lend out a fraction of the money that they take in

Isn't it a multiple instead of a fraction? Banks are required to keep in reserve a small percentage of the actual amount being lent, which means that they can lend a multiple of the money they take in.

[zrail]

Correct. In the US the required capital reserve is expressed in terms of daily net transaction amount. Wikipedia has a good breakdown[1], but for large banks the Fed requires 10% of NTA to be swept into the bank's Fed account overnight. There are also capitalization requirements for all banks, which are more stringent for nationally important "too big to fail" banks and bank-like entities.

[zrail]

What is “real money” in our current system?