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by aaronblohowiak 2095 days ago
> Banks are actually allowed to lend part of the money without even asking anyone.

not just part of the money. most of the money (fractional reserve banking.) and recently, the fraction to be held in reserve was lowered to ~0 iirc
1 comments
matheusmoreira 2095 days ago
> not just part of the money. most of the money (fractional reserve banking.)

Yes, I agree completely. I didn't remember the exact exact figure so I said "part of the money" in order to be less wrong...

> recently, the fraction to be held in reserve was lowered to ~0 iirc

Wow that is ridiculous... Is that in the USA? What country did this?

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Nition 2095 days ago
It was recently set to 0 in the US yes, but many other countries have the same 0% (for example, Canada, the UK, Australia, Sweden and others have all had a 0% requirement for many years).
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samatman 2094 days ago
Either fractional reserve banking itself is ridiculous, or a 0% net balance is the right number.

If withdrawals get out ahead of collections on debts held by the bank, FISA can (will) step in and make the withdrawing parties whole. The bank now owes FISA and can repay at leisure. This works even if the bank experiences a run, FISA has a bottomless wallet.

If credit issued exceeds 100% of "held" assets, that's clearly fraudulent, it will never work out. But compelling banks to hold some arbitrary amount of the leverage is pointless.

The bank is of course in trouble if defaults exceed the interest on loans, but that was already the case. A 0% balance surfaces this problem faster, and again, FISA pays out, acquires the outstanding debts in lieu of full repayment, and the bank goes bankrupt. No big deal.

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