DiscussWorldIssues - Socio-Economic Religion and Political Uncensored Debate - View Single Post - Let's talk about the fractitional reserve banking system

**seatlyled** · 01-03-2012, 11:21 PM

Again, if the bank is not loaning money that is on deposit, they are not practically/effectively risking one penny. Their methods of accounting may suggest that they are taking a risk, but how can you risk something that you never had in the first place? I say, you can't. Their only risk is that they won't earn money that they weren't entitled to in the first place. Furthermore, if the money loaned is placed into the system, that is new money that didn't exist previously. New money= new supply. Increased supply effects the scarcity of money and thus translates into higher prices (and yes, I know this is not the technical definition of inflation) as long as all other factors are equal.

dys

Here is how I see it. I may not be perfectly accurate.

The bank is LICENSED to AUTHENTICATE Federal Reserve Notes. They are licensed and audited by their regional bank. If they fail the audit they are bankrupt. Just like any corporation a bank can lose its sanction to operate if their balance sheet is in the red. Yes, they can lose from loan defaults. They must account for the FRNs that they AUTHENTICATED in accordance with their LICENSE. The bank is a franchise of the federal reserve system.

01-03-2012, 11:21 PM	#14
seatlyled Join Date Oct 2005 Posts 476 Senior Member	Again, if the bank is not loaning money that is on deposit, they are not practically/effectively risking one penny. Their methods of accounting may suggest that they are taking a risk, but how can you risk something that you never had in the first place? I say, you can't. Their only risk is that they won't earn money that they weren't entitled to in the first place. Furthermore, if the money loaned is placed into the system, that is new money that didn't exist previously. New money= new supply. Increased supply effects the scarcity of money and thus translates into higher prices (and yes, I know this is not the technical definition of inflation) as long as all other factors are equal. dys Here is how I see it. I may not be perfectly accurate. The bank is LICENSED to AUTHENTICATE Federal Reserve Notes. They are licensed and audited by their regional bank. If they fail the audit they are bankrupt. Just like any corporation a bank can lose its sanction to operate if their balance sheet is in the red. Yes, they can lose from loan defaults. They must account for the FRNs that they AUTHENTICATED in accordance with their LICENSE. The bank is a franchise of the federal reserve system.
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