Renegade Rants Episode 1: Fractional Reserve Banking (D-tube Video)

In this video, I discuss our debt based monetary system. Even though it is often referred to as fractional reserve, there are really no reserve restraints on the money supply. Despite this, economics classes still incorrectly teach "fractional reserve." I wonder why LoL!

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."
- Henry Ford

Back when I originally wrote this article and made the video, I was still having a lot of issues with D-tube so I uploaded the video to Youtube and imbedded it. Dtube has been working well for me lately and I feel like now is a good time to add this video to D-tube before I continue the series.

I have included the the original article below with a few tweaks for convenience as there is valuable information and sources in it.

In this Rant video I make two main points.

Commercial banks create money by issuing a loan, which takes almost no effort, but the borrower has to work hard to pay back the loan.
While the repayment of the principle destroys the money created by the loan, where does the borrower get the money to pay the interest from? It has to come from the issuance of new loans and the amount borrowed must always expand or the system will collapse.

The modern money system we have been living under for the past 100 years or so is perhaps the biggest swindle in history. Commonly called fractional reserve banking, this monetary system shouldn't even be referred to by this name anymore because no reserves are actually required in most jurisdictions. While doing the research to support the arguments I make in this Rant video, I discovered that commercial banks require no reserves and simply loan money into existence. The only restraint being the monetary policy of the Central banks.

"However, it is important to note that money is also created within the private banking system every time the banks extend a new loan, such as a home mortgage or a business loan. Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower's bank account, thereby creating new money (see Appendix B). Most of the money in the economy is, in fact, created within the private banking system."

Penny Becklumb, Mathieu Frigon. How the Bank of Canada Creates Money for the Federal Government. Publication No. 2015->51-E. Library of Parliament. 10August 2015. Ottawa, Canada.

"Just as taking out a new loan creates money, the repayment of bank loans destroys money."

Michael McLeay, Amar Radia and Ryland Thomas. Money creation in the modern economy. :2014 Q1 Bank of England Quarterly Bulletin.

The Bank of England even produced a video to go along with the source I quoted above. It should start at 59 seconds.

Sources:

How the Bank of Canada Creates Money for the Federal Government

Money creation in the modern economy

Thanks for reading/watching everyone! Please upvote, follow and resteem to support this work. As always, comments are welcome and I would be more than happy to discuss this issue with you.

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canadianrenegade (67) 7 years ago

It appears that my second source, Money Creation in the Modern Economy has been memory holed. The video is still working though and I will try and find a suitable alternative.