Study: The Majority of Americans Don’t Understand How Fractional Banking Works

  • Because of fractional reserve banking, your bank likely does, in fact, hand much of your money over to third parties without your knowledge or consent
  • You may not be cool with it

Explaining Fractional Reserve Banking

Why Fractional Reserve Banking Exists

  • Banks lending and investing customers’ deposits allows the banks to make profits and sustain their business
  • Money “created” through lending and investment by banks grows the money supply
  • By growing the money supply and stimulating the flow of credit from banks to other institutions and individuals, fractional reserve banking “grows the economy”

Critiques of Fractional Reserve Banking

  • The bank should store your hard-earned money in a vault far more secure than anything you have access to
  • The bank should guarantee that you can access your money when you need it, without excuse or exception
  • Your money is not held by the bank you deposited it in at all, let alone in a vault
  • If enough customers of consequence request to withdraw their money at the same time, then there may not be enough money in bank coffers to guarantee access to your money

Conclusion

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