Frackin’ Reserve – “How” Fractional Reserve Banking Creates
Money and “Why” it is Fraudulent (3/6)   In Part 1 we looked at
the mechanics of fractional reserve banking and the mathematics
behind it. We also saw how absurd it could be when trying to
divide by zero. Then in part 2 we looked at one perspective of
“what is money” and defined it in terms of its relationship to
wealth.  It is now time to turn out attention to discovering
“how” fractional reserve banking creates money. Once we
understand the “how”, we can answer the question, “Why is
fractional reserve banking fraudulent?”  If you recall the basic
fractional reserve banking cycle, it went like this:  The basic
fractional reserve banking cycle  Putting that in a table, we
can see that the total amount of money that people have very
quickly grows from an initial deposit of $1,000 to much, much
more.  Depositor Deposited Loans Deposits Borrower 1. Adam
1,000.00 0.00 1,000.00 Anne 2. Brian 900.00 900.00 1,900.00
Brenda 3. Chris 810.00 1,710.00 2,710.00