Saturday, 20 November 2010

The myth of fractional reserve banking and the monetary multiplier

Trying to get to the bottom of fractional reserve banking is hard work. But I discovered an unusually enlightening article here.


  1. Well, since M0 is typically notes and coins - i think it's actually the treasury that controls that. It is interesting how at least some of the problem is essentially being caused by there being two definitions for money floating around - physical notes and coins, and bank accounts.

    Someday we are all going to have to explain to our grandchildren how on earth we ended up in the 21st century without any clear and official explanations of how the banking systems works. Or indeed, a precise definition of money.

    -- cc