|
|
|
| video library |
|
 |
|
|
Fractional Reserve Lending |
|
|
|
| Uploaded on Saturday 13 June, 2020 to the illusion of money |
|
| Money creation in a fractional reserve system |
|
|
|
Money creation varies by country as per the legislation on the books. By definition, the money supply consists of narrow money, which is all tangible money in notes, coins or reserves as well as money in demand deposits and other liquid assets held by the central bank, and, so too does it consist of broad money, which is all money held by households and companies, whether in tangible form or bank deposits, treasury bills and gilts.
New money is essentially created in either of two ways from quantitative easing (QE), which involves the process of the government emitting bonds onto the open market, normally to pension funds and other asset managers, and selling the bulk thereof to its central bank in order to raise money and stimulate the economy, or, from loans by commercial banks. The latter may take the form of money loaned from a depositor to a bank for an agreed duration of time (full reserve banking), or money loaned from a bank to a depositor as a fraction of reserves held in bank deposits (fractional reserve banking). This tutorial explains the money multiplier of liquidity in a fractional reserve system.
This video is courtesy of the Khan Academy whose YouTube channel is available here. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Click the icon to load the player or launch the popup |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
