|
|
|
| video library |
|
 |
|
|
Overview of Fractional Reserve Banking |
|
|
|
| Uploaded on Sunday 14 June, 2020 to the illusion of money |
|
| How new money is multiplied in a fractional reserve system |
|
|
|
It is a common misconception to hold that most of the money in the system is within a central bank's control. Central banks are tasked with fulfilling certain roles, like to act as the lender of last resort to financial institutions whenever a short-term need for money arises to manage payments. Known as liquidity insurance, this safety net is vital in an economy of fiat money where the public's trust in the value of promissory notes is of paramount importance. Quantitative easing (QE) is a bilateral process which involves the treasury issuing liabilities in the form of government securities onto the market and the central bank injecting liquidity into circulation by either printing money or, in most cases, creating money digitally and purchasing the bulk of the bonds. The funds transacted get deposited into bank accounts, which serve to replenish bank coffers for future lending. This tutorial explains the part that a central bank plays in fractional reserve banking.
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
