Important to note:
On March 26, 2020, the Federal Reserve reduced reserve requirements for all depositary institutions to zero. Instead, banks are now paid a specific interest rate on their reserve balance to encourage holding reserves.
Imagine you put $100 in the bank. The bank then lends $90 of it to someone else, keeping just $10 in reserve. That $90 gets deposited again, and the bank lends out $81, keeping the cycle going. This way, your original $100 can turn into $1000 in the system. It's like magic, but it's just #FractionalReserveBanking at work!
https://youtu.be/fsI6rbvR9SI?si=-nVxGraVUV0P57_j
#Wbtm #[0]
Discussion
Yup... I remember university economics covering fractional reserve banking, and thinking “this sounds like make believe - either the money is there or it is not, and it clearly is not”. So I focused on learning the economic systems and cause-and-effect networks, taking everything I learned afterwards with a grain of salt 🤙
Prussian education system, established in the 18th century, unchanged only by technology. Yes with a grain of salt… everything you think you know.