The Fractional Reserve Banking (FRB) Scam

1) It promises something it cannot deliver

When you deposit money in a bank, you believe your funds will be available whenever you want (it’s your money, not the bank’s).

But under fractional reserve banking, the bank lends out most of that money.

That’s a contractual contradiction:

• A deposit should be safekeeping.

• A loan means giving up the use of the money.

The bank does both at the same time with the same funds.

According to the Austrian School of economics, this is deceptive by definition.

2) Money is created “out of thin air”

Under FRB:

• You deposit $100

• The bank lends out $90

• That $90 returns to the system as a new deposit and is lent out again

Now there is more “money” circulating than real savings.

There was no additional work.

No additional production.

No additional saving.

The money supply was inflated—legal counterfeiting.

3) It creates artificial business cycles

When banks expand credit, interest rates are artificially lowered.

Entrepreneurs are misled into believing there is more real savings than actually exist.

They invest in long-term or risky projects—but the savings aren’t real.

When credit expansion stops:

Projects fail, recessions hit, unemployment rises, and crises follow.

And as we all know, there’s no such thing as “market failure” here.

4) It depends on the State to avoid collapse

If everyone tried to withdraw their money at once, banks couldn’t pay—it simply isn’t there.

That’s why the system requires:

• A central bank as lender of last resort

• Bailouts and rescues

In other words, a system that cannot sustain itself and socializes losses.

This is not a free market.

It is institutionalized fraud.