How haven mandate extent how most lending the bank can do.
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ok, true but if you have to re-explain what the man says then where does that lead? If one cant understand 10, dont try to explain 100…. i find what he stated 100% clear and shouldnt be overlooked or restated… it was precise and accurate…dont try to change his words becuase someone doesnt understand why the difference between represented value is and actual value
When he keeps saying “these people” (customers), I could see how the student might get that confused, thats all. Good vid anyways.
I don’t care about his “fake situation”. In real life customers are going to have different amounts of deposits so its not about the % of customers but the % of deposits that are taken out at a given time. W
I agree with what you said. The 7:45 mark is what I was referring to. He says, “if no more than 20% of ‘these people’ (customers) don’t demand their money back, the bank is going to have liquidity.” I know what he was talking about & he definitely knows what he is talking about, but the the novice might not. I was just clarifying it for anyone watching the vid & reading the responses.
its not a ten fold increase…. 2 fold is 10 x’s 10= 100 3 fold is 10x10x10 10 fold is 10 x10, ten times…
never stated it was 80% of customers. he states 80% of value being removed. he states the reserve ratio is gold over demand. not gold over customers. it doesnt matter if 1 person comes or 9000… its based on demand. which he clearly states. Im not sure why you think he means customers. in his fake situation, you see person a respresents x value which is why he states customers. but he is referring to the value behind that individual
Not really. A bank that would use a healthy fractional reserve of, let’s say 20%, can still be hurt by a bankrun on other banks.
If other banks start to get a bank run, public might fail to trust the entire banking system, and a run can begin on banks that are very responsible.
checking accounts are loans from people to the bank.
In reality the growth should be 10 ->> 100 = 1000%
!
because you start from 10 and you should arrive to 100, that meens 10fold increase
long live GDP growth……
In this example the Reserve Ratio is 20%Having a bank run is not a question of the percentage of customers coming in to claim their “money.” For instance, 20% of the customers could potentially be the ones with the least stake in the bank. It is more of a question of the amount of “money” being pulled out and not the amount of customers coming in to claim their “money.” I know you understand this and I am just clarifying your statement.
@khanacademy
You said in this vid that Federal Reserve Ratio is 10%. Going back to vid 3 of this series, you say (paraphrasing) the bank’s wealth exists in the fractional reserve system as long as investments boost the economy by a sufficient amount. So as far as I can see that means the economy of a society has to grow by (100-10% =) 90% in productivity for the banking system to stay solvent in terms of real wealth. Isn’t that a hugely unrealistic risk?
@khanacademy
You said in this vid that Federal Reserve Ratio is 10%. Going back to vid 3 of this series, you say (paraphrasing) the bank’s wealth exists in the fractional reserve system as long as investments boost the economy by a sufficient amount. So as far as I can see that means the economy of a society has to grow by (100-10% =) 90% in productivity for the banking system to stay solvent in terms of real wealth. Isn’t that a hugely unrealistic risk?
Sal, you say at the end that the bank has more assets than liabilities. Does not the bank have exactly the same amount of assets and liabilities? until it starts making some interest?
wait… at 5:05 why does the bank have to pay back a loan? I thought they were giving them out.
Bank Runs are good. Endlessly building confidence in malinvested banks is bad. Banks that are not overextended would be survive, others would fail
reload it
Yes, and that’s called deleveraging and it contracts the money supply. That’s what happened and boosted the demand for the US dollar.
no if u printed too much money than the gold u got then money would be useless everything will rise and the country will fall
why are some of the videos not available anymore?
there is no gold, its all credits now. watch the fractional reserve video in this series.
so have they printed more money than they have in gold?…thus are able to lend more than reserves?
if the reserve ratio is 20 percent.
And if some people want to remove their savings from the bank.
In order to remain on 20 percent, must the bank get back their lendings, so they musts request people that have loans at the bank to bring it back?
In fact the bank does not need a vault.
Because it is all numbers on a computer nowadays
I love those, especially bank notes of SAl Bank:D
Thank you.