Posts Tagged ‘fractional reserve banking system’

What happens when someone pays his debt in a fractional-reserve banking system?

Monday, February 1st, 2010

What happens when someone pays his debt in a fractional-reserve banking system?

Is only his past debt subtracted from the reserve or also all subsequent debts that was loaned to other people with his initial debt?

For instance, a person A borrows 100$ then it becomes part of the reserve, then a person B can borrows from his deposit 80$, then a person C 64$, given a reserve requirement of 10% for banks.

Banking 4: Multiplier effect and the money supply

Saturday, December 26th, 2009

How “money” is combined in a fractional haven promissory note system. M0 as well as M1 definitions of a income suppy. The multiplier effect.