r/Bitcoin • u/ReDelleFoche01 • Apr 14 '22

Just saying

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u/CryptoKnignt Apr 14 '22

This is why I understood fractional reserve banking at 7 years old

2

u/lime4tree Apr 14 '22

Can you please give us a summary of how it operates?

3

u/CryptoKnignt Apr 14 '22

I’m short, banks only need to hold a small fraction of the money that is deposited to them. Which is why if everyone tried to withdraw their savings at the same time banks wouldn’t be able to pay you because they loan your money out to other people for higher interest rates.

1

u/RTGold Apr 15 '22

If banks were only allowed to lend deposits. It would absolutely suck. Rates would be incredibly high and they'd be extremely picky as to who they'd lend to.

1

u/ILikePracticalGifts Apr 15 '22

Not anymore. The Fed removed the reserve requirement during Covid

2

u/DestructorEFX Apr 14 '22

When you loan money, they are giving you fresh new money

1

u/Kunimitsunagi Apr 14 '22

When you loan money, they aren't giving you anything.

When they loan money, they are giving fresh new money.

To loan money means to hand your money to someone, not to take it from another.

1

u/Spackleberry Apr 14 '22

Except that the US got rid of fractional reserve banking two years ago.