explanation of fractional reserve banking I have found. Last 37 pages more esoteric. The early pages explain:
1) Money is created on loan origination.
2) Money is destroyed on loan repayment. (Self-destruct Mechanism)
3) Created money (with no backing) from both tiers is used as reserves.
4) The system has two tiers:
a) FED creates cash at whim, cash exchanged for US Bonds enters circulation.
b) Commercial Banks use cash and originated credit as reserves for loans.
5) There are three types of debt (had to make this up myself to grok it)
a) Simple Debt: the kind most people understand, paying the plumber recognized in cash accounting.
b) Obligatory Debt: A contractual promise to assume debt in future, kids college, social security, medicaid. Recognized in GAAP based accounting.
c) Monetary Debt: the other side of the balance sheet in a loan from the money, credit or cash. The Anti-matter. Extinguishes buying power on loan repayment.
Want DP delivered to your inbox daily? Subscribe here: