Very Reserve
What happens when someone pays their debt in a fractional reserve banking system?
What happens when someone pays their debt in a reservation system fractional banking? Is it just their past debts remaining from the reserve, or even all debts after it was ceded to other people with the original debt? For example, Person A then takes $ 100 becomes part of the reserve, then a person borrows from B $ 80 deposit, then a person C $ 64, taking into account the reserve requirement of 10% for banks.
I think you have it backwards. When a person borrows $ 100, does not become part of the reserve. But I understand your real question. They say the bank receives a deposit of $ 100. The reserve requirement says that for every $ 100 you have in deposits, which can emit X dollars in loans. Thus, a deposit of $ 100 increases your ability to make loans for $ X. Now suppose it has already provided everything is permitted. If a borrower repay the loan, the bank is less concerned with what is permitted, and thus can give that money back. Now suppose that a depositor wants their money. Now the bank have less money and thus not allowing as many loans. If in fact has been paid to its limit, it is in trouble and either have to call some loans or obtain new sources as soon as possible. To avoid this, banks pay attention to how much money they expect depositors to withdraw every day and make sure they have enough to cover it. At the same time, do not want their money sitting doing nothing and earn no interest. That's why banks always have something of their money on "overnight loans. This is money they know they can come back tomorrow. Http: / / www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V7T-4HYMSJY-1&_user=10&_rdoc=1&_fmt=&_orig=search&_sort=d&view=c&_acct=C000050221&_version=1&_urlVersion = 0 & _userid = 10 & md5 = http://ideas.repec.org/p/fip/fedgfe/2004-29.html 22487fbd87f0f15b9f9be1abdba42d2b One problem with the current financial crisis is that banks no longer trust other banks to pay these loans in the short term, without delay, which has raised interest rates on these loans: http://www.washingtonpost.com/wp- dyn/content/article/2008/09/30/AR2008093002629.html
Florida congressman Alan Grayson laughs in Ben Bernanke’s face – priceless!
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