Fractional Reserve Banking

Fractional Reserve Banking

The Fractional Reserve Banking is an organization from the United States that controls the economy and flow of money. It is a banking system where the bank holds a fraction of the total deposit it has in the bank, and the rest of the deposit is loaned to the people. The fraction of deposit that is hold on is usually 10% or lower. This is the primary mode of operation from the retail banks located around the whole globe.

This banking system, called Fractional Reserve Banking prevents the destruction of a country's economy. It prevents inflation and future depressions such as the one of the 1930s. The Great Depression was an event that found many of economy savers such as the Fractional Reserve Banking. During the Great Depressions the banks collapsed because they did not had all the amount of money the people wanted.

MLA citation:
"Fractional-reserve Banking." - RationalWiki. Rational Wiki, 03 Apr. 2014. Web. 04 Apr. 2014. <http://rationalwiki.org/wiki/Fractional-reserve_banking>.