Post
Topic
Board Economics
Re: BitCoin, Fractional Reserve Banking, and lesson of history.
by
freetx
on 03/07/2011, 15:05:10 UTC
Thats not how banking works. The bank acts as a middleman between the borrower and the lender and the bank's profit is the spread between the two.

If you deposit $100 into the bank and they lend it out....how come you can go withdraw $20 to buy some lunch?

Because the money lent is largely 'created' on the borrowers signature.