Why do some people state that fractional reserve banking does not increase the money supply?

[Ronin Truth]

Because some people are really ignorant, and even stupid, and simply have not even bothered to do any of their homework on the subject.

 

[Madison320]

I hate banks and think all banks should die. I don't care if it makes purchases more difficult.

Central banks with govt monopoly power are bad. Private banks are good. Private banks in a free market system allow businesses to borrow money accumulated from savers. It's a win-win situation. Savers get paid interest and businesses get loans to make large capital investments like build a factory for example. Without private banks, our standard of living would be much lower.

 

[Zippyjuan]

This may be true if we were only dealing with dollar bills being loaned out. Checks and electronic banking made this much simpler to get around.

The reason they can get away with creating money out of thin air, is that they have ability to just create a number in your bank account out of thin air that you owe back, something no company or person has the ability to do.

They loan you $90 of the $100 dollars Johnny deposited, then they still have $100 actual dollars in their vault, but added a promise to add $90 more from a guy who can't just create numbers in his bank account.

When repaid, you have successfully created $190 out of $100. It is that simple. You just want to make it sound complicated to confuse people, just like you always do.

Cash money and electronic money are subject to the same rules. Loans are not allowed to exede 90% of deposits. If it is "so simple to get around" why do banks have to balance their books on outstanding loans vs deposits regularly and why don't loans exceed deposits?

Source: St. Louis Federal Reserve, Federal Reserve Board of Governors, as of 11/18/2013.

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