Fractional Reserve Banking & The Federal Reserve
Fractional reserve banking
Fractional-reserve banking is the practice whereby a bank retains funds equal to only a portion of the amount of its customers’ deposits as readily available reserves (currency on hand at the bank plus deposit accounts for that bank at the central bank)
from which to satisfy demands for payment. The remainder of
customer-deposited funds is used to fund investments or loans that the
bank makes to other customers.[1] Most of these loaned funds are later redeposited into banks, allowing further lending. Because bank deposits are usually considered money in their own right, fractional-reserve banking permits the money supply to grow to a multiple of the underlying reserves of base money originally created by the central bank.[2][3]To mitigate the risks of bank runs (when a large proportion of depositors seek withdrawal of their demand deposits at the same time) or, when problems are extreme and widespread, systemic crises, the governments of most countries regulate and oversee commercial banks, provide deposit insurance and act as lender of last resort to commercial banks.[2][3] In most countries, the central bank (or other monetary authority) regulates bank credit creation, imposing reserve requirements and other capital adequacy ratios. This limits the amount of money creation that occurs in the commercial banking system, and helps ensure that banks have enough funds to meet the demand for withdrawals.[3]
Fractional-reserve banking is the current form of banking in all countries worldwide.[4]
http://en.wikipedia.org/wiki/Fractional_reserve_banking
Marc Faber on shadow banking, market psychology, & the global impact of American monetary policy
Read more: http://www.foxnews.com/politics/2011/04/26/critics-say-fed-policies-devalue-dollar/#ixzz2aUe4In33
The dollar has lost over 96% of its value
To devalue a currency, like the dollar, means that the value of the currency decreases. The value of a currency is also referred to as purchasing power. The more a currency is devalued, the less you can buy with it because the purchasing power decreases.
The graph below shows the purchasing power of the US dollar since 1913. 1913 is when the Federal Reserve, which is actually a privately-owned central bank, took over the US banking system. As you can see, it’s been pretty much downhill since the Fed took over. In fact, the dollar has lost over 96% of its value. That means today’s dollar would be worth less than 4 cents back in 1913.
Chinese national sues Federal Reserve for devaluing the dollar
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