Cyph3rp9nk on Nostr: On this day in 2008, Lehman Brothers went bankrupt. When I am asked why I am in ...
On this day in 2008, Lehman Brothers went bankrupt.
When I am asked why I am in Bitcoin I always answer, out of dignity.
It is a good time to explain how fractional reserve banking works and its ability to create money, not only the central bank can create money, there are different ways.
Fractional reserve banking is a system in which banks are only required to hold a fraction of their customers' deposits as reserves. This means that they can lend or invest the rest of the money deposited.
How does it work?
Initial deposit: A customer deposits $1000 with the bank.
Mandatory reserve: If the bank is required to keep only 1% of deposits, it will keep $10 as a reserve.
Loans: The bank can lend the remaining $990 to other customers.
Deposit and loan cycle: The borrowed $990 can be deposited in the same bank or in other banks, which in turn will keep 1% ($9.90) and lend the remainder ($980.10).
With an initial deposit of $1000 and a reserve ratio of 1%, the total money that can be created is $100000.
In January 2012 the ECB established that the reserves of European Banks should be 1% of their total deposits.
In March 2020 the FED established that the reserves of US banks should be 0% of their total deposits.
Yes, you read that right, 0%.
Do you understand why I am in Bitcoin? DIGNITY.
When I am asked why I am in Bitcoin I always answer, out of dignity.
It is a good time to explain how fractional reserve banking works and its ability to create money, not only the central bank can create money, there are different ways.
Fractional reserve banking is a system in which banks are only required to hold a fraction of their customers' deposits as reserves. This means that they can lend or invest the rest of the money deposited.
How does it work?
Initial deposit: A customer deposits $1000 with the bank.
Mandatory reserve: If the bank is required to keep only 1% of deposits, it will keep $10 as a reserve.
Loans: The bank can lend the remaining $990 to other customers.
Deposit and loan cycle: The borrowed $990 can be deposited in the same bank or in other banks, which in turn will keep 1% ($9.90) and lend the remainder ($980.10).
With an initial deposit of $1000 and a reserve ratio of 1%, the total money that can be created is $100000.
In January 2012 the ECB established that the reserves of European Banks should be 1% of their total deposits.
In March 2020 the FED established that the reserves of US banks should be 0% of their total deposits.
Yes, you read that right, 0%.
Do you understand why I am in Bitcoin? DIGNITY.