Banking on Bondage (Part 1): The Brilliant Yet Sinister Scheme of Fractional Reserve Lending Explained

How to discuss the Fiat Currency System Scam with friends and family without sounding like a conspiracy theory nut.

The lifeblood of the global fiat currency debt system is the powerhouse of currency creation: Fractional Reserve Lending.

This mechanism not only fuels the economy but also amplifies the “Currency Creation Scam” as I will explain in this article.

This cycle of deposit, lend, and re-deposit can inflate the initial deposit significantly, creating a vast majority of the currency supply not through government minting, but within the banking system itself.

Fractional Reserve Lending: Massive Leveraging of Your Bank Deposits

Fractional Reserve Lending operates on a principle as simple as it is brilliant.

Banks are required to keep only a fraction of your deposit in reserve, lending out the rest.

With a 10 percent reserve ratio, for example, a $100 deposit can magically transform into $90 of loanable funds.

This leaves us with a peculiar situation: your bank account still shows that you have a $100 balance, yet actually $90 is now elsewhere, in the hands of borrowers.

How?

Through the creation of “bank credit,” a digital mirage replacing real dollars.

Astonishingly, 92 to 96 percent of all fiat currency in existence is created (out of thin air) through multiplied cycles of bank credit.

Bank Credit: The True Secret of an Invisible Currency

This bank credit, while lacking the tangible form of cash, functions as currency within our economy. It emerges from a simple yet profound act: banks typing numbers into a computer.

This fabricated currency, stemming from your initial deposit, multiplies via loans as it moves through the banking system from one bank, to another and another.

A $100 deposit can balloon into $1,000 of bank credit, all while being backed by a mere $100 from the original deposit.

As loans are made and the currency circulates, each recipient re-deposits the funds, enabling further lending.

This cycle of deposit, lend, and re-deposit can inflate the initial deposit significantly, creating a vast majority of the currency supply not through government minting but within the banking system itself.

Astonishingly, 92 to 96 percent of all fiat currency in existence is created (out of thin air) through this cycle of bank credit.

The Real Cost of These Digital Currency Dollars Numbers

What does this mean for you, the everyday person? Let’s think this through step-by-step.

When you or your business takes out a loan, the proceeds of the loan simply go into another bank account, which creates more deposits (digital numbers) that are then re-loaned out again via fractional reserve lending, and then multiplied via the same process again and again.

This mechanism of currency multiplication underpins a system where the majority of our money supply is not real ‘money’ but a web of IOUs.

Every unit of fiat currency is an IOU created through fraction reserve lending that multiplied and expanded from one loan to the next and one bank to another.

While it fuels economic activity, it also represents a precarious balance, reliant on everyone’s continued faith and participation in the banking system.

The implications become obvious … a system built on fractional reserves is a system built on a foundation of trust, not real, tangible value.

In the next article, I will explain how this fabricated ‘wealth’ affects inflation, interest rates, and ultimately, the transfer of wealth from the many to the few.

Peeling back the layers of the fiat currency system and understanding these unsound mechanisms is the first step toward recognizing the potential true workings of our current financial infrastructure.

The fiat system has a finite self-life leading to an inevitable global financial reset based on more tangible, asset-based systems.