Victoria Grant explains Fictional-Reserve Banking and why everything is crashing

[hazek]

I guess that's a problem then, I always thought FRB means a bank lends more than it's deposits, meaning they create money out of thin air, something which we know is damn near impossible with bitcoin. Lending out a % of deposits != FRB to me.

Your understanding is wrong.  A bank cannot lend out more than its deposits.  In fact, the reserve ratio is what specifies how much they can lend out.  They are allowed to lend (in the UK) 97% of deposits.

3 questions:
- Do depositors in such a bank have access to their deposits whenever they please?
- If no, do the depositors think they have access to their deposits whenever they please?
- If yes, how can that be if the bank lent 97% of their deposits to someone else?

1) Only if the bank allows demand deposits, and those usually have restrictions stated in contracts, such as with ATM cards' daily & per-transaction limits (though those are also to protect against fraudulent purchases being too out of control -- many banks will change the limits if you ask nicely).
2) I'd imagine most depositors think they do, but if people were stupid enough to believe the banks have full reserves of deposits, there would never be bank runs (except in cases where the bank has extremely negative equity) because depositors would "know" there should be no liquidity problems possible.
3) The problem you imply is why demand deposit schemes aren't implemented in the Bitcoin community. Successfully operating a bank with demand deposits and FRB requires a large volume of money spread across MANY different people. Meanwhile, CD programs are designed to fill the need of large depositors ($100k+). They're granted a higher interest rate but severely penalized if they withdraw early. This allows the bank to plan for when they need to have large reserves of cash on hand to pay those CD-holders. Since BTC lenders don't deal with thousands of accounts, we can really only do CDs or bonds. That's not because of anything inherent with Bitcoin, but because it would lead to disastrous bank runs.


The market is what should be finding what the proper reserve ratio is, not the government - meaning banks should not be forced by threat of state violence to hold any % of deposits in reserve, including 100%. If a bank tells a depositor that they have access to their funds via contract, then the bank needs to honor that or the depositor should be able to sue.

And I'm perfectly ok with this kind of definition of FRB.

But I defined FRB different and how it actually happens in the real world today. Where deposits are immediately used as reserves for loaning money that does not exist.

[1713925302]

1713925302

[realnowhereman]

I guess that's a problem then, I always thought FRB means a bank lends more than it's deposits, meaning they create money out of thin air, something which we know is damn near impossible with bitcoin. Lending out a % of deposits != FRB to me.

Your understanding is wrong.  A bank cannot lend out more than its deposits.  In fact, the reserve ratio is what specifies how much they can lend out.  They are allowed to lend (in the UK) 97% of deposits.

3 questions:
- Do depositors in such a bank have access to their deposits whenever they please?
- If no, do the depositors think they have access to their deposits whenever they please?
- If yes, how can that be if the bank lent 97% of their deposits to someone else?

Irrelevant.  Your assertion was that they loan out more than they have deposited.  Which is what I showed wasn't true.  I also note that you've jumped to a different argument in response to that demonstration rather than admit that your understanding was flawed.

Answer 1: yes they do.  It's called demand deposit and every current account operates under that principle.

Answer 2: n/a

Answer 3: Firstly, 97% is less than 100%. To counter your obvious "ho ho ho, what about when they all want their money out at once?"; the answer is that central banks act as the "lender of last resort".

So, Hazek starts shouting in the street "it's all a lie, the banks don't have enough money to pay you", and a bank run starts.  In the past a run would kill a bank, for no bank operated 100% reserve -- if they loaned a single penny then they were less than 100%.  Nowadays, if a run looks likely the retail banks simply call the central bank and say "please lend me a gazillion dollars".  The central bank can create as much as it wants, so can do this easily.  Everyone withdraws their money and nothing happens.  The retail banks are all still standing  (albeit with massive amounts owing to the central bank).

What then does everyone do with their money?  The answer is: deposit it back in the bank.  At which point the massive debt to the central bank can be repaid and everything carries on as it was. (this is the proper function of a central bank; unfortunately they all abuse their position and print money when there is no expectation that it is a temporary run-stopping measure)

(Incidentally, bitcoins will be good for us all here too, since there will be no central bank to create money the banks will have to try much harder to maintain the trust of their depositors and will have to evaluate the risks of default much more carefully.  We might even find that they don't feel that it's sensible to bang their reserve ratio up against the legal limit).

[P4man]

As I said above; money is under FRB is not created out of thin air.  It is created by pulling apart a zero into an asset and a matching liability.

The money created by FRB is indeed an increase in money supply;

FULL STOP, that is fraud, stealing from savers holding this same money.

With FRB, money is destroyed when debts are paid back. Do you consider that fraud too?
With FRB the money supply expands as the economy grows, and contracts when the economy does. Thats neither fraud nor insane.

[hazek]

Your assertion was that they loan out more than they have deposited.  Which is what I showed wasn't true.

+

Everyone withdraws their money and nothing happens.

=

does not compute


How is this not creating more money out of thin air which is what I actually said they do when they do FRB.

[Kluge]

I guess that's a problem then, I always thought FRB means a bank lends more than it's deposits, meaning they create money out of thin air, something which we know is damn near impossible with bitcoin. Lending out a % of deposits != FRB to me.

Your understanding is wrong.  A bank cannot lend out more than its deposits.  In fact, the reserve ratio is what specifies how much they can lend out.  They are allowed to lend (in the UK) 97% of deposits.

3 questions:
- Do depositors in such a bank have access to their deposits whenever they please?
- If no, do the depositors think they have access to their deposits whenever they please?
- If yes, how can that be if the bank lent 97% of their deposits to someone else?

1) Only if the bank allows demand deposits, and those usually have restrictions stated in contracts, such as with ATM cards' daily & per-transaction limits (though those are also to protect against fraudulent purchases being too out of control -- many banks will change the limits if you ask nicely).
2) I'd imagine most depositors think they do, but if people were stupid enough to believe the banks have full reserves of deposits, there would never be bank runs (except in cases where the bank has extremely negative equity) because depositors would "know" there should be no liquidity problems possible.
3) The problem you imply is why demand deposit schemes aren't implemented in the Bitcoin community. Successfully operating a bank with demand deposits and FRB requires a large volume of money spread across MANY different people. Meanwhile, CD programs are designed to fill the need of large depositors ($100k+). They're granted a higher interest rate but severely penalized if they withdraw early. This allows the bank to plan for when they need to have large reserves of cash on hand to pay those CD-holders. Since BTC lenders don't deal with thousands of accounts, we can really only do CDs or bonds. That's not because of anything inherent with Bitcoin, but because it would lead to disastrous bank runs.


The market is what should be finding what the proper reserve ratio is, not the government - meaning banks should not be forced by threat of state violence to hold any % of deposits in reserve, including 100%. If a bank tells a depositor that they have access to their funds via contract, then the bank needs to honor that or the depositor should be able to sue.

And I'm perfectly ok with this kind of definition of FRB.

But I defined FRB different and how it actually happens in the real world today. Where deposits are immediately used as reserves for loaning money that does not exist.

I'm still not "getting it." Banks don't get to pick a reserve amount and then are able to loan out some multiple of that, they have to keep a % of deposits on-hand as a reserve. The alternative to fractional-reserve and full-reserve is no-reserve, where banks can freely loan out as much cash as they have -- it doesn't mean they get to create an infinite amount of cash to loan out.

Let's say the reserve ratio for banks in the US is a flat 9%. That means if a bank has $100b in deposits, they must keep $9b as cash or something which can be near-immediately turned into cash or regulators will shut them down. It doesn't mean that banks can use the $100b from deposits and claim it as a reserve which multiplies their amount to lend to $1.11t. I'm pretty darn sure that doesn't happen anywhere, though if I'm wrong, my mind'd be blown.

[hazek]

With FRB, money is destroyed when debts are paid back. Do you consider that fraud too?

This is only possible because of the original fraud. Without it, this second thing cannot happen and therefor is irrelevant.

With FRB the money supply expands as the economy grows, and contracts when the economy does. Thats neither fraud nor insane.

Ahhh who cares if savers got the shaft in the process right?

[realnowhereman]

Your assertion was that they loan out more than they have deposited.  Which is what I showed wasn't true.

+

Everyone withdraws their money and nothing happens.

=

does not compute


How is this not creating more money out of thin air which is what I actually said they do when they do FRB.

Excellent selective quoting.

The rest of my post pointed out that in the event of a bank run it was the central bank that created money not the banks themselves; and that when the run is over, that money is destroyed again.

Cash money in people's fists at the end of the run does them no good; they instantly start spending it or depositing it.  If they spend it it goes to a merchant who puts it back in the bank, the central bank debt is repaid and the money is destroyed again.

The money that is "created" is merely so those panicing people can hold the bits of paper in their hand.  There is no more or less money in the economy than there was when the bits of paper were 0s and 1s on the banks computer screen.

[hazek]

I guess that's a problem then, I always thought FRB means a bank lends more than it's deposits, meaning they create money out of thin air, something which we know is damn near impossible with bitcoin. Lending out a % of deposits != FRB to me.

Your understanding is wrong.  A bank cannot lend out more than its deposits.  In fact, the reserve ratio is what specifies how much they can lend out.  They are allowed to lend (in the UK) 97% of deposits.

3 questions:
- Do depositors in such a bank have access to their deposits whenever they please?
- If no, do the depositors think they have access to their deposits whenever they please?
- If yes, how can that be if the bank lent 97% of their deposits to someone else?

1) Only if the bank allows demand deposits, and those usually have restrictions stated in contracts, such as with ATM cards' daily & per-transaction limits (though those are also to protect against fraudulent purchases being too out of control -- many banks will change the limits if you ask nicely).
2) I'd imagine most depositors think they do, but if people were stupid enough to believe the banks have full reserves of deposits, there would never be bank runs (except in cases where the bank has extremely negative equity) because depositors would "know" there should be no liquidity problems possible.
3) The problem you imply is why demand deposit schemes aren't implemented in the Bitcoin community. Successfully operating a bank with demand deposits and FRB requires a large volume of money spread across MANY different people. Meanwhile, CD programs are designed to fill the need of large depositors ($100k+). They're granted a higher interest rate but severely penalized if they withdraw early. This allows the bank to plan for when they need to have large reserves of cash on hand to pay those CD-holders. Since BTC lenders don't deal with thousands of accounts, we can really only do CDs or bonds. That's not because of anything inherent with Bitcoin, but because it would lead to disastrous bank runs.


The market is what should be finding what the proper reserve ratio is, not the government - meaning banks should not be forced by threat of state violence to hold any % of deposits in reserve, including 100%. If a bank tells a depositor that they have access to their funds via contract, then the bank needs to honor that or the depositor should be able to sue.

And I'm perfectly ok with this kind of definition of FRB.

But I defined FRB different and how it actually happens in the real world today. Where deposits are immediately used as reserves for loaning money that does not exist.

I'm still not "getting it." Banks don't get to pick a reserve amount and then are able to loan out some multiple of that, they have to keep a % of deposits on-hand as a reserve. The alternative to fractional-reserve and full-reserve is no-reserve, where banks can freely loan out as much cash as they have -- it doesn't mean they get to create an infinite amount of cash to loan out.

Let's say the reserve ratio for banks in the US is a flat 9%. That means if a bank has $100b in deposits, they must keep $9b as cash or something which can be near-immediately turned into cash or regulators will shut them down. It doesn't mean that banks can use the $100b from deposits and claim it as a reserve which multiplies their amount to lend to $1.11t. I'm pretty darn sure that doesn't happen anywhere.

Of course if they were the only bank doing this. But they are not and when the loans get deposited at some other bank that other bank can again loan out a fraction and again and again and again and the end results is what I said it was.

[realnowhereman]

Of course if they were the only bank doing this. But they are not and when the loans get deposited at some other bank that other bank can again loan out a fraction and again and again and again and the end results is what I said it was.

Nonsense.  It makes no difference whether it is one bank or one "banking system".  There are loans and there are deposits.  No bank is allowed to lend more than it has had deposited.  If anything, the fact that there are multiple banks makes it harder for them to lend right up to the theoretical maximum as determined by the reserve ratio.

[hazek]

Your assertion was that they loan out more than they have deposited.  Which is what I showed wasn't true.

+

Everyone withdraws their money and nothing happens.

=

does not compute


How is this not creating more money out of thin air which is what I actually said they do when they do FRB.

Excellent selective quoting.

The rest of my post pointed out that in the event of a bank run it was the central bank that created money not the banks themselves; and that when the run is over, that money is destroyed again.

Cash money in people's fists at the end of the run does them no good; they instantly start spending it or depositing it.  If they spend it it goes to a merchant who puts it back in the bank, the central bank debt is repaid and the money is destroyed again.

The money that is "created" is merely so those panicing people can hold the bits of paper in their hand.  There is no more or less money in the economy than there was when the bits of paper were 0s and 1s on the banks computer screen.

ORLY?:

[JusticeForYou]

It is not 'just' deposits. It is 'assets'.

When the bank loans 100K for a house, the house becomes an asset so the growth of the unpaid portion of the house increases that asset. But made it much worse besides the housing crash, is that the Accounts receivable became an 'asset', so instead of the 100K, they counted 300K they 'Will' be paid from the 100K loan as an asset.

[hazek]

Of course if they were the only bank doing this. But they are not and when the loans get deposited at some other bank that other bank can again loan out a fraction and again and again and again and the end results is what I said it was.

Nonsense.  It makes no difference whether it is one bank or one "banking system".  There are loans and there are deposits.  No bank is allowed to lend more than it has had deposited.  If anything, the fact that there are multiple banks makes it harder for them to lend right up to the theoretical maximum as determined by the reserve ratio.

You are being completely oblivious to the time factor.

UGH, maybe this cartoon will explain to you http://www.youtube.com/watch?v=Zx0vrR2BFp8 The explanation starts at 13:30 and is so clear and easy to understand a 5year old will get it.

[realnowhereman]

The money that is "created" is merely so those panicing people can hold the bits of paper in their hand.  There is no more or less money in the economy than there was when the bits of paper were 0s and 1s on the banks computer screen.

ORLY?:

Ok, I'm out.  You're not worth debating with.  Here's what I said as well:

What then does everyone do with their money?  The answer is: deposit it back in the bank.  At which point the massive debt to the central bank can be repaid and everything carries on as it was. (this is the proper function of a central bank; unfortunately they all abuse their position and print money when there is no expectation that it is a temporary run-stopping measure)

The central banks print money when there is no call to.  That is completely independent of any fractional reserve banking that's going on and would go on even if you completely outlawed FRB.  The fact that they've been increasing the monetary base, M0 is nothing at all to do with FRB.

Edit.  Incidentally: see that little drop back down after the massive spike up?  That is the only part that represents the central bank doing what it should for FRB.  After the threat of a run was over, they destroyed some money, clearing the some of the debts the retail banks had incurred and bringing the monetary base down.

[Kluge]

But I defined FRB different and how it actually happens in the real world today. Where deposits are immediately used as reserves for loaning money that does not exist.

I'm still not "getting it." Banks don't get to pick a reserve amount and then are able to loan out some multiple of that, they have to keep a % of deposits on-hand as a reserve. The alternative to fractional-reserve and full-reserve is no-reserve, where banks can freely loan out as much cash as they have -- it doesn't mean they get to create an infinite amount of cash to loan out.

Let's say the reserve ratio for banks in the US is a flat 9%. That means if a bank has $100b in deposits, they must keep $9b as cash or something which can be near-immediately turned into cash or regulators will shut them down. It doesn't mean that banks can use the $100b from deposits and claim it as a reserve which multiplies their amount to lend to $1.11t. I'm pretty darn sure that doesn't happen anywhere.

Of course if they were the only bank doing this. But they are not and when the loans get deposited at some other bank that other bank can again loan out a fraction and again and again and again and the end results is what I said it was.

That still doesn't make sense. The amount doesn't multiply.

If Joe Bob loans $100m to Bank A, then Bank A deposits in Bank B, then Bank B deposits in Bank C....

Bank A is only allowed to loan $91m to Bank B and must keep $9m on-hand to pay all of their depositors. Bank A now has $9m in cash, $91m as an asset in the form of a deposit, but they still have a $100m liability to Joe Bob, so they're done -- Bank A can't loan out any more of the $100m. They have $100m assets, $100m liabilities from the transaction.

Bank B now has a $91m deposit (cash). Bank B needs to keep $8.19m as a cash reserve and deposits $82.81m in Bank C. Bank B now has $8.19m as cash, and $82.81m as an asset in the form of a deposit with Bank C, but they still have a $91m liability to Bank B. Bank B is now done, they can't loan anymore money from the transaction which started with Joe Bob's deposit.


Bank C now has $82.81m, and let's say they loan it out to Producto Corp. at an interest rate high enough to profit off the deposit they got from Bank B. Bank C needs to keep $7.4529m in reserves to pay depositors, so they loan $75.3571m to Producto Corp.



Let's looks at the totals:

Assets created on paper: $373.81m ($24.6429m held as cash by the banks, $349.1671m in assets as the form of deposits)
Liabilities created on paper: $373.81m (assuming the times match up perfectly, when Bank C is repaid by Producto Corp., they pay Bank B $82.81m + interest, Bank B pays Bank A $91m + interest, and Bank A pays back Joe Bob $100m + interest)
Amount of money created when the transaction's over: 0 (they cancel each other out)

Yeah - I guess Bank A and Bank B could keep depositing money in each other, and then they could build up their assets (AND liabilities) by quadrillions but it doesn't make sense. It doesn't create any additional money to loan, just a bunch of pointless paperwork.


ETA: The exact same thing could be done with Bitcoin, except we're not subject to reserve ratios, so we could actually lend the whole amount out infinitely to each other. I loan Patrick 100BTC, he loans me 100BTC, and we keep doing it back and forth. We could have 1 trillion BTC worth of assets, but we'd also have $1t worth of liabilities. We could even not do the BTC exchange and just pass along "IOU BTC" notes to each other. Lending/depositing with each other doesn't create money, it just creates assets and liabilities on paper.

[hazek]

I guess that's a problem then, I always thought FRB means a bank lends more than it's deposits, meaning they create money out of thin air, something which we know is damn near impossible with bitcoin. Lending out a % of deposits != FRB to me.

Your understanding is wrong.  A bank cannot lend out more than its deposits.  In fact, the reserve ratio is what specifies how much they can lend out.  They are allowed to lend (in the UK) 97% of deposits.

3 questions:
- Do depositors in such a bank have access to their deposits whenever they please?
- If no, do the depositors think they have access to their deposits whenever they please?
- If yes, how can that be if the bank lent 97% of their deposits to someone else?

Irrelevant.  Your assertion was that they loan out more than they have deposited.  Which is what I showed wasn't true.  I also note that you've jumped to a different argument in response to that demonstration rather than admit that your understanding was flawed.

Answer 1: yes they do.  It's called demand deposit and every current account operates under that principle.

Answer 2: n/a

Answer 3: Firstly, 97% is less than 100%. To counter your obvious "ho ho ho, what about when they all want their money out at once?"; the answer is that central banks act as the "lender of last resort".

Btw I let this slide but I shouldn't have since it's the crucial point of my argument.

Sooooo the depositors can spend their money that a loan was made based on and the borrower can naturally spend his borrowed money? How does this happen without creating money out of thin air?

[hazek]

But I defined FRB different and how it actually happens in the real world today. Where deposits are immediately used as reserves for loaning money that does not exist.

I'm still not "getting it." Banks don't get to pick a reserve amount and then are able to loan out some multiple of that, they have to keep a % of deposits on-hand as a reserve. The alternative to fractional-reserve and full-reserve is no-reserve, where banks can freely loan out as much cash as they have -- it doesn't mean they get to create an infinite amount of cash to loan out.

Let's say the reserve ratio for banks in the US is a flat 9%. That means if a bank has $100b in deposits, they must keep $9b as cash or something which can be near-immediately turned into cash or regulators will shut them down. It doesn't mean that banks can use the $100b from deposits and claim it as a reserve which multiplies their amount to lend to $1.11t. I'm pretty darn sure that doesn't happen anywhere.

Of course if they were the only bank doing this. But they are not and when the loans get deposited at some other bank that other bank can again loan out a fraction and again and again and again and the end results is what I said it was.

That still doesn't make sense. The amount doesn't multiply.

Demand deposits. You would be right if banks didn't allow depositors to have access to their depoists, but they do and that's what creates money out of thin air and is the fraud that robes the savers that I'm desperately trying to point out.

[hazek]

That still doesn't make sense. The amount doesn't multiply.

If Joe Bob loans $100m to Bank A, then Bank A deposits in Bank B, then Bank B deposits in Bank C....

Bank A is only allowed to loan $91m to Bank B and must keep $9m on-hand to pay all of their depositors. Bank A now has $9m in cash, $91m as an asset in the form of a deposit, but they still have a $100m liability to Joe Bob, so they're done -- Bank A can't loan out any more of the $100m. They have $100m assets, $100m liabilities from the transaction.

Yes but Joe Bob still has access to his $100m through demand deposits while the bank lent $91m to someone else which is where the money creation happens.

[hazek]

Maybe FRB isn't as much fraud as are demand deposits?

[Kluge]

That still doesn't make sense. The amount doesn't multiply.

If Joe Bob loans $100m to Bank A, then Bank A deposits in Bank B, then Bank B deposits in Bank C....

Bank A is only allowed to loan $91m to Bank B and must keep $9m on-hand to pay all of their depositors. Bank A now has $9m in cash, $91m as an asset in the form of a deposit, but they still have a $100m liability to Joe Bob, so they're done -- Bank A can't loan out any more of the $100m. They have $100m assets, $100m liabilities from the transaction.

Yes but Joe Bob still has access to his $100m through demand deposits while the bank lent $91m to someone else which is where the money creation happens.

Bank A's reserves are made up of waaaay more cash than what they need to keep on-hand for Joe Bob. They're not just loaning to Joe Bob, but likely tens of thousands of other people who also make up Bank A's cash reserves. Let's say Bank A has $5b total of deposits. Bank A thus needs $450m in reserves, so they'll have no problem paying Joe Bob if he needs money right away, and if four other people withdrew $100m on the same day, Bank A would simply request an intra-bank loan (often called "overnight loans"). These short-term loans by banks to other banks ensure they're able to meet the reserve ratio for cash-on-hand enforced by government regulators. In this case, Bank A has -$50m and needs a ~$525m loan from another bank. These loans usually happen within a few hours because banks have established reputations with each other. We do something similar with Bitcoins. If I need to pay a depositor but don't have enough on-hand, I ask Patrick or someone along those lines for a short-term loan I pay a minimal % on. When I'm able to liquidate my investments, or loan repayments are made to me, I pay Pat.

Maybe FRB isn't as much fraud as are demand deposits?

Now we're getting somewhere, and that's why I think more options should exist. Banks which keep full reserves are essentially payment processors providing online banking and safe storage of money, and they'll charge depositors some annual % as well as much higher fees than we're used to.

If people want to get paid for depositing, they should commit to long-term loan contracts (CDs).

[hazek]

That still doesn't make sense. The amount doesn't multiply.

If Joe Bob loans $100m to Bank A, then Bank A deposits in Bank B, then Bank B deposits in Bank C....

Bank A is only allowed to loan $91m to Bank B and must keep $9m on-hand to pay all of their depositors. Bank A now has $9m in cash, $91m as an asset in the form of a deposit, but they still have a $100m liability to Joe Bob, so they're done -- Bank A can't loan out any more of the $100m. They have $100m assets, $100m liabilities from the transaction.

Yes but Joe Bob still has access to his $100m through demand deposits while the bank lent $91m to someone else which is where the money creation happens.

Bank A's reserves are made up of waaaay more cash than what they need to keep on-hand for Joe Bob. They're not just loaning to Joe Bob, but likely tens of thousands of other people who also make up Bank A's cash reserves. Let's say Bank A has $5b total of deposits. Bank A thus needs $450m in reserves, so they'll have no problem paying Joe Bob if he needs money right away, and if four other people withdrew $100m on the same day, Bank A would simply request an intra-bank loan (often called "overnight loans"). These short-term loans by banks to other banks ensure they're able to meet the reserve ratio for cash-on-hand enforced by government regulators. In this case, Bank A has -$50m and needs a ~$525m loan from another bank. These loans usually happen within a few hours because banks have established reputations with each other. We do something similar with Bitcoins. If I need to pay a depositor but don't have enough on-hand, I ask Patrick or someone along those lines for a short-term loan I pay a minimal % on. When I'm able to liquidate my investments, or loan repayments are made to me, I pay Pat.

And that is the fraud that FRB enables. Joe Bob and all the other depositors believe they have access to more money than they actually do and this belief reflects in prices robbing savers. If Joe Bob didn't believe he could have immediate access to his deposits he wouldn't be out there competing for goods or services and savers wouldn't get robbed. I don't care whether savers get robbed because of money actually being created out of thin air or just imagined it was created.

Joe Bob thinks he has his deposits available to spend immediately and so all the other depositors meanwhile the bank lent a fraction to someone else who again probably deposited their borrowed money with a bank and again believe they have immediate access to it while the bank loaned a fraction of it.

Even if the actual money supply hasn't increased it has increased in the minds of all the depositors which is what ultimately really matters when good and services are being competed for and how the savers get the shaft.

It's an unseen fraud hence why I'm not getting anywhere in this thread.