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Fractional Reserve Banking

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Fractional-reserve banking with varying reserve requirements

The process by which evil large banking establishments generate money. In this system, when a depositer gives the bank money, that money is then in turn lent out. A fraction of the original deposit is kept to ensure that the bank will have enough deposists on hand to cover day to day withdrawels, but in the event of a full panic bank run the bank would be unable to cover all deposits. Since the individual depositer still has access to their full deposit, but the lendee also has the value of their loan, in effect the bank doubles the amount of money in circulation. Somehow this is bad.

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