Fractional Reserve Banking

Fractional Reserve Banking is also known for Fractional Deposit Lending, and it is used by a lot of countries most of the countries in the world operate by this system. This banks operate in a way that they are never loosing , and they are trying also to prevent inflation. Inflation is when there is a lot of money and the value of the money is lost, around 1930 there was the great depression and there was a lot of inflation and the Fractional Reserve Banking system prevent this. It consists of taking a little percent of what they have and always having it there, they are always with money and all the money that enters to them they get a percent and the rest they let it for the people to use it. This is also done to expand the economy, and they can lend to other countries money.

On the film we also observed how can inflation happen, and it is because people start to produce a lot of money and there is so much money that it lists its value.  In the video it was a part were they clearly explained how money each time looses more and more its value, they said 1 dollar in 1913 is like almost 27 dollars in 2010 that is a huge difference, and is a lot of loss in the value of the money. I understand from the video that the new money they were making it was just a piece of paper but the real value of this money was given by the money that already existed. This banking system is used in most of the countries, this can help the countries to maintain a estable economy and prevent they economic crises. This banks try to show people they can multiply the money and put it to produce because most of the times people give a bank deposit they consider it as money in their own right.