FRACTIONAL RESERVE BANKING SYSTEM

The United States fractional banking system is a system that basically creates money out of thin air. The process by which the money is made is the following. First the US government asks for money to the Federal Reserve and gives them the printed paper. Then the US government puts the money into a private account. The bank is obligated to keep the 10% of the money physical and the other 90% is available for loans. This generates money from thin air. For every 10 billion dollars the US government creates, about 80 billions are created from thin air.

This system only generates difference among social clases and a bigger amount of poverty. Inflation is one of the main characteristics of the fractional reserve banking system. This is basically the devaluation of the money and the production of more money. This is very similar to the system in colombia but it has a bigger rate of inflation.