Fractional Reserve Banking Exposed

Updating those parameters updates everything else automatically.

To view a time series of the iterations of the fractional reserve banking, simply click the “Show me in a table” button. Frackin’ Reserve will create an HTML page with a table for you, and open it in your default browser. This is a table made using the default parameters:

Iteration #	Deposited by Customer	Amount Held in Reserve from Deposit	Amount Currrently Available to Lend Out from Deposit	Total Amount that “Can” be Lent Out	Total Amount that Has Been Lent Out	Total Amount Held in Reserve	Total Amount that Customers Believe They Have	Amount of Interest for 10 year(s) @ 5.0% on Loaned Money CAN NEVER BE REPAID!
1	1,000.00	100.00	900.00	900.00	0.00	100.00	1,000.00	0.00
2	900.00	90.00	810.00	1,710.00	900.00	190.00	1,900.00	582.31
3	810.00	81.00	729.00	2,439.00	1,710.00	271.00	2,710.00	1,106.39
4	729.00	72.90	656.10	3,095.10	2,439.00	343.90	3,439.00	1,578.06
5	656.10	65.61	590.49	3,685.59	3,095.10	409.51	4,095.10	2,002.56
6	590.49	59.05	531.44	4,217.03	3,685.59	468.56	4,685.59	2,384.61
7	531.44	53.14	478.30	4,695.33	4,217.03	521.70	5,217.03	2,728.46
8	478.30	47.83	430.47	5,125.80	4,695.33	569.53	5,695.33	3,037.92
9	430.47	43.05	387.42	5,513.22	5,125.80	612.58	6,125.80	3,316.44
10	387.42	38.74	348.68	5,861.89	5,513.22	651.32	6,513.22	3,567.10
Fractional Reserve Banking is EVIL.

You can set your own parameters and create any table you want. This is useful to see exactly what is happening at each iteration in the process, and how it grows like an out-of-control brush fire.

Using Frackin’ Reserve!

Frackin’ Reserve! is super simple to use. Simply change the parameters, and everything is updated automatically. Here’s a quick rundown of what each parameter and output result is:

Initial Parameters for Fractional Reserve Calculations

Initial deposit: This is the first “kick-starter” for the whole system. It puts some money into the banking system, and is the foundation for all subsequently created fiat money.

Fractional reserve factor: This is expressed as a factor, though most often it is expressed as a percentage. It is also called the “reserve requirement”, “cash reserve ratio”, or “reserve ratio”.

Iterations: This is the number of times that people deposit money into the system. The first iteration is the initial deposit. All subsequent iterations are loans, create fiat (fake) money, and bear interest.

Fractional Reserve Results on the Money Supply

What customers think they have: This is the running sum of what all customers have deposited into the banking system.

What the bank has in reserve: This is amount of the initial deposit that the bank actually has kept back in reserve. It is a running sum.

What the bank can loan out: This is the amount that the bank has the right to loan out from all past deposits. It is a running sum.

What the bank has loaned out (fake money): This is the actual amount loaned out by the bank. On the first iteration, it is zero. It is a running sum.

What the bank’s next loan is: This is the amount that the bank’s next loan will be. It is always smaller than the previous one. It is not a running sum.

Interest Owed Parameters

Interest periods (in years): This is the number of years that you wish to calculate compound interest on.

Interest rate ( × 100 = %): This is the interest rate expressed as a decimal. Multiply it by 100 to get the percentage.

Compounded: This is how you wish the interest to be compounded. It can be one of annually, monthly, daily, hourly, by the minute, by the second, or by the “tick”. A tick is a unit of measurement, and there are 10,000,000 ticks per second.

Interest Owed Results

Total interest on money lent out: This is the amount of interest owed on all loans. It does not include the principal; it is only the interest.

Total interest and principal: This is the total of all the interest and the principal. It is equal to the “Total interest on money lent out” plus the principal.

It should be noted that Frackin’ Reserve! is a simple simulator, and does not take into account the rate of iterations. This is largely an academic point though, and doesn’t really matter all that much. It is only useful if you want to know what the state of things are at some particular point in time for a given rate of loans. i.e. it has no bearing on illustrating the way fractional reserve banking works. The iterations in reality are fast enough to discount the rate as being unimportant. The short and simple version of that is that Frackin’ Reserve! assumes that all loans and deposits for all iterations are made at the same time. If you don’t understand what that means, then don’t worry. It’s really only a minor technical note for those that already know about how the system works. These are not the droids you are looking for…

Code Notes for Programmers and Non-Programmers

The source code is EXTENSIVELY commented with the express purpose of making it easy to follow for non-programmers.

So, even if you do not program, there’s lots of information in there, and it’s basically a tutorial on its own.

For programmers… It’s ugly. Yeah… I did naughty things because it’s easier to read for non-programmers that way. This is meant to be educational about fractional reserve banking, and not a programming tutorial. So, when you see everything stuck in 1 method, just remember that it’s all for a good cause.

Ryan Smyth is a Canadian expat currently living in Australia. He works in software, but is passionate about many current issues and the impending demise of freedom and privacy. He can be found blathering on (and sometimes ranting) at his blog, Cynic.me.

http://www.activistpost.com/2012/05/frackin-reserve-fractional-reserve.html#more