Banking and its effects on the money supply and asset bubbles: Part 2

Fractional reserve banking in a nutshell. What is it and how does it work?

Dear Reader,

In my bank I described in Part 1, it is unlikely that we will have too many problems. The main issue will be if one of our debtors defaults and I, as the bank, have to use my money to top up your deposit. The implications of a default here are relatively small and unlikely as I focus my lending on assets that will raise the income of my deb…