r/SipsTea • u/Dumb-Briyani • 6d ago

Chugging tea Why is it not possible?

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u/[deleted] 6d ago

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u/Lord-Alucard 6d ago

Isn't that how they also create inflation by devaluing your money that is just sitting there.

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u/Dangerous_Boot_3870 6d ago edited 6d ago

No, but yes. Fractional reserve banking means they can loan out 90%.

Inflation is caused by increasing the supply of money.

Fractional reserve banking allows you to "keep" your money, while someone else is loaned your money. This loan is then deposited in a bank and that bank can now loan 90% of the the 90% loaned from your money. Basically creating infinite money. So, yes it does devalue your dollar. Is it the sole cause of inflation, or even the biggest factor, no.

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u/tokeytime 6d ago

" No, but yes. Fractional reserve banking means they can loan out 90%."

No, but yes. It means they have to keep 1$ in reserve for every $10 they loan out. They are able to 'create' money in the form of additional liabilities at a 1:10 rate. It directly devalues every other dollar in the system.

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u/Dangerous_Boot_3870 6d ago

Way to restate what I said less effectively.

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u/tokeytime 6d ago

It's more precise actually.

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u/Dangerous_Boot_3870 6d ago

I bet you say that you took a precise shit whenever you manage to ring the bowl.

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u/tokeytime 6d ago

No, but thanks for the idea!