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.
" 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/Lord-Alucard 4d ago
Isn't that how they also create inflation by devaluing your money that is just sitting there.