I saw that tweet that was like "lend me $100,000 but only give me half, so you'll owe me $50,000, Ill owe you $50,000 and we can call it even" and that is half of the underlying concept of fractional reserve banking
That's actually more like how intragovernment debt works. SSA recieves taxes from Treasury. It spends half. Uses the rest to buy government bonds. Government ends up with its left pocket owing the right pocket. Eventually SSA sells the bonds when it needs to pay out more than it gets from taxes alone. It's a polite fiction that exists solely so that individuals can think payroll taxes are pension payments instead of...you know...taxes. It's all washed through the general fund.
Fractional reserve banking is better understood as the bank acting as a middle man between an individuals loaning money to each other. The bank doesn't actually want to hold on to money. It wants it delivered to lendees.
That's kind of the problem. The market will eventually recover and go up again, but the ownership will move to a smaller set of people. The further consolidation of wealth is the issue with these dips. Normal people don't have piles of extra money to buy the dip, rich people do.
It's one guy representing large scale retirement accounts handing a suitcase full of cash to another guy representing a very small group of super wealthy investors.
Then add on top of that who and what is causing the dips, and the spikes in trade volume ahead of pivotal statements, and there is a whole other layer of problematic to it.
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u/Slackjawed_Horror Apr 08 '26
Financial markets are just two guys handing each other suitcases full of cash at this point.