Economic info every American needs to know

24. June 2009 by admin.

A lot of people are being told that Americans are getting screwed by our government’s rescue plan, but most Americans don’t really know how.  To give the reader a good example of why this bailout reeks of “mismanagement,” all we’d have to do is look at banks and their excess reserves.

Now, as a little background information, every US bank dealing with more than $43.9 million is ordered by the Federal Reserve to have roughly 10% of their deposit money as reserves on hand (12).  This means that if people put $100 in the bank, the bank has to have about $10 on hand and can lend the remaining $90 to other people.  Allowing banks to hold only a fraction of their loaned amount on hand is known as fractional reserve banking, and it essentially allows banks to create money (something that you and I would be thrown in jail for.  Check that last link out)(1)(2). Read the rest of this entry »

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