Fractional Reserve Banking System

The fractional reserve banking system is presented in all the process of the creation of money. The FED, produced a document that is called Modern Money Mechanics, where its purpose is to describe the money creation. According to the film, Zeitgeist Addendum, and what i understood, there are multiple steps to create the money that we spend every day. The first step is when the government give bonds to the Federal Reserve (FED), so they can start to create what is called money, so they can give it back to the government. The next step is after the money is with the government again, they give it to a bank and in that process occurs the legalization of the money. The final step is when people start borrowing money from the banks.

That last step is considered as a debt, so money eventually means a debt. It can be explained as LOAN DEMAND+RESERVE=NEW MONEY CREATED. But the value that is given to this new money was given by the money that already exist. This leads to inflation, that is when the general prices goes up and the dollar value goes down. Inflation is a tax for for the people. There is a 96% of devaluation in 94 years. Finally, with all this data i think that this reserve system, was a temporary solution to prevent recession but in another part a new solution that developed a stable economy that shows us how much people depend on how this system goes.

Source:
"ZEITGEIST: ADDENDUM | 2008 (HD)." YouTube. N.p., 28 Dec. 2012. Web. 03 Apr. 2014. <https://www.youtube.com/watch?v=HbvCxMfcKv4>.