The Fractional Reserve Banking System

The Illusionary Black Magic of A Fractional Reserve Banking System Enables Banks to Print, Use and Leverage Money
That DOESN'T Exist to Create, For Themselves, Even
"More Money" That Doesn't Exist Out of "Thin Air"

fractional reserve system creates magic money

A fractional reserve banking system is a monetary system that operates in and encourages debt, "legally"
steals money from those who fall prey to their easy credit acquisition scheme through interest and excessive
taxation, all the while enabling the bankers who oversee, control and manipulate it to make unfathomable
and incomprehensible sums of money at the cost of the many. - Chuck Danes

"Deficit spending is simply a scheme for the "hidden" confiscation of wealth."
Alan Greenspan - Chairman of the Federal Reserve 1987-2006

A Fractional Reserve Money System is a Monetary System that Operates in and Depends on a System of Debt.

The premise of a fractional reserve system is quite simple to understand. In a nutshell, by only requiring a fraction of Real Value to be stored A central banking system vastly increases the ability of bankers to lend more money than they possess in reserves.

While many look at debt as a necessity, when looked at and seen for what it truly is, debt is a form of bondage and oppression.

What follows will reveal how and why our GLOBAL banking system “creates” money out of thin air to generate greater wealth for for those who oversee and govern much of the world's money supply, creating unfathomable wealth for themselves out of "thin air" at the expense of those who unknowingly and unwittingly have allowed themselves to become slaves of debt via a credit monopoly that drives, sustains and at some point will, destroy the entire monetary system itself.

Put simply the fractional reserve banking system combined with many other facets of the money machine that are intricately interwoven into our global monetary policies equate to "magically creating wealth" for a few of the global elite out of thin air, which is being done at YOUR expense.

What is a “fractional reserve” monetary system?

It’s a very simple concept and from my perspective quite sinister.

It's also VITALLY IMPORTANT to understand because the fractional reserve banking system combined with INFLATION is literally diminishing the VALUE of your money.

Combine the effects of inflation with the literal theft and transference of wealth that's taking place at the top tier of the banking system, the Federal Reserve,

It's being DONE legally but it's STEALING and creates a form of bondage for humanity regardless of how you slice it, who "claims" that it's legal, or how "under the radar" and sinister it might be.

As is becoming more and more evident with each passing year, as it pertains to overbearing, power hungry governments and greedy, self serving banking institutions, legislation declaring something as "Legal" doesn't necessarily make it Truly Legal, Right OR Moral.

The fact of the matter is, the Federal Reserve Act of 1913, although "believed and perceived" as being "legal" by most, is downright illegal, unconstitutional and contrary to what the Constitution of the United States clearly states as "legal and NOT legal" as it pertains to the monetary system of the U.S.

As it stands, the one with the most money and the biggest guns wins and as it pertains to banking and a fractional reserve monetary system, banks and the elite bankers (aka the Money Masters) at the top of the monetary food chain who OWN these banks are WINNING big time.

I'm referring to the "Money Masters" as those who are at top of, oversee, control and manipulate the monetary food chain as it relates to money matters. The Federal Reserve Banking System who are, described in the simplest and easiest to understand terms, the bankers of the banks.

Under the Fractional Reserve Banking System a Few "Self Serving" Interests WIN While the Billions Who Use and Depend on It LOSE Both Their Money and Their Freedom...BIG TIME

As does EVERYTHING, the fractional reserve banking system that's in place has an upside and a downside. It's out of kilter though simply because a few are on the "winning side" and MANY are on the "losing side."

The banks win, the bankers of the banks (the FED) win BIG, but YOU, I and every other individual on this planet loses at varying degrees, due to HOW the entire monetary system is constructed. Due to HOW it was constructed combined with HOW it operates, it's "sinister function" enables and allows only a VERY SMALL handful to benefit, become EXTREMELY wealthy and powerful by STEALING money and eroding the liberties and freedoms of the billions of people all over the planet who remain ignorant about and oblivious to what's taking place.

I'm all about WINNING unless and until it comes down to the majority LOSING Big Time so a few power hungry elite "private bankers" can WIN and become EXTREMELY wealthy at the COST of the many.

A BIG part of the problem and what enables this "legal form of theft" to continue is the fractional reserve money game that citizens are "forced" to play without understanding the rules of the game or the strategies.

Doom and gloom isn't the answer FOR SURE. But if you HAVE to play the game, it's certainly advisable to know and understand that it is a 'sinister game" the strategies and rules that enable the "game" to continue.

Here, I'm going to provide the rules of the game regarding the fractional reserve money system that we ALL depend on and which drives the global monetary system.

I'm also going to provide you with a strategy and a solution that, for thousands of years, hasn't failed yet.

But first it's of VITAL importance to understand the fractional reserve banking system which

It’s the very cause of our debt ridden society and what keeps us "borrowing more" and remaining in debt as individuals.

It's a vicious cycle, and for most, can "seem to be" an impossible one to break.

Unless and until you learn about HOW the fractional reserve banking system functions, combined with how it and other factors determine the consistent devaluing of your money through recession and inflation, you'll remain a slave to the money machine due to the rules that have been established and carried out by the money masters.

That's the BAD News. The GREAT news is, you CAN do something to STOP the fleecing and "legal theft" that has been and currently IS taking place on a global scale.

The 3 Simple Yet Overlooked Factors that Drive and Sustain The Fractional Reserve Banking System

A fractional reserve banking system's ability to function and sustain itself is dependent on 3 very key yet simple factors...

  • A "public belief" in the value of the resource that's being used as a medium of exchange

  • A perception held by the public that this medium of exchange has "real value" and can be exchanged for goods an services

  • Individuals, businesses and entire societies depending on, getting into and REMAINING In Debt.

Unbeknownst to MOST, the key to our current monetary system working at all is a "belief" in the system.

If it weren't for "public belief" in our monetary system and what we call money, the money we currently use would become TOTALLY worthless and the monetary system we utilize would become non-existent.

What's more, if it weren't for DEBT, the entire world's monetary system as we know it, would collapse.

One of the BIGGEST reasons why it would, is because of the fractional reserve money system that's in place which every country on the planet utilizes.

Here's where it gets crazy and a bit mind bending...

In a “fractional reserve system”, the “value” “perceived and believed” to exist in “tangible form”; meaning the "value" that paper dollars are supposed to and "believed to" represent, doesn’t REALLY exist at all.

The "paper" that represents and is "believed to be" money that has value, has no Real Value AT ALL with the exception of the "perception of value" that the general public "believes" it has.

Belief is the ONLY THING that keeps the current money machine working. Loss of confidence in and "belief of" this "system" is creating some SERIOUS problems on a GLOBAL scale.

How so and WHY?

You could look at the money you work for, receive and use to exchange for the goods and services you need in life to sustain you and your family's quality of life, as "monopoly money."

Although that's what the "money we use" is, I'm referring to the "paper money" that is used in the popular game called Monopoly.

If you ever tried to take some of this "monopoly money" to a bank or a store and exchange it for goods, services or a deposit slip, you'd quickly find that it is worthless and can't be exchanged for ANYTHING because it has no Real Exchange Value.

Any value of exchange it has is limited to the game Monopoly.

The "paper money" that you receive is really no different with the exception of your belief combined with a public belief that it has and holds some form of value.

Because the bank is authorized by law to create loans (DEBT) based on a small fraction of deposits that are actually held in checking and savings accounts, it is able to create, generate and provide loans far greater in number than the amounts of money deposited and held in the bank.

It also draws interest on those loans for money that hasn't been deposited, isn't there and in reality, doesn't really exist at all.

That's why it's called a fractional reserve system. Only a fraction of the money (paper dollars) held, actually exist in tangible form.

Most people worldwide, believe that when you deposit your money into a bank, that it's being safely stored and that the money deposited is the property of the depositor. The fact is, when you deposit money into a bank, you have lent the bank your money and are an “Unsecured Creditor.”

Under the fractional reserve system, the law in most countries states that the funds deposited by a customer (depositor) are no longer the property of the customer once they're deposited.

Once you deposit funds into a bank, you relinquish your rights and ownership of YOUR money and essentially, you give "ownership" to the bank. Those monies are "owned", controlled and utilized by the bank to create more "money."

Although it get's a bit "tricky" to understand, the reason why "ownership is transferred" is because under civil law, monies deposited into a bank aren't considered to be a bailment.

A bailment exists in and is enforceable under "common law", NOT necessarily in civil, commercial, legislative, or criminal law.

Commercial law (The Uniform Commercial Code) is the governing statute pertaining to most banking transactions.

Under commercial law, the monies you deposit into a bank become the banks "legal property", they DO own it and they can and DO use it how and when they see fit.

In a bailment agreement, property is temporarily transferred by an individual or institution to another individual or institution and stored for safekeeping by the receiving party with no transference of ownership expressed or implied.

A contract, either expressed or implied is necessary because, although the possession of the asset is transferred to another party for "safekeeping", ownership of the asset remains with the person or entity that initiated the transfer.

As an example, a bailment agreement can be best understood by considering a restaurant who, as a courtesy, provides a coatroom for it's customers. When you enter the restaurant you can check your coat in prior to being seated. This doesn't relinquish ownership of your coat or give the restaurant or the person checking coats permission to USE or take your coat. It's simply stored in the coatroom for safekeeping.

Here's something that VITALLY IMPORTANT to know yet which MOST have no idea of...

That is NOT the case with your money when you deposit it into your bank.

Put in simple terms, monies you deposit into a bank is NOT legally YOUR money once it's been deposited. Although it's done "unknowingly" by MOST, you, in a sense, literally transfer ownership of your money to the bank. We'll get into the reason WHY this is necessary to keep a fractional reserve money system alive soon. We'll also take a REALLY up close and personal look at who it protects and who it doesn't protect.

For now I'll just say, it's a well constructed and thought out plot to protect someone in ALL scenarios, but it's NOT you or your money that's being protected and it's CERTAINLY not in your best interest.

Although the bank isn't legally obligated to pay a depositor for whatever monies that he/she deposits in a bank, it does because the entire monetary system would collapse very quickly if the bank said "Sorry, I can't pay this "unsecured loan." The reason why it would collapse is simply because people lose their belief in the system.

You could say, the reason banks do allow you to deposit and then USE your OWN money as needed, is because it creates loans on that money and receives dividends in the way of interest for loans made with the money that you deposit.

It also pays dividends to the depositor based on a predetermined and agreed to amount of interest paid to the depositor for whatever amount of dollars that are deposited and stored.

Under the fractional reserve money system, the bank can loan a far greater amount to a borrower based on the deposit of a depositor that's much smaller in size.

That “fraction” has changed dramatically over the course of many years.

When the Federal Reserve Act was first adopted as law in the U.S. in 1913, under the fractional reserve system, for every deposit made in a bank, 40% of the amount of the deposit had to be held in reserve by the bank. The other 60% represented an amount that could be loaned to other borrowers.

In other words when $1,000.00 of your money was deposited into the bank, the bank was considered to have “liquid assets” of $1,600.00 for every $1000.00 deposited. $1,600.00 it held. Based on these "assets", 90% of the deposit (not the actual amount of money deposited and stored) could be loaned to another person.

Years later, the percentage of reserve currency that was required to be held by the bank dropped to 10%.

For every $1,000.00 dollars that you held or saved in a checking or savings account at a banking institution, under the fractional reserve banking system, the bank could show $1,900.00 in assets, creating an additional $900.00 which could be borrowed by and loaned to another consumer.

If you held $10,000.00 in your checking or savings account, a $100,000.00 loan could be generated and made based on your money.

A $10,000.00 savings account = 10% of a loan made for $100,000.00.

Put simply, if a bank had 1000 customers and each deposited $1,000.00 of their money, although there would only be $1,000,0000.00 of actual deposits in the bank vault, under the fractional reserve banking system, $100,000.00 would be held in reserve (based on a 10% reserve requirement) and $900,000.00 would become available to loan to borrowers. The bank's ledger assets would be 1,900,000.00 in assets controlled by the bank.

Today (2014) that “fractional number” has been lowered even further and stands at a "floating amount" depending on the size of a banks assets...kind of. I say "kind of" because reserve requirements are pretty much determined by funds in "checking accounts."

That can get VERY tricky and mind boggling so let's keep it as simple as possible.

  • For net transaction accounts in 2014, the first $13.3 million, is completely exempt from any reserve requirement.

  • A 3 percent reserve ratio is required on accounts over $13.3 million up to and including $89.0 million.

  • A 10 percent reserve is required on accounts in excess of $89.0 million.

In real numbers as it pertains to you based on a 3% reserve requirement, that means for every $100.00 of your money deposited and held in a bank, it now represents a bank asset of $197.00 once the "non-reserve amount" is loaned and "legally justifies" an additional $97.00 loan being made for every $100.00 held by the bank.

The “interest” earned from this loan which is paid by the borrower of the loan TO the bank, doesn’t come to the person who HAS the money in their account and who created the asset.

The interest earned on the loan is "owned by" and paid to the lender (the bank) who granted the loan.

Under the fractional reserve system, the amount of interest (money) that the BANK receives for money loaned, FAR EXCEEDS the amount of “interest” that you receive for the money you have stored or saved in the bank.

Even if you were given the same amount of interest, your $10,000.00, based on a generous 5% annual rate of interest would yield a $500.00 annual gain paid to you if you were to leave that money in the bank for that entire year.

Under the fractional reserve banking system that exists today which is made possible because of YOUR money, based on the SAME 5% interest rate paid to and received by the bank, the loan made possible and created WITH your money would total $1,000,000.00 and generate a $50,000.00 annual gain for the bank, reducing in size as the “loan” was satisfied.

How can that be possible?

It's quite "simple" really...

  • When you deposit $100,000 in your bank, the bank becomes able to loan someone else $90,000

  • That person deposits $90,000 into their bank who loans someone else $81,000

  • That person deposits $81,000 in their bank who loans someone else $72,900

  • That person deposits $72,900 in their bank who loans someone else $65,610

  • That person deposits $65,610 in their bank who loans someone else $59,049

  • That person deposits $59,049 in their bank who loans someone else $53,144

  • That person deposits $53,144 in their bank who loans someone else $47,829

  • ...etc. etc. etc.

The point is, due to the “partnership” created between the Federal Reserve and the Federal government, the banks and “bankers” are earning 1000 TIMES MORE than YOU for YOUR money that you work for, earn and deposit into your bank.

Here's where it get's REALLY wild and VERY scary for depositors.

The amount of dollars received in interest from borrowers is creating MASSIVE wealth for the banks and the bankers banks that collectively make up the FED, yet the MONEY doesn’t even exist.

Let's say it doesn't truly exist. It exists, but only as a ledger entry based on the amount of debt created and it's "value" is only realized as the borrower makes payments to the bank who loaned the money.

The "bank" earns money off of the debt and the person who acquires the "debt" is

Under this fractional reserve system, the more you get into and STAY in debt, the RICHER the banks and the bankers who operate them become.

It gets crazier and more sinister than that.

The MONEY that circulates, runs and sustains our system of debt which is BELIEVED and PERCEIVED by the general public to have some form of "value", doesn’t even exist. It is literally created out of “thin air”, just as the profit (interest) received ONLY becomes “profit received” because a “borrower” continues paying the interest on the money he/she borrowed which ALSO doesn't and never has existed.

That's the sinister thing about a "fractional reserve monetary system." The money that interest charges are being calculated on, determined by and which is being paid to and RECEIVED by the bank who made the loan doesn’t exist either.

In other words they are making money by charging interest for money that doesn't exist.

I call that "funny money." Not because it's "funny" for YOU or I as consumers, but rather because the money that's generated in the form of interest and bank charges which is received by the lending bank, isn't even real.

What’s worse, is that the money being generated, received, borrowed, loaned and paid back has ZERO intrinsic value.

What can be “mind boggling” and difficult to grasp for most is that, since the money you work for and place in the bank has ZERO “intrinsic value”, even THAT money doesn’t REALLY exist.

You might be tempted to argue that it DOES exist because you yourself held a big wad of those paper bills in your hand before you deposited it in the bank.

It doesn’t because it’s NOT REAL MONEY due to the fact that, although you "believe" the pieces of paper you held in your hand and deposited into the bank exists and "perceive it" as having some form of value, depending on the numerical value printed on it, it has ZERO intrinsic value.

In other words there is nothing to support or substantiate the "VALUE" of that "paper dollar" with the exception of the value of the paper and the ink.

The paper dollars that we think, believe and perceive as having value is really nothing more than a fiat currency. A portion of the “paper dollars” exist, but the VALUE of those dollars DOES NOT exist with the exception of the “belief and perceived value” that the public holds regarding the value of the paper money they have in their checking or savings account or that's in their physical possession.

The fact of the matter is, money that's in circulation today is backed by nothing more than a “promise.”

The ONLY thing that enables MONEY to exist based on this current fractional reserve system, is the “public’s BELIEF” in the promise to pay which is the ONLY thing that enables and allows the system to continue to function.

Because our money has nothing to back it and ZERO intrinsic VALUE, if the “BELIEF” of the citizens of the U.S. or any other country goes away, regarding their money and/or monetary system, so does our ENTIRE monetary system.

When the "perceived value" of the paper loses it's value in the minds of the public and the monetary system crashes, the Promise to Pay" goes away and you'll soon discover who really OWNS your money.

One solution is to STOP depending on “paper money” and START exchanging your “virtually worthless” and rapidly declining paper dollars into a “commodity” that has a 5000 year history of holding and/or increasing in Real Value.

That commodity is GOLD.

The personal solution I use to do that, PLUS earn a VERY substantial and significant income for paying it forward and sharing it with others in the process, is a company called Karatbars International.

Karatbars International distributes the highest quality gold available to individuals around the globe and does so in quantities that anyone can afford.

If you’re going to save your money and earn Real Money in return, exchange a portion of those paper dollars for Gold.

The Karatbars 999.9% gold bullion product has and ALWAYS will have intrinsic value. The VALUE you give by “paying it forward” serves others through "protecting the value" of their money and also provides something of Real Value back to you via “Real Money” that can be transformed into “paper money” should you choose to do so.

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Copyright © 2005-2014, The Fractional Reserve Money System article and all content on is strictly prohibited from copy or reproduction in whole or in part, electronically or otherwise, without the express written consent of the author Chuck Danes and/or Enlightened Journey Enterprises. All Rights Reserved Worldwide.

Each of the resources recommended in the Fractional Reserve Money System article and throughout has been personally tested, approved and is utilized by the founder as a credible and effective means of accomplishing it's intended purpose. Any and all guarantees are handled through the company that provides the resource.

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The Reality of Money

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