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FRACTIONAL RESERVE BANKING: HOW IT WORKS AND ITS IMPORTANCE
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The article analyzes the basic principles of money creation in the fractional reserve banking system. The connection between the emergence of banking crises and the functioning of the fractional reserve system is shown. The author concludes that partial reserves are directly related to the creation of crises. It artificially increases the supply of credit and lowers interest rates, making money more accessible. An excess (or rather, the appearance that there is an excess) of money in the ―economy‖ allows entrepreneurs to increase the savings rate (i.e., the share of income that is directed not to current consumption, but to investment). An investment boom begins. Investment decisions are made taking into account the fact that there are more resources (fixed assets, investment goods, natural resources, labor) in the ―economy‖. However, this is an illusion: there are no more resources in the ―economy‖. There is only more money, and money is not a resource, but only a mirror image of it. The author’s goal is not to find someone’s mistakes, but to correctly state the problem, show the possibilities of change, and also justify the need to separate the deposit-crediting and investment activities of banks
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Sobirjonova , K. . (2024). FRACTIONAL RESERVE BANKING: HOW IT WORKS AND ITS IMPORTANCE. Academic Research in Educational Sciences, 5(6), 95–99. https://doi.org/
Sobirjonova , Kholidabonu . “FRACTIONAL RESERVE BANKING: HOW IT WORKS AND ITS IMPORTANCE.” Academic Research in Educational Sciences, vol. 6, no. 5, 2024, pp. 95–99, https://doi.org/.
Sobirjonova , . 2024. FRACTIONAL RESERVE BANKING: HOW IT WORKS AND ITS IMPORTANCE. Academic Research in Educational Sciences. 6(5), pp.95–99.