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The Reserve Requirements (or Cash Reserve Ratio) is a Central bank regulation that sets the minimum reserves each Commercial bank must hold to customer deposits and notes i.e the amount that the bank surrenders with the central bank. ... As of 2006 the required reserve ratio in the United States was 10% on transaction deposits.

http://en.wikipedia.org/wiki/Reserve_requirement



That's exactly what I said, not what he said. You keep 10% and loan 90%. He said they deposit $100 and then the bank loans out $900 (9x the deposit).


If you read further down, it seems to show that the banking system as a whole can expand $100 into $1000 with a 10% reserve requirement:

"Reserve requirements affect the potential of the banking system to create transaction deposits. If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit. If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the change in excess reserves of $90 into a maximum of $1,000 of money ($100+$90+81+$72.90+...=$1,000), e.g.$100/0.10=$1,000."

- from http://en.wikipedia.org/wiki/Reserve_requirement


it's just saying that money+loans IGNORING DEBTS instead of subtracting debts can be a multiple of money. if in addition to adding loans u also subtract debts then you'll find nothing happened.




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