(Note: This article is an updated version of an original article published in 2017. On March 15, 2020, the Federal Reserve Board reduced reserve requirement ratios to zero percent effective March 26, 2020. The action eliminated reserve requirements for all depository institutions.)
FRACTIONAL-RESERVE BANKING
The expression “elephant in the room“…
“…an important or enormous topic, question, or controversial issue that is obvious or that everyone knows about but no one mentions or wants to discuss because it makes at least some of them uncomfortable or is personally, socially, or politically embarrassing, controversial, inflammatory, or dangerous. (source)
A wordy definition, yes; but it is applicable to our topic of Fractional-Reserve Banking. After reading the rest of this article, you should be able to see just how important and enormous Fractional-Reserve Banking is; as well as how dangerous.
Lets’s start with some history.