Wednesday, July 7, 2010

A Primer On Fractional Reserve Banking

First published in the British humour magazine “Punch” on April 3, 1957:

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Q: What are banks for?

A: To make money.

Q: For the customers?

A: For the banks.

Q: Why doesn't bank advertising mention this?

A: It would not be in good taste. But it is mentioned by implication in references to
reserves of $249,000,000,000 or thereabouts. That is the money they have made.

Q: Out of the customers?

A: I suppose so.

Q: They also mention Assets of $500,000,000,000 or thereabouts. Have they made that
too?

A: Not exactly. That is the money they use to make money.

Q: I see. And they keep it in a safe somewhere?

A: Not at all. They lend it to customers.

Q: Then they haven't got it?

A: No.

Q: Then how is it Assets?

A: They maintain that it would be if they got it back.

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