"If the debt which the banking companies owe be a blessing to anybody, it is to themselves alone, who are realizing a solid interest of eight or ten per cent on it. As to the public, these companies have banished all our gold and silver medium, which, before their institution, we had without interest, which never could have perished in our hands, and would have been our salvation now in the hour of war; instead of which they have given us two hundred million of froth and bubble, on which we are to pay them heavy interest, until it shall vanish into air... We are warranted, then, in affirming that this parody on the principle of 'a public debt being a public blessing,' and its mutation into the blessing of private instead of public debts, is as ridiculous as the original principle itself. In both cases, the truth is, that capital may be produced by industry, and accumulated by economy; but jugglers only will propose to create it by legerdemain tricks with paper."
- Thomas Jefferson to John W. Eppes, 1813. ME 13:423
From Wikipedia, the free encyclopedia.
In economics, particularly in financial economics, fractional-reserve banking is the near-universal practice of banks of retaining only a fraction of their deposits to satisfy demands for withdrawals, lending the remainder at interest to obtain income that can be used to pay interest to depositors and provide profits for the banks' owners. Fractional-reserve banking allows for the possibility of a bank run in which the depositors collectively attempt to withdraw more money than is in the possession of the bank, leading to bankruptcy. It also increases the money supply through a mechanism called the deposit creation multiplier, explained below, which can lead to inflation if reserves are too low. Most governments impose strictly-enforced reserve requirements on banks, with the exact fraction of deposits that must be kept in reserve generally set by a central bank.
"The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in iniquity and born in sin. Bankers own the Earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough money to buy it back again...Take this great power away from them and all great fortunes like mine will disappear, and they ought to disappear, for then this would be a better and happier world to live in. But if you want to continue to be slaves of the banks and pay the cost of your own slavery, then let bankers continue to create money and control credit'."
- Sir Josiah Stamp, The Bank of England
Here's a little research on the effects of modern banking on housing.
"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around [the banks], will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."
- Thomas Jefferson
The Fed: Our Central Bank
Minneapolis Federal Reserve Bank
"The most important of the Fed's responsibilities is formulating and carrying out monetary policy. In this role, the Fed acts as the nation's "money manager"—working to balance the flow of money and credit with the needs of the economy. Simply stated, too much money in the economy can lead to inflation, while too little can stifle economic growth. As the nation's money manager, the Fed seeks to strike a balance between these two extremes, or, in other words, to foster economic growth with price stability."
Living Inside a Bubble?
Some Worry Housing, Foundation for Economic Growth, Could Crumble
May 24, 2002, By Ramona Schindelheim, ABC News
While business spending slowed last year,...