— If quantitative/easing money printing causes inflation why is fractional reserve banking fine?

Question

Not much more to it than that. Why is it the world’s end when a government prints money but fine when a banking system does it?

In: 9

Answer 1

* You deposit $1000.
* The bank holds on to a *fraction* of it, hence the name. Say they hold on to $100.
* The bank loans out the remaining $900 to someone.
* That person repays the loan and ends up paying back both the $900, and $100 in interest.

The bank *made a profit* but did not *print money*. The bank’s profit came from someone giving them money.