Understanding the reasons of the present financial problems lies In understanding the substance of fractional reserve banking. The substance of fractional banking is in lending more money than the bankers have. Banking of partial reserves is an alternative form which links deposit banking and credit banking. Fractional banking is causing many unfavorable economic impacts in the worldwide system, specifically an inflation.
free text keywords: fractional banking, banking of partial reserves, Ponzi Scheme, Multiplication Effect, jel:E00, jel:G00