Crime Against Humanity: Fractional Reserve, Namely Legalized Counterfeiting, 8

“As if”? You hold a bank statement saying that you have 10 units on your account; and indeed you can at once go back into the bank and withdraw them in cash, or make a wire transfer, or write a cheque, or these days make an online payment: it’s money, to all intents and purposes. At the same time, your friend holds another bank statement saying he has 9 units on his account, and indeed he can dispose of his 9 units very much as you can dispose of your 10: it’s money, to all intents and purposes, too. You look at each other, perplexed. Wait a moment… how much money did exist before you entered the bank? You had 10 units, you friend had none. Since you are a bit incredulous, you go and spend it; result? It’s money, to all intents and purposes: all those 19 units get accepted as money having purchasing power in exchange for goods and services. In the actual fact, in the real world, that mainstream “as if” does work so much like a straightforward “it is”, it is so indistingushable from it, that you both wonder which adjective would do to describe the mainstream version, and if hypocrite would seem just a tad too indulgent and, in the final analysis, naive.
But your incredulity dies hard, so you decide to repeat the test. Out of your legitimate blissful innocence, you merely wished to double−check the fact that rather magically your units of purchasing power nearly doubled in the pockets of the bankers, so you wouldn’t ever imagine you’d better brace yourself; you’re about to meet the most amazing facet of fractional reserve: recurtion… Your friend gets hold of a second friend, and they go to a bank; first, the friend who borrowed 9 units of money provides the bank with further deposits by depositing them into his account, then, the second friend saturates again the bank’s lending capacity by borrowing all the corresponding further credit, say, 8.1 units of money, again on account of the fractional reserve currently supposed at 10 percent. You look at each other, even more perplexed than before; there’s something that just doesn’t add up, but you can’t put your finger on it; so you decide to repeat the test to the bitter end, until you hopefully grasp it.