Conclusion

So what can we conclude from this simple model of fractional reserve banking with a central bank?

Banks create money.

• The Federal Reserve does not create money; it only sets the limits for money creation.

Significance

To devise a solution to the problem of monetary expansion you need to understand two general concepts:

An accurate understanding of the source of monetary expansion.

This presentation should help you understand monetary expansion—not entirely the result of actions of The Fed.

How monetary expansion creates problems in the economic system.

Study the "Austrian Business Cycle Theory" (adjusted for any misunderstandings of the present day banking system.) Monetary expansion distorts prices causing entrepreneurs to make otherwise sound decisions based on flawed information.

 

Ending The Federal Reserve System alone will not eliminate monetary expansion and the problems precipitated by it. We must:

1. End The Federal Reserve System.
2. Terminate the FDIC—and other government guarantees of bank deposit liabilities.
3. Let the market dictate the composition and level of bank reserves.