Simultaneously, a group of investors start a collection of independent banks, which we will refer to as The Fantasy Banking System.

Although the creation of a central bank looms on the horizon, they do not yet have to deal with their version of The Fed. These banks have, however, agreed to operate as a fractional reserve banking system. They have set their required reserve ratio at 40% of deposits, which we would consider a quite conservative reserve requirement today.

In addition, these banks make no distinction between demand and time (savings) accounts. Our current banking system makes only a nominal distinction between the two general types of deposits. (Thus, making that distinction for this model serves no purpose.)