“So if i walk into a bank and deposit #1000 and say the reserve requirement is 10%, commercial banks by existing law of the land will keep #100 (10% of #1000) and loan out the #900 to customers in need of a loan”
This is the backbone of fractional Reserve Banking System.
But you might be tempted to ask, “if Access and Zenith and UBA loan out my deposits, how come i still have the amount i deposited still reflecting in my bank account”
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“Money dont grow on trees — thats true because money grows faster than leaves on trees” –Micheal Maloney, Author and Monetary Historian.
What if I told you the commercial banks contribute to the inflation rate in the country in their own coded way.
What if I told you there’s a solution… how I propose solving the problem
PART 1
The Beginning: False Education of the masses
Most bank customers believe that their money is lying somewhere in a wardrobe stored safely inside a bank
They believe that whenever they deposit money, the banks loan out the exact money they deposited to the next bank customer in need of a loan
While all of this sounds believable, NONE OF IT IS TRUE.
PART 2: THE FINANCIAL MISEDUCATION
FRACTIONAL reserve BANKING:
One of the major reason there’s inflation in a country is because of the Central Banks/their Baby banks(commercial banks) and how they operate in a DEBT-BASED economy. Nigeria, like the United States and a host of other countries operate on a debt based economy system and in a debt-based economy, there has to be debt for money to be created.
(For easy understanding, I’ll interchange CURRENCY with MONEY even though they’re not exactly same)
All the money that is in circulation right now and has been was because someone borrowed it into existence AND every naira you have ever spent since you were born, someone was paying an interest on it. The money in your pockets right now, someone somewhere, a total stranger or your close family member, is paying an interest on it. Because what’s in your pockets IS not entirely MONEY but DEBT
What am I saying
If ALL of Nigerias debt, as a Country, were to be repaid miraculously, there would be NO MONEY IN THE COUNTRY’S ECONOMY.
and added on top of the no money situation, THERE WOULD STILL BE DEBT circulating as interest on the borrowed loans as I explained
“By this means, government may secretly and unobserved, confiscate the wealth of the people and not one man in a million will detect the theft” –John Maynard Keynes
The naira notes in circulation only accounts for a small percentage of the total money in Nigeria and it’s being used by market women, drivers, abokis, ATMs, you and I for our everyday transactions while the larger part is computer numbers bankers type in their computer
The large part of Naira circulating now is numbers in a computer, and all of this is because of Fractional Reserve Banking:
If every bank customer in Nigeria was to demand their physical paper money stored in their various banks right now, THERE’D BE A PROBLEM: the banks can’t give them. it CAN NEVER HAPPEN cus THE BANKS DONT HAVE IT and there’d be a bank run which has happened before.
That’s why cashless policy was introduced: To hide the fact that MATHS MAGIC was done on physical cash deposited by bank customers
Its all done like this. Quite simple.
PART 3: FRACTional RESERVE MONEY MULTIPLICATION
“If the Reserve Requirement is 100%, then the system is full reserve banking in which the bank has enough money to give to depositors if all of them come into the bank demanding their money at once. But IF the reserve requirement is less than 100%, its a Fractional Reserve Banking System — all bank customers can’t walk into the bank to physically demand their money back.THEY WONT GET IT”
There’s always a reserve requirement (in percentage %) for every cash deposit a bank customer deposits. That is, banks by laws operating under fractional reserve banking are mandated to keep a certain reserve of customers money and loan out the rest. The money kept out of every customer deposit is called VAULT CASH.
Lets assume the Reserve Ratio in Nigeria is 10%
So if i walk into GTB and deposit #1000 and the reserve requirement is 10%, GTB, a commercial bank by existing law of the land will keep #100 (10% of #1000) and loan out the #900 to customers in need of loan
This is the backbone of fractional Reserve Banking System.
But you might be tempted to ask, “if Access, Zenith, GTB and UBA loan out my deposits, how come i still have the amount i deposited still reflecting in my bank account”
That’s because when say a GTB customer need a loan from GTB, although GTB takes 90% from another customer account, it now replaces that 90% it borrowed in THAT SAME customer account with IOUs called ‘BANK CREDITS’.
These Bank credits are Computer numbers 0s and 1s that even you can type if you were given the access to in a Banking System
and THAT IS JUST HOW new MONEY IS CREATED by the commercial banks: replacing borrowed money from a customers account with computer number money PENDING the time the borrower repays the loan given
This is a risk the banks take that’s why they pay themselves in the form of INTEREST on loans
***And this risk is supposed to be reduced with the existence of BVNs linking to customers various bank accounts, but it seems LAPO and co hasn’t gotten the update yet. If borrowers can easily repay their loans, the excess money in circulation is cancelled out. So interest rate on loans to be paid should be reduced while interest rates on loans to be given out should be increased. This alone will mop up the excess cash from the economy. This is why increasing minimum wage is not the answer…of which I’ll discuss in another seperate topic***
In this case, the banks have Literally created #900 naira out of thin air WHICH CAN BE WITHDRAWN in any ATMs in Nigeria
Its quite scary learning about the commercial Banks mode of operation.
But thats until you find out how their Parents, the Central Banks, creates their own money LITERALLY out of thinner air. lolzzz
Now although these ‘Bank Credit’ IOUs are very different from physical cash because they only exist in computers, they are STILL currency
WHY
because you, the bank customer whose account was borrowed from and replaced with computer numbers called bank credits can still walk to an atm and withdraw this ‘bank credits’ AS CASH.
SAME WAY the borrower of your previously deposited money can also.
And now if both of you (the original owner of the bank account having the money the banks borrowed from and the borrower of your deposit as loans from a bank) were to walk into the bank at the SAME TIME to demand physical cash, the banks cant give it both to you…UNLESS it borrows ANOTHER MONEY from ANOTHER customers account. lolzzzzz
AND THAT RIGHT THERE IS THE SCAM OF THE BANKING INDUSTRY THAT OPERATES IN A DEBT-BASED ECONOMY: the commercial banks, GTB, Access, Zenith and co. do not count on both the original account owner and the borrower TO WALK into the bank demanding their physical cash AT ONCE!
Now this is just 2 bank customers alone. Now multiply this for 100,000,000 Nigerians owning bank accounts in these commercial banks and you start to see the BIG picture.
Nigeria Commercial Banking System does this, and so does the American commerical Banking System too
It’s same for any country operating on a Fractional Reserve Banking System
“Commercial Banks create checkbook money whenever they grant a loan simply by adding new deposit dollar in accounts on their books in exchange for a borrowers IOU” — Federal Reserve Bank Of New York – “I bet you thought” p.19
That is the deposit dollar/Checkbook money/Bank Credits. They are NOTHING BUT NUMBERS the banks type into their computer to make it seem like there is still money in your account after they have borrowed from it.
TA-DA! Hello People.
PART 4: PUTTING FRACTIONAL RESERVE BANKING IN PRACTICAL STEPS
We’ll be using bank deposit of #1000 and a fractional reserve ratio of 10% for this example
This is what happens when you walk into the GTB, Access or Zenith to deposit your #1000 note.
1) Bank customer deposit money (#1000) in bank account.
2) Banks keep reserve requirements of 10% (#100) and loan out the remaining (#900).
3) Banks doesnt want the customer to know it has borrowed out the customers deposits so the keeps BANK CREDITS in place of the loan it borrowed out which in this example is #900. so the banks take out actual #900 from your bank account and replace it with #900 of computer money
By so doing, a bank credit / computer money of #900 HAS LITERALLY BEEN CREATED OUT OF THIN AIR to serve as actual money so you, the original depositor won’t find out your money was borrowed. Money has JUST been multiplied
abra cadabra. lolzzzz
now this process is multiplied until you have BANK CREDITS BECOMING MORE THAN PHYSICAL CASH IN THE ECONOMY
Let’s dive deeper
I’ll give you a General Rundown using Access Bank for instance:
STEP 1: An access Bank customer deposits #1000.
STEP 2: #100 (10% reserve requirement) is kept and #900 is loaned out to another bank customer in need of a loan and access bank uses #900 of their computer money to replace the actual #900 they borrowed.
STEP 3: Now that borrower takes the loan and deposits it in his bank(which could be same bank, Access. The central Bank of Nigeria sets the Reserve Ratio and all commercial banks in Nigeria operates under it, so what happens in GTB, happens in Access) and #90(10% reserve requirement) is kept as vault cash and #810 is loaned out to another customer WHILE automatically, Access uses #810 computer money to replace the actual money they took
thats #900 + #810 = #1710 created out of thin air via Bank credits in form of computer numbers vs #190 actual Money!
and this process doesnt end here because that #810 can be redeposited again IF IT IS BORROWED!
so at the end of the day, you find out that if the initial depositor had deposited #1000 and the reserve requirements as stipulated by CBN is say 10%, then that #1000 automatically becomes: #10,000
using the formula, money multiplier= 1/ Reserve Ratio
= 1/ 10%
= × 10
so initial deposit X 10= Money in circulation
But the central bank, as of today May 2nd, 2024 uses a fractional reserve ratio of 45%
This means that any money deposited by any bank customer in any commercial bank be it Zenith, Access, GTB, OPAY etc WILL BE MULTIPLIED BY 2.2 (1/45%)
#1000 becomes #2,200
and the United States formerly as of date, operated on a reserve requirement of 10%
so
$1000 becomes $10,000
$10,000 becomes $100,000
but now, THE UNITED STATES DOESN’T HAVE A RESERVE REQUIREMENT so any money deposited in any commercial bank in the United States is multiplied TO INFINITY INFINITY
What spells excess money in circulation better than THIS!
Now guess what. This excess money in circulation isn’t enough to trigger inflation at all, if not, Americans would have it worse than Nigerians, inflation wise
What triggers INFLATION in an economy IS WHEN these excess money being created by means of Fractional Reserve Banking ISN’T MATCHED with THE PRODUCTION of goods in the country SO the NEWLY CREATED MONEY via Fractional Reserve Banking then STEALS VALUE FROM THE OLD MONEY causing inflation,
This coupled with the fact that the plenty money created from fractional reserve banking IS CHASING THE DOLLARS all because there is no local production for most of the goods that are being imported with the dollar.
NOTE:
The dollar is also subject to fractional reserve banking so more dollar notes in circulation in the united states means INFLATION as these many dollar notes will steal value from the old dollar notes already existing IF:
1) the production of local goods in the US comes to a halt and
2) if the US stops exporting goods because by exporting goods, countries seeking to import united states exports would have to EXCHANGE their currency for united states dollar TO BUY US goods having a dollar value hence spreading the dollar far and wide
(so the Countries like the United States operating on a debt based economy and Fractional Reserve banking system IS SAFE because all the excess money they create out of thin air, IS ACTUALLY EXPORTED to other countries seeking to import goods made in the United States because they would have to change their country currency, whatever it may be, TO THE UNITED STATES DOLLAR.
THIS is why inflation rate doesn’t increase in the United States compared to a country like Nigeria
but say if US relied only on imports say from china, the US would have to exchange their dollar for yuan. All good right
Until china finds out they cant do anything tangible with the united states dollar because the united states are not producing local goods and rely only on imports so the strenght of the dollar becomes weakened.
but thats not the case because although the united states rely on fractional reserve banking which multiplies money and causes inflation, they also have local production which also gives them goods to export hence codedly exporting their excess dollars when countries exchange to buy goods in the United States. So its all good for them unlike Nigeria with no local production and plenty of importation WHILST having only one primary good to export of which the government said they have sold their oil into the future.
What’s the need of countries selling their official currency to purchase the excess Naira from fractional reserve banking hence making the Naira valuable
lolzzz. now you see it. the BIG picture
And what better way to hide this money multiplication magic from the everyday people than to introduce cashless policy EVEN TO THE LOCAL MARKET WOMEN.
why
BECAUSE the paper money in circulation is getting MORE THAN the computer money in form of Bank Credits
“and mark my words today, October 31st 2023, it’ll be a matter of time before they make it compulsory for bus drivers to receive bus fares through phone transfer and not cash…YES…IN NIGERIA!
***all they’d have to do is tell you, the passengers, to purchase ‘bus fare credits’ through an app instead of paying cash (The app will have a fancy name to enable mass adoption) and the driver will scan your qr code or vice versa and receive his payment after you, the passenger, has selected the amount the driver states his fare would be.
OR BETTER STILL, each sit will have a unique qr code to match its sit number so a passenger can easily enter the bus, scan the qr code and pay his/ her bus fare without having to stress the driver and the driver can also know which sit havent paid based on the qr scan notification he receives. prolly on a large screen cus no driving and texting rii
now this same script will be applied to the abokis selling peppers and other basic stuffs.
the end game: to remove all physical cash from the system. WHY? to hide the scam of fractional reserve banking by calling it cashless economy” – The Secret Redpill
WHAT SHOULD NIGERIA DO NOW IN ITS CURRENT INFLATIONARY ECONOMY.
The opposite of Inflation is Deflation
1) INCREASE ITS FRACTIONAL RESERVE RATIO
Because a less reserve ratio = more money in circulation which isn’t backed by any local production hence causing inflation as these excess money will only steal value from the old money already circulating hence causing inflation.
Inflation is not because the value of goods went up. It’s all because the value of money went down, making the everyday person need more money to buy the same goods they previously bought. That’s how their Purchasing Power gets reduced.
Nigeria Reserve Ratio should be increased for now to 50% + making less money in the economy. and when the economy picks up ie local production of goods is encouraged and farmers return to their Farms, then the Reserve Ratio should be reduced
That means, Nigeria should operate on a Floating Based Reserve Ratio based on the Economic Situation
