Griff also gets extra credit for spreading the bullshit fallacy about fractional reserve banking. I've had people going on about this today, apparently completely unable to do basic maths.
Banks are allowed to lend 90% of the cash they have on deposit, keeping 10% liquid to cover day-to-day needs (by a very healthy margin in normal conditions). Dumbfucks who believe the internet think this means that banks can lend ten times the cash they have on deposit (by creating it electronically). Whilst technically, yes, banks only have one tenth of their deposit liabilities in liquid cash at any one time, this is very different from saying that banks can create tem times their deposits as electronic money from nowhere. Only the government/BoE can do that.
Thanks to Griff, the flame of stupid continues to burn bright across the nation.
I understand the above.
But... (I may be just another dumbfuck here), what if 90% is lent to another bank (Which keeps 9% liquid) and lends out 81%.
That bank then lends on .....
I can do the maths It's a geometric series whose result tends towards 1 / ( 1 - r (0.9) ) or 10 times.
The general idea being that there's 10 times as much money washing about as really exists.
I'd like to see the practical issues preventing this.
Market friction would have been one, until the advent of automated computer trading.
I don't know what exists now.
Reference here for the hard sums. http://mathworld.wolfram.com/GeometricSeries.html