(L85) Counterfeiting & Fractional Reserve Banking

Is it counterfeiting when government-licensed banks create money out of nothing?

Fractional reserve banking is a system that allows banks to issue more deposits (by lending money out) than they have actually taken in. The banks basically create money out of thin air (deposit slips), and lends it to businesses and consumers with interest rates.

Deposit slips are a form of counterfeiting, and counterfeiting is theft. In the words of Gary North, “all good things that are counterfeited must come to an end”; the economic booms created by these low short-term interest rates result in a rise in prices because in reality, there was no saving throughout the economy as had been portrayed.

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