Fractional Reserve Deposit Expansion
Fractional reserve deposit expansion is a descriptive name for the banking system currently being operated here in Canada and many other countries throughout the world. The term “fractional” refers to the fact that the actual amount of “money” held by a bank in reserve against deposits is only a fraction of the amount of money, which a bank can create and lend or spend into circulation. “Deposit” refers to loans created by banks and “expansion” identifies the fact that the banks expand the quantity of credit available to the public in a manner unique to the banking system. (A private individual can lend only what he possesses, he cannot “expand” or lend more than he has unless he becomes a fractional reserve deposit banker.)
In Canada, the banks were, at one time, required to hold “reserves” of 50%, which meant they could “create” new loans (deposits) twice over the totals of their deposits. Through a series of amendments to the bank act, this reserve requirement was steadily reduced to 10% (allowing for new loans (deposits) of 10 times the amount of deposits on hand), then to 8% (which allowed for new loans (deposits) of 12.5 times the amount of deposits on hand, then to 3% (33.3 times) and then to zero. On Dec.9, 1991, the Federal Parliament amended the Bank Act (Bill C-19) to provide for the reduction of any reserve requirement by the banks over the next 3 years to zero and came into full effect January 1, 1994. The banks were no longer required to hold any reserves. This meant the banks had unlimited power to create new loans (deposits) through deposit expansion. On page 257 of the Canadian Bank Act, Section 457 (4) states the following:
"On the first day of the first month following the month this section comes into force, the primary reserve referred to in subsection (2) shall be reduced by 3 per cent, and thereafter on the first day of the first month of each of the next three succeeding six month periods, the primary reserve as modified by this subsection shall be reduced by 3 per cent, and on the first day of the twenty-fifth month following the month in which this section comes into force, the primary referred to in subsection (1) shall be NIL."
Inflation
Debt induced dollar devaluation. Inflation is characterized by the loss of purchasing power of the dollar (or any other monetary unit). Steadily rising prices are a symptom of this loss of purchasing power. It is the devaluation of the dollar that forces general price increases. The dollar's devaluation, in turn, is caused by the inherent flaw in the debt-dominant money system, namely, the creation of most money as debt.
Interest
A charge made to a borrower by a lender who possessed the money he lends. That is, money which is already in existence in contrast to usury.
Usury
Any charge at all by a private lender for the use of money he is allowed to create out of nothing as a debt to someone else and an interest bearing asset to himself.