Fractional Reserve Banking
Banks lend far more money than they actually hold. Understanding this system reveals why controlling your own banking matters.
From Building Your Warehouse of Wealth, Chapters 1–3
When you deposit $1,000 in a bank, the bank keeps only a fraction on hand — historically around 10% — and lends the rest. That $900 gets deposited elsewhere, and that bank lends 90% of that. From your original $1,000, the banking system creates roughly $10,000 in total loans and deposits.
The money being lent doesn't exist in any physical sense — it's created through the lending process itself. Nash considered this legalized counterfeiting. The whole structure depends on the assumption that all depositors will never want their money back at the same time. When that assumption fails, you get a bank run.
This is a fundamental argument for IBC. Life insurance companies do not operate on fractional reserves. They maintain full reserves against their obligations. When you build your banking system inside whole life insurance, your money is backed by one of the most conservatively managed financial structures in existence — not by the leveraged promises of fractional reserve banking.