To help explain what the effects of fractional reserve banking are, and to illustrate just how evil it is, I’ve written a simple program that lets you simulate fractional reserve banking and the effects of compound interest. The Frackin’ Reserve! program simulates what happens in fractional reserve banking, and lets you change the parameters for it. What this lets you do is simulate fractional reserve banking from a variety of perspectives, and see the results in real time. It also lets you generate a report so you can view all the generated output in a linear time series of the iterations through fractional reserve banking. That was probably a mouthful, and may have sounded like so much balderdash to some people. But it will all become clearer later on, and in particular when I post a follow-up article about fractional reserve banking.
The 10 Second Summary Download and run the program to play with the factors that make up fractional reserve banking. Change them to see what happens. As a bonus, you can also see how interest works.
There are no other special requirements.
FREEDOM: Frackin’ Reserve! is licensed under the GPLv3, so you are free to do with it whatever you wish as long as you pass on that same courtesy if you redistribute it. (Yay for freedom!) Feel free to share with whomever you like.
And here’s a screenshot:
To view a time series of the iterations of the fractional reserve banking, simply click the “Show me in a table” button. Frackin’ Reserve will create an HTML page with a table for you, and open it in your default browser. This is a table made using the default parameters:
|Iteration #||Deposited by Customer||Amount Held in Reserve from Deposit||Amount Currrently Available to Lend Out from Deposit||Total Amount that “Can” be Lent Out||Total Amount that Has Been Lent Out||Total Amount Held in Reserve||Total Amount that Customers Believe They Have||Amount of Interest for 10 year(s) @ 5.0% on Loaned Money CAN NEVER BE REPAID!|
|Fractional Reserve Banking is EVIL.|
You can set your own parameters and create any table you want. This is useful to see exactly what is happening at each iteration in the process, and how it grows like an out-of-control brush fire.
Using Frackin’ Reserve!
Frackin’ Reserve! is super simple to use. Simply change the parameters, and everything is updated automatically. Here’s a quick rundown of what each parameter and output result is:
Initial Parameters for Fractional Reserve Calculations
Fractional Reserve Results on the Money Supply
Interest Owed Parameters
It should be noted that Frackin’ Reserve! is a simple simulator, and does not take into account the rate of iterations. This is largely an academic point though, and doesn’t really matter all that much. It is only useful if you want to know what the state of things are at some particular point in time for a given rate of loans. i.e. it has no bearing on illustrating the way fractional reserve banking works. The iterations in reality are fast enough to discount the rate as being unimportant. The short and simple version of that is that Frackin’ Reserve! assumes that all loans and deposits for all iterations are made at the same time. If you don’t understand what that means, then don’t worry. It’s really only a minor technical note for those that already know about how the system works. These are not the droids you are looking for…
Code Notes for Programmers and Non-Programmers
The source code is EXTENSIVELY commented with the express purpose of making it easy to follow for non-programmers. So, even if you do not program, there’s lots of information in there, and it’s basically a tutorial on its own. For programmers… It’s ugly. Yeah… I did naughty things because it’s easier to read for non-programmers that way. This is meant to be educational about fractional reserve banking, and not a programming tutorial. So, when you see everything stuck in 1 method, just remember that it’s all for a good cause.