Banks, money, fractional reserve banking… and why you should never ask for change from someone from Yap

Posted: March 25, 2014 in Uncategorized

The Sowellians today dug into the world of money and banking.  After sharing why a solid banking system is essential to a prosperous society, the students reviewed the history of money.

Creating wealth by banking... Khan broke down fractional reserve banking

Creating wealth by banking… Khan broke down fractional reserve banking

From salt to cowry shells to bitoins, money is not just pieces of paper and traditional coins.  Money is simply anything that people can use to acquire real goods and services.

And when money goes bad — hello Zimbawe and its 100 trillion notes — a nation will suffer.  Both inflation and deflation can take a toll.

We then had a guest lecture from Sal Khan of the Khan Academy who explained in 11 minutes how fractional reserve banking works.  Start with 1,000 gold coins and wind with 2,700 coins in circulation (or something like that).

Finally, we touched on the role of the Federal Reserve Bank and its charter.  And we met the new Fed chair, Janet Yellen.  Here’s the PPT from today.   Week 11, March 25

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