English transcript

...the fundamental part of money, which is called fractionalized banking.

And fractionalized banking is something that finance people understand,

and the people on the street—and when I say people on the street, that's where I was when I started on Wall Street—

would find it impossible to believe.

Impossible.

Why?

Bank and bank, I give you one dollar.

Just one single dollar.

In our system of banking, I would say, "Okay, Steve, I gave you a dollar."

"How much could you lend out to your friends?"

And your natural reaction would be, "Probably something less than a dollar,"

"because I want to keep something in my pocket."

The way our system works is if I... you as a bank are holding my dollar,

you can lend out an additional eight or nine dollars.

"No, it's impossible. I only have a dollar, Jeffrey."

We have something called fractionalized reserves, which is if you have one, you can lend out nine.

That's the way our system works.

And so, not only do world leaders not understand banking, but the man on the street,

my father who worked in the Parks Department,

it it would be beyond his imagination that people could lend out more money than they actually had in their pocket.

If the public understood that the bank really doesn't have their money

at any one time,

there's... one of the things during the Depression, there were runs on the bank.

The reason the banks don't keep much money in the actual bank

is they assume that not everyone's going to want their money on the same day.

So it's not... not really the fear of inflation, their fear is a run on the bank.

Everybody wants to take out something that doesn't really exist.