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RE: The Mathematics of Fractional Reserve Banking
I disapprove of people misunderstanding mathematics.
I also disapprove of my complete lack of misunderstanding of economics.
Explain to me why you approve of the general population not understanding mathematics?
Or maybe I didn't understand your comment properly ... probably so. I am almost always incorrect.
I don't mind the general population not understanding advanced mathematics. Just as I expect people to don't mind I don't speak French fluently.
Infinite geometric series and sequences are not necessarily all that advanced. We've been studying, constructing, and observing such objects for at least 2 millennia and are relatively basic.
Neither is speaking French, if you speak French.
And what's so bad about trying to teach people the language that I happen to be the most fluent in?
Trying to teach anything is a noble cause and can only be encouraged. But it's important to understand not everybody needs French, and plenty of people dislike French enough to TL;DR anything related. It's this last option I think is the case for many upvoters of this post. And I know I sound jealous (I am, a bit) but I dislike the riding-the-whale voting on this platform.
I'm trying to create a math blog, and I just happened to explore a topic that both interests me as well as the general audience (many blockchain enthusiasts). Most people here dislike the banking system (hence, why they are cryptotoken users).
The purpose of this post was to illustrate money multiplication via reserve rates and demonstrate how infinite geometric series can be applied to my understanding of the system at that time.
My illustration may have been a poor example to what happens in the real world, but whether banks borrow from the central bank in order to meet RR before a loan is made or after a loan is made does not change the underlying principle of how money multiplication, via deposits in a bank.
So, yes, one could have instead simply used the (inverse of 1 - RR) - 1 and expressed this as the maximal money multiplier that could have occurred and stated that the actual MM is determined by numerous factors, including a ratio of how much of a particular loan is kept in cash, not used to pay off other businesses, and is therefore not deposited into a new bank account. And in fact, you'll note that I do state that is the maximal MM that can exist and indeed derive it from using the infinite geometric series model. Coincidence?
I could do a completely new post that explains this in light of all the new economics that I have learned from @sigmajin and yourself, if you think it would prove worthwhile.
I don't have the feeling I have anything I can learn you, tbh :)
As for the new article, please no, forvtwo reasons: 1) I don't want to be the cause, even partly, for anyone doing anything and 2) after this discussion, I think the OP+thread is a very complete assessment of the concept.
And maybe a 3) I'd much rather see you work on another blogpost, next in the series...
Meanwhile, check out my latest post I linked here somewhere. That'll give you an idea how bad I am at economics, lol. And there are some questions I'd like to see answered by more capable people...