Fractional reserve is different from capitalisation of banks. My mistake. Fractional reserve relates to deposit expansion and how money comes out of thin air.
Let's start with the AppleMoney having $80billion. It can only lend out 90% of that i.e. $72billion at this stage. But, because the banking system works as a closed system, that $72billion has to be deposited in another bank. So, another bank gets $72billion in deposits. Now that bank can then loan out 90% of that. So it can loan $64.8billion. That $64.8billion has to be deposited somewhere, say, back at AppleMoney. So now, AppleMoney has $64.8billion in deposits.
So now, AppleMoney has $80billion + $64.8 billion in deposits.
AppleMoney now has $144.8billion. It can now loan out 90% of that which is ~$130billion.
But wait, you say. How can AppleMoney now have $144.8billion if it lent out $72billion? It should only have $80-72=$8billion, plus the $64.8billion deposited.
THIS IS THE BEST PART AND HOW BANKING IS THE BIGGEST SCAM IN OUR LIFETIME"If business is active, the banks with excess reserves probably will have opportunities to loan the $9,000. Of course, they do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created."http://en.wikisource.org/wiki/Modern...osit_Expansion
Read the above again: THEY DO NOT REALLY PAY OUT LOANS FROM THE MONEY THEY RECEIVE AS DEPOSITSThe $72billion "paid out" as a loan from AppleMoney does not "come out" of the $80billion deposit
."If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers' transaction accounts. Loans (assets) and deposits (liabilities) both rise"LOANS AND DEPOSITS BOTH RISE
ie. AppleMoney now has $72billion as assets (loaned out), $80billion still as deposit, plus now $64.8billion as deposit from the other bank loaning somebody the money, which goes back to AppleMoney since that loaned money doesn't go under the mattress.
So again, AppleMoney now has $144.8billion in deposits ($80billion + $64.8billion). It can now loan out 90% of that which is ~$130billion.
AppleMoney's total assets (loans) = 72+130 = $200billion.
AppleMoney's total liabilities (deposits) = 80+64.8 = $144.8billion
I'll pause here for all to reflect. This is the most important point for us to understand how money comes into existence through loans, ie. money as debt.