Fractional Reserve Banking Simulation¶

Download Simulation¶

The latest version of the simulation can be downloaded from the Files section:

http://www.mindmakers.org/projects/frb/files

Running the Simulation¶

You will need a version of python 2.6 or later that includes wx python, numpy, and matplotlib. If you don't already have that, the easiest way to install it is probably to download the Enthought Python Distribution from:

http://www.enthought.com/products/epd.php

There are academic and free versions.

Then:

python grid.py

at the command line should suffice.

Warning¶

Although this simulation is useful to understand the entry level Economics Textbook description of the banking system, it is not particularly helpful in understanding today's banking system. The textbook description appears to be a partial explanation of Gold Standard Era practices. After the collapse of the Bretton Woods agreement in the 1970's, the gold standard was no longer used, and regulatory control shifted to the Basel Capital Accords in the 1980's. Basel regulates lending as a multiple of the Bank's capital reserve, and appears to have completely removed the direct dependency on the quantity of the bank's deposits.

Further Reading

• Background
• Papers
• Literature