THIS IS A RESPONSE TO WALFFLER SMITH's COMMENT "The quote is an absolutely correct and truthful statement. The "demand liabilities of a bank" are your deposits. Because of the "law of large numbers" the bank while still promising you access to your money on demand also is able to lend some of it to others. Thus in effect you and the others both have access to your money at the same time. Because there are so many individual depositors at any one time and no one demands their money at the same time the banking process can continue indefinitley. This quote is a simple truth and you guys get off on it and go gaga. I don't get it! It has nothing to do with the Fed or the USA, this is a universal attribute of banking. FLAW #1. Have you ever heard of anyone's personal checking account being debited when a loan is created?. Majority of the money or loans in circulation is created as a book keeping entry, 1s and 0s in cyber space to be more specific. This fact is possible because of the smoke screen of the Federal Reserve. If you break the Federal Reserve, the system crumbles. when you local banks creates a loan, it makes a book keeping entry using your sweat and labor to back it up. It brought nothing to the table for that transaction FLAW #2: THe reason your bank doesn't shut down is because it is relaying on deposits from checks issued by other banks. The minute the incoming deposit drops below the checks drawn against the banks, the bank goes under.. The bank of Venice operated for 500 yrs without gold or silver. It operated on credits issued by the government. This was an exchange between producers (government providing security) and citizens produce goods. This was an organic money system. The system failed after Napoleon's invasion. The current money supply in the US is a parasitic money system. The non producers, the banks steal the wealth from the citizens.