Frackin’ Reserve! – A Fractional Reserve Banking Simulator

To help explain what the effects of fractional reserve banking are, and to illustrate just how evil it is, I’ve written a simple program that lets you simulate fractional reserve banking and the effects of compound interest.

The “Frackin’ Reserve!” program simulates what happens in fractional reserve banking, and lets you change the parameters for it. What this lets you do is simulate fractional reserve banking from a variety of perspectives, and see the results in real time. It also lets you generate a report so you can view all the generated output in a linear time series of the iterations through fractional reserve banking. That was probably a mouthful, and may have sounded like so much balderdash to some people. But it will all become clearer later on, and in particular when I post a follow-up article about fractional reserve banking.

The 10 Second Summary

Download and run the program to play with the factors that make up fractional reserve banking. Change them to see what happens. As a bonus, you can also see how interest works.

Frackin’ Reserve!

Program Requirements

Operating System: Windows XP / Vista / 7
.NET: Requires .NET 4 (available free from Microsoft as a web installer here or stand alone installer here)

There are no other special requirements.

Downloading Frackin’ Reserve!

You can download Frackin’ Reserve as a stand alone program here, or download the complete source code here, and if the whole requirements thing scares, you, then there’s an installer version here (includes source code) that will take care of all the requirements for you automatically. So, summarizing that:

FREEDOM: Frackin’ Reserve is licensed under the GPLv3, so you are free to do with it whatever you wish as long as you pass on that same courtesy if you redistribute it. (Yay for freedom~!) Feel free to share with whomever you like.

And here’s a screenshot:

Frackin' Reserve - Fractional reserve banking simulator

Where you see “parameters”, you can change the values. So, in other words, you can change these:

Frackin reserve editable parameters

Updating those parameters updates everything else automatically.

To view a time series of the iterations of the fractional reserve banking, simply click the “Show me in a table” button. Frackin’ Reserve will create an HTML page with a table for you, and open it in your default browser. This is a table made using the default parameters:

Iteration # Deposited by
Amount Held
in Reserve
from Deposit
Available to
Lend Out
from Deposit
Total Amount that
“Can” be
Lent Out
Total Amount that
Has Been
Lent Out
Total Amount
Held in Reserve
Total Amount that
Customers Believe
They Have
Amount of
Interest for
10 year(s) @ 5.0%
on Loaned Money
1 1,000.00 100.00 900.00 900.00 0.00 100.00 1,000.00 0.00
2 900.00 90.00 810.00 1,710.00 900.00 190.00 1,900.00 582.31
3 810.00 81.00 729.00 2,439.00 1,710.00 271.00 2,710.00 1,106.39
4 729.00 72.90 656.10 3,095.10 2,439.00 343.90 3,439.00 1,578.06
5 656.10 65.61 590.49 3,685.59 3,095.10 409.51 4,095.10 2,002.56
6 590.49 59.05 531.44 4,217.03 3,685.59 468.56 4,685.59 2,384.61
7 531.44 53.14 478.30 4,695.33 4,217.03 521.70 5,217.03 2,728.46
8 478.30 47.83 430.47 5,125.80 4,695.33 569.53 5,695.33 3,037.92
9 430.47 43.05 387.42 5,513.22 5,125.80 612.58 6,125.80 3,316.44
10 387.42 38.74 348.68 5,861.89 5,513.22 651.32 6,513.22 3,567.10
Fractional Reserve Banking is EVIL.

You can set your own parameters and create any table you want. This is useful to see exactly what is happening at each iteration in the process, and how it grows like an out of control bush fire.

Using Frackin’ Reserve!

Frackin’ Reserve is super simple to use. Simply change the parameters, and everything is updated automatically. Here’s a quick run down of what each parameter and output result is:

Initial Parameters for Fractional Reserve Calculations

Initial deposit: This is the first “kick-starter” for the whole system. It puts some money into the banking system, and is the foundation for all subsequently created fiat money.

Fractional reserve factor: This is expressed as a factor, though most often it is expressed as a percentage. It is also called the “reserve requirement”, “cash reserve ratio”, or “reserve ratio”.

Iterations: This is the number of times that people deposit money into the system. The first iteration is the initial deposit. All subsequent iterations are loans, create fiat (fake) money, and bear interest.

Fractional Reserve Results on the Money Supply

What customers think they have: This is the running sum of what all customers have deposited into the banking system.

What the bank has in reserve: This is amount of the initial deposit that the bank actually has kept back in reserve. It is a running sum.

What the bank can loan out: This is the amount that the bank has the right to loan out from all past deposits. It is a running sum.

What the bank has loaded out (fake money): This is the actual amount loaned out by the bank. On the first iteration, it is zero. It is a running sum.

What the bank’s next loan is: This is the amount that the bank’s next loan will be. It is always smaller than the previous one. It is not a running sum.

Interest Owed Parameters

Interest periods (in years): This is the number of years that you wish to calculate compound interest on.

Interest rate ( × 100 = %): This is the interest rate expressed as a decimal. Multiply it by 100 to get the percentage.

Compounded: This is how you wish the interest to be compounded. It can be one of annually, monthly, daily, hourly, by the minute, by the second, or by the “tick”. A tick is a unit of measurement, and there are 10,000,000 ticks per second.

Interest Owed Results

Total interest on money lent out: This is the amount of interest owed on all loans. It does not include the principal. i.e. It is only the interest.

Total interest and principal: This is the total of all the interest and the principal. It is equal to the “Total interest on money lent out” plus the principal.

It should be noted that Frackin’ Reserve is a simple simulator, and does not take into account the rate of iterations. This is largely an academic point though, and doesn’t really matter all that much. It is only useful if you want to know what the state of things are at some particular point in time for a given rate of loans. i.e. It has no bearing on illustrating the way fractional reserve banking works. The iterations in reality are fast enough to discount the rate as being unimportant. The short and simple version of that is that Frackin’ Reserve assumes that all loans and deposits for all iterations are made at the same time. If you don’t understand what that means, then don’t worry. It’s really only a minor technical note for those that already know about how the system works. These are not the droids you are looking for… 😉

Code Notes for Programmers and Non-Programmers

The source code is EXTENSIVELY commented with the express purpose of making it easy to follow for non-programmers.

So, even if you do not program, there’s lots of information in there, and it’s basically a tutorial on its own.

For programmers… It’s ugly. Yeah… I did naughty things because it’s easier to read for non-programmers that way. This is meant to be educational about fractional reserve banking, and not a programming tutorial. So, when you see everything stuck in 1 method, just remember that it’s all for a good cause. 🙂




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10 thoughts on “Frackin’ Reserve! – A Fractional Reserve Banking Simulator

  1. I’m very happy to see this released under a freedom-granting license like the GPLv3. However, I’m confused how (who clearly understands the issues of software freedom) could develop Free Software for a freedom-restricting operating system like Windows? By developing for and releasing software for Microsoft’s platform like this, you effectively advocate that users give up the very freedoms the GPL is designed to provide and protect. Again, I very much appreciate the fact that you released this code the way you have but surely you must see the contradiction here. I value freedoms 0-3 and would therefore, never run an operating system like Windows or OS-X. It wouldn’t matter if every piece of addon software is copyleft when the underlying platform is essentially robbing you of these liberties.

    1. Hello Adam,

      Believe me… I know the contradiction. The problem for me is that I live in the MS world, and that puts food on the table. 🙁 I’m still working at extricating myself from my dependency on MS products, but it’s much easier said than done.

      Both MS and Apple really are pretty sinister, but that’s another rant.

      In the meantime, I ported the program to a web edition so that people on Linux (or Macs) could use it.



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  2. Good Morning Ryan,
    If you are indeed the Ryan of Renegade Minds. Its a common mistake I’m sure we all make in pre-judging or creating images of people in our minds depending on their/our connections. When i first became aware of your GDT and e-mailed a request etc. I had the mistaken image of some teen-age Canadian ex-pat living off-shore in a far-away oriental land writing computer programmes. Anyway its nice to find you again in this electronic web of intricate, delicate data strands. I’ve been working on a few “inventions” lately, mixing music, visual art and writing.
    Take care Ryan


    1. Hello David,

      Hahaha~! Yep. I’m that Ryan. I’m far from teen-aged… But still a Canadian expat. Looking to get back to Canada though, in a major way!



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