Poof, it is gone. $25 billion at FDIC insuring $trillions in empty accounts.

"Fraudulent Guarantees; Fictional Reserve Lending

Base Money Supply: $2.9 Trillion
M1: 2.4 Trillion
M2: 10.4 Trillion
Total Credit Market Debt Owed: $56.3 trillion

One Giant Ponzi Scheme

Clearly far more money has been lent than exists. How can it possibly be paid back? If it can't be paid back, how good is a guarantee?

In 2010 Bernanke proposed ending reserve requirements completely, but long-time Mish readers understand that is the de facto state of affairs already.

For example, even the $2.4 trillion in M1 money that is "guaranteed" to be in your checking account and "available on demand" isn't in your checking account at all. It too has been lent...

There are no reserve requirements on savings accounts right now.

There are reserve requirements on checking accounts, but you have to take into consideration the fact that Greenspan allowed sweeps in 1994.

Sweeps allow banks to move (sweep) money from checking accounts into savings instruments nightly (unbeknown to customers who think the money is really there in their checking accounts).

Once Greenspan allowed banks to sweep, banks did so in mass, and the end result is there are essentially no reserve requirements on checking accounts either.

The bottom line is banks will continue to do what they have done since 1994, and that is to keep enough reserves on hand to meet estimated withdrawals."

And these figures do not include $trillions in bank derivative bets. More at link [link to globaleconomicanalysis.blogspot.com]