Let me set the scene. The UK was working it’s way through a century that gave us the plague, the execution of Sir Walter Raleigh, the arrest of Guy Fawkes and the great fire of London. The 1600’s certainly gave the UK some talking points for the centuries to come.
Meanwhile Sweden was introducing a financial system that would change the world forever. In 1668 the Svergis Risbank became the first central bank in the world and began the practice of Fractional Reserve Banking.
Now if you ever come to DevDosh Ltd towers and meet us we won’t be wearing pre-1668 clothing and writing with quills. Something else we do not engage in from the 1600’s, is the fractional reserve practice of banking with our investors money. DevDosh Ltd pride ourselves on being charmingly old school and very conservative with in our endeavors. The internationally accepted fractional reserve system however is more about gang buster growth and profit over substance and care.
The fractional reserve system works on the basis that only a “fraction” of the customers money needs to be kept in “reserve” and the rest can be lent to other customers. There are two benefits to this system. Firstly the bank makes profits from interest charged on loans. Secondly paying money forward in the form of loans stimulates the economy as borrowers then use that money to buy goods and services.
The reason that fractional reserve banking can do such a good job of stimulating the economy is because it literally grows the economy by multiples of deposits.
Fractional reserve growth example
- Customer 1 deposits £100,000 with bank A: Bank A keeps 5% in reserve and lends £95,000 to customer 2
No problems here unless customer 1 wants their access to his money and customer 2 hasn’t paid it back right?
- Now customer 2 deposits £95,000 with bank C: Bank C keeps 5% in reserve and lends £90,250 to customer 3
No problems here unless customer 1 and 2 want access to their money ……… An so the chain continues.
This is a simple example but does begin to illustrate the fragility of the banking system upon which we all rely.
DevDosh Ltd promote a much simpler, more substantial and sustainable system. An old school system with simple and forthright values. Quite simply we lend the capital our investors trust us with to property developers in the form of 1st charge real estate development mortgages. Those property developers repay the mortgage with interest. We the repay the investors their capital back and we also pay the investors the lions share of the interest we have collected from the property investor.
DevDosh Ltd, for the safest 10% yield in the current fixed income investment market, contact us today.