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So I've had some conversations with some others about what would happen if we adopted a 100% reserve banking system (probably backed by gold.) I argue that such a system would eliminate the constant boom-bust cycles because it would put an end to the government/banks increasing the money supply leading...
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I have heard the claim that fractional reserve banking is not a problem with a lone banker, i.e., if there is only one bank in which all people have all their accounts. If there is only one bank, however, I would think that the problem, in a sense, can get worse than it otherwise would have. Because...
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"Should be" and "if" statements are for dreamers, not doers. With strict adherence to the principles of classical banking, your demand account is not at risk because you maintain ownership of the funds. Your investment account, which by nature is at risk, would be the basis for the...
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Don; Fractional reserve banking can be replaced by two types of accounts; the first is typically known as demand account where you maintain ownership of the funds. This type of account is held with the 100% reserve requirement. In layman's terms, it is the money you would deposit from your job and...
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In a fiat money system it is the same thing. Explain how the money supply shrinks if a bank fails
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If the bank can inflate bank notes why do bank runs occur? The bank could just issue more and more bank notes and never have to default??? If the bank inflates bank notes then why does the money supply shrink when the bank goes bust?
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Lehman Brothers failed because of the moral hazard of the Federal Reserve. And the ultra low interest rates, freddie and fannie and the tax code which all perpetuated the bubble. In the 30s, it was the same thing. The banks failed because the Federal Reserve encouraged them to lever up. I believe fractional...
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Why wasn't fractional reserve banking possible? If you had 100 pieces of gold on deposit. You could loan out 90 pieces and keep 10 in case anyone wanted to withdraw some money. "Hiccups" in the market can occur for the individual but for a class of people it is different. There is consistency...
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"Inflation can occur even without a central bank but it's dangerous to the inflating banks". What?? How can you inflate the money supply, without having a central bank that has the capability of printing money? Fractional reserve banking will not magically produce more gold/money.
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"...since they are part of the Federal Reserve System, they ask for and receive a temporary line of credit from the Fed of $50". THEY CAN DO THAT??? The reason in this case that fractional reserve banking is inflationary is because they would be receiving a "temporary line of credit"...