The Faults of Fractional-Reserve Banking

[traelin0]

In a November 1, 2010, blog post titled "Could the World Go Back to the Gold Standard?," Martin Wolf, the Financial Times chief economics commentator, comes to the conclusion that "we cannot and will not go back to the gold standard."

Among a number of mainstream-economics arguments leveled against the desirability and feasibility of the gold standard, Mr. Wolf puts forth a line of reasoning that can serve particularly well as a starting point for debating his position. Mr. Wolf writes,

Economists of the Austrian school wish to abolish fractional reserve banking. But we know that this is a natural consequence of market forces. It is wasteful to hold a 100 per cent reserve in a bank, if depositors do not need their money almost all of the time. Banks have a strong incentive to lend some of the money deposited with them, so expanding the aggregate supply of money and credit.

Read more here.

[deziloooooo]

trae...I know you feel, wait one...I think you feel that so many of our problems if not all are caused by inaccurate dealings in our supply of money, wealth..how we aquire it, use it...
However, I have to tell you, it's been decades since I sat in finance and economic classes and if you want to get your ideas across to the average poster here, me, who is interested in discussing, battling and discourse on ideas and issues, your going to have to dumb down in your explanations.

Naturally I am speking for my self here but wouldn't be surprised that I am also speaking for many of our other posters and readers here too.

No disrespect meant , just the way I feel when you post these tidbits of economic , fiscal and monetary explanations and articles.

[Savoir Faire-Demogague in NJ]

Hey Tough, you are the first person in nearly 40 years who has mentioned the NY State Regents! LOL
I took the regents classes and the mandatory regents finals, resulting in my HS diploma being a Regents Diploma...

[Savoir Faire-Demogague in NJ]

Yes, I am familiar with all those schools. I was originally going to attend Stuyvesant, but got accepted to Bishop Ford at the very end of the summer, and ended up there.

Back then, in the 70s, you had to take an exam to get into Stuy High. I had a few friends who went to Brooklyn Tech, which I think has changed it's name to Metro Tech. There was another school called Aviation High, located in Queens. I applied there, took the exam, which was brutal.

[Savoir Faire-Demogague in NJ]

Well Aviation is located near La Guardia....LOL

[ungenteel]

loans based on fractional reserves are basically a bet on the creation of future wealth for re-payment .. the only thing that creates wealth (instead of re-shuffling wealth) is value added activities ... it wasn't a problem until we moved so much of our value added activities offshore .. now we have a big problem with those "bets"

[mudflap81]

I've been hearing more and more people saying "Well, our currency has to be backed by either debt or gold" more and more often. Thoughts? It seems to be a defense for the deficit spending.