23
Oct
Alternatives To Fractional Reserve Banking. Under free banking for example banks. Abolish not only fractional reserve banking but all usury so that nearly all lending as a form of capitalization for corporations is replaced entirely by equity ie stock investments in corporate shares instead of debtbonds while commercial deposit banks are replaced by investment banks with a cash reserve ratio and some small limitations on withdrawals that exceed a certain percentage of the total. You could also have a fractional reserve banking system where banks are required to fully shift loans between their asset and liability columns as they make them or customers pay them off. Central bank Bank reserves Reserve requirement and more.
Fractional-reserve banking is similar to these topics. In the 100-percent reserve case growth in money demand must cause prices to decline at a roughly corresponding rate roughly because there may be some shifting of available gold from non-monetary employments to bank reserves. A system that delivers the highest possible level of material welfare might not be the best system for everyone. Under fractional-reserve banking in contrast there will be greater scope for monetary expansion depending on how free banks are from legal impediments. Youre into commerce so youre on your own. One standard proposal is to break up bank deposit taking into two components.
March 16 2020 by IWB If you thought 2008 was bad just wait.
Under free banking for example banks. The bottom line is that it is not fractional reserve banking per se that is the cause of inflationary increases to the money supply due to the money multiplier process but rather the ability of central banks to override market signals thanks to their monopoly status and add reserves to the banking system at their discretion and independently of the publics preferences. Youre into commerce so youre on your own. On the contrary. Central bank Bank reserves Reserve requirement and more. And that all points to the wisdom of full reserve banking which is the alternative to fractional reserve.