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John O
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The Faults of Fractional-Reserve Banking - Thorsten Polleit -

"Austrians therefore argue for privatizing money production, shutting down central banks, and letting the market decide what kind of money people want to use. Government wouldn't have to play any active role in the workings of a free-market monetary system."

Isn't the nature of fractional-reserve banking an open secret? There is no conspiracy in any relevant sense of the term, and so I wonder how it can be considered fraudulent. I concede that the wild excesses of fractional-reserve banking--to the extent that the world economy and the lives of billions of people are at the mercy of the credit market's violent mood swings--have only been made possible through government power, but in a genuinely free, Austrian-style market, I do not understand how it can be outlawed.

I believe that a mild amount of fractional-reserve banking can be beneficial to the economy and that a free market would restrain it, without recourse to government bans. If the government had any proper role to play, it ought to be in making sure that financial institutions do not defraud the public by deceiving depositors as to the nature of the arrangement, although I think a free market would do most of the heavy lifting.

Not a flattering analogy, I guess, but it's kind of like reporting your friends to the police because they made every effort to deceive you (without cheating, I mean) during the course of a poker game.

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Beginning of the headline :Fractional-reserve banking means that a bank lends out money that clients have deposited with it. Fractional-reserve banking thus leads to a situation in which two individuals are made owners of the same thing... Read More

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