RE: Fractional Reserve Lending
October 19, 2016 at 10:59 am
(This post was last modified: October 19, 2016 at 11:24 am by The Grand Nudger.)
You set up frb and full reserve as opponents OP...so why not let depositors decide who they'd rather trust their assets with? Let the gov set thresholds, ban egregious practices, sure...but also refuse to allow them to underwrite the risks and failures that any bank using either system might take (it's central banking as-practiced..and not either system in and of themselves that create the issues you seem to be concerned with). I think you'd find that successful frb banks outperformed their full reserve counterparts by orders of magnitude...this is, ofc, why we went with the system to begin with. Those who were risk adverse would use full reserve banks, while those who wanted to assume a little risk in order to avail themselves of longer lines of credit would use frb banks. Others would avail themselves of both.
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