Sunday 9 March 2008

(Pea)nuts in your bank

Mish is one of my favourite bloggers.

This shows why:

The root of the problem is fractional reserve lending in conjunction with a Fed that micro-manages interest rates without having a clue as to what they are doing. So, if banks want to sell insurance, peanut butter sandwiches, and Girl Scout cookies while offering checking services I say go for it, provided we get to the real solution to this banking mess.

The solution to this mess is not more regulation but less regulation and less government interference. The best things to do would be to abolish the Fed and eliminate fractional reserve lending, the latter on a phased in approach.

1 comment:

David Farrer said...

Comments made on previous template:

David Farrer
Hi Patrick 
I think that a fully privatised fractional reserve banking system would be legitimate if things were made quite clear to the customers. For example, I deposit £1 into the bank and on my statement it states that the bank is going to lend out £10 on the back of my deposit but, not to worry, we bankers know that not all depositors will withdraw their money at once so everything is OK. But I'd prefer to put my £1 in a bank that only lent out £5. Or, better still, £1.

27 March 2008, 07:41:31 GMT
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Patrick Crozier
Fed and central banks generally, I get as culpable but fractional reserve banking? If recessions happen when debtors can no longer service their debts then that will happen whether you have fractional reserve banking or not? 
Well, won't it?

24 March 2008, 17:19:37 GMT
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dave allison
Yup - I am overdrawn at my bank by £70.

12 March 2008, 08:03:37 GMT