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The Faults of Fractional-Reserve Banking - Thorsten Polleit -

The argument Mr. Wolf makes is flawed from the outset, when he uses a bogus straw man to knock down. He states "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." This statement implies that fractional reserve banking only lends out "some of the money deposited", when everyone knows that fractional reserve banking lends out none of the money deposited, but rather uses the deposits as it's reserve and creates 9 times as much new money, out of thin air. This description describes a bank lending out say 900 dollars of a 1,000 dollar deposit, leaving 100 to satisfy a 10% reserve requirement. This is not how fractional reserve banking works. The fractional reserve bank would not lend out any of the 1,000 deposit, leaving it as it's 10% reserve against 9,000 in new loans.

Wolf's argument sounds so incredibly reasonable if you don't question his initial assessment of fractional reserve banking. The fact that he has to give us a bogus description of how fractional reserve banking works tells me that he knows that the details concerning the operations of fractional reserve banks is repulsive.

His description of lending out some of the depositor's deposits wouldn't even expand the money supply.

After I read that paragraph, I knew Mr. Wolf is either a clown who doesn't know the first thing about banking, or someone who's being purposefully deceptive.

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Début de l'article :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... Lire la suite

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