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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: mishedlo who wrote (49231)1/9/2006 1:42:37 PM
From: Tommaso   of 110194
 
Shostak is so concerned to limit the definition of money as strictly as possible that he says that money deposited in a bank is totally the property of the depositor and that the cash he deposits is his cash and his alone. He does not state clearly that a bank will never hold more than some prescribed percentage (it seems to vary with federal and state banking requirements) of those demand deposit totals in either cash or as a deposit with a Federal Reserve bank.

It may be that by arguing this way, he means to argue that demand deposits SHOULD be 100% backed by cash, i.e. Federal reserve notes. But in trying to define what money is, he says that demand deposits ARE backed by cash.

It seems to me that whatever reserve requirements existed for checking and savings accounts fifty years ago were sound. Maybe I can look them up.

Fractional reserves are the essence of banking.

I have run out of time right now and have to sign off.
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