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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: Ilaine who wrote (11737)12/9/2001 10:20:31 AM
From: Don Lloyd  Read Replies (1) of 74559
 
CB -

Rather than try to dig through all your assumptions right now, the key one seems to be that 100% reserve means no credit. This is hardly true. The real problem of fractional reserve banking is the privileged position of the bank that prevents effective non-bank competition and the Federal guarantees that provide the incentive to make excessively risky loans, and loans that finance unrealizable projects. The bank executives either produce enormous profits if they are lucky, or garner enormous severance packages if they are not. Anyone in the economy that has capital will loan it out if the prospective returns for doing so are superior on a risk/reward basis to the other alternatives. The advancing of credit predates even the existence of money and will always exist as it confers a benefit on both parties, as with any other economic exchange.

Regards, Don
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