American Presidential Politics and foreign affairs Message Board

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Politics : American Presidential Politics and foreign affairs

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To: DuckTapeSunroof who wrote (38459)	11/11/2009 8:11:04 PM
From: TimF	Read Replies (1) of 71588

to adhere to the fundamental principle of sound fractional lending - that is, insisting that for each dollar of unsecured lending outstanding at any instant in time the institution hold one dollar in actual capital That's not a fundamental principle of sound fractional reserve lending, its full reserve lending. The transition would require a massive contraction in the effective money supply, and also probably result in people being charged by banks to hold their balances. Why? Because otherwise you're lending THE SOVEREIGN'S CAPITAL! No your lending your own. Well I suppose if you create any risk the "sovereign" may decide to bail you out, and if your counting on that in effect your lending "the sovereign's capital", but the answer to that is just don't have the bailouts. With no bailouts or expectations of bailouts your not leveraging the government's credit, your leveraging your own.

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