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To: smolejv@gmx.net who wrote (11806)	12/12/2001 11:21:07 PM
From: LLCF	Read Replies (1) \| Respond to of 74559

I'm assuming that 100% reserves is simply eliminating the fractional system.... somewhere in history it probably ment that banks just held the money for safe keeping, we're obviously not going back to that, nor does the Austrian school advocate it that I know of [see Rothbard quote]. Today the meaning of 'reserves' against demand deposits is cash on hand and deposit at the Fed neither of which earn any interest. Current reserves in this form are 10% I believe except much smaller for the first bit of deposits... I forget exactly what. Requirements for savings and CD's I think are zero like my model. The problem is none of this has to do with the highly leveraged and grey area of lending/borrowing many times against capital [depending tier 1-?] and other assets like [borrowed?] government bonds: bis.org DAK

To: smolejv@gmx.net who wrote (11806)	12/12/2001 11:51:21 PM
From: Don Lloyd	Read Replies (2) \| Respond to of 74559

dj - ...So, discussing the case of 100% reserves required is fine - for a fresman course on "let me start you on banking". ... The reason for discussing this is that it is 'fractional reserve banking', not fiat money itself, that represents the primary danger of deflation/depression when the expanded credit that boosts the money supply subsequently contracts and takes the money supply with it, depressing economic activity and business profits, and making loan repayment difficult as the purchasing power of the required money repayments increases. This is all new to me within the last week or two. This was a major reason that the US suffered severe business cycles even under the gold standard, as it was always a fractional reserve gold standard, or at least that was what I read. Regards, Don