Fractional reserve banking, quick question.

slipthru

amcluesent wrote: »

There's talk the in papers of reverting to a Bretton Woods style of financing, where the currencies are pegged to the gold standard.

where would that leave us, didn't clown sell all our gold for a really cheap price?

tomstickland

I love thought experiments.One thing that's clear from my experiment above is that the fractional reserve method allows a magnification of commerical money supply but is inherinently risky. The central bank could ultimately have to supply all of the commercial money on top of the real money it started with.

One thing I didn't think about was interest. That'd be back to my original point. If every bank along the line demands payment with interest then more money has to be paid back then was every created in the first place.

amcluesent

> more money has to be paid back then was every created in the first place.<

Yep, but then you have unpriced network externalities to factor in. Fractional reserve "works" because the system consumes non-replaceable resources (oil the most obvious) and doesn't have to fully account for the damage to third parties (child labour, pollution etc.). By not costing this into the value exchanges, fractional reserve appears to create more than the sum of parts.

Faded

jim83 wrote: »

Aye.
There's a good film floating around on Google Video called Zeitgeist Addendum which explains this very well (it then goes on to some conspiracy theory stuff which can be taken with a pinch of salt - but the start is good).

Just so you guys know.. I came across a post on here within the last couple of days where someone mentioned the Zeitgeist Addendum movie stating that it contained a lot of good information, and had posted a link to it. The person who answered, immediately accused the poster of spamming. This annoyed me as it was clearly needlessly accusing someone without any knowledge of what he was talking about. So i signed up to answer him. When i defended the original poster and made it known that Zeitgeist is definately NOT spam, i myself was accused of actually posting the original message.

When i then defended myself and asked for evidence of this as well as posting information on Zeitgeist Addendum, which jim83, as you quite rightly say, explains the concept of fractional reserve banking - the thread was deleted.

So this was my first couple of posts on this forum and i must say it smacks of dictatorship - we'll needlessly accuse you of spamming with no evidence whatsoever, and if you prove us wrong we'll just conveniently delete the thread. To the guys that did this, savemoney, Clive Woody, _Andy_, nice going guys, cynicism is definately still alive and well. Thanks for the welcome to the forum.

ruggedtoast

The Paul Grignon film on google video is a good starting point. Money as debt or something.

tomstickland

There have been problems with one post wonders spamming, so people tend to assume spam a bit too quickly.

Faded

Thanks Tom, i appreciate you taking the time to tell me. My post count is now lower as my original posts were of course deleted along with the thread, and funnily enough after a quick search i find the exact same subject being discussed here. So, for anyone thats interested in an explanation of the fractional reserve banking system, and, seeing as the film is not for profit, heres the offical link to the movie to watch free of charge on googlevideo :-
http://video.google.com/videoplay?docid=7065205277695921912