trfie wrote: ↑Sun Jun 24, 2018 3:02 pm
@Bluenote, based on this post, and some of the posts above, you seem to fundamentally misunderstand what FRB is. The Australian system is NOT effectively the same thing as FRB.
This is a (simplified) example of Australia:
You open a bank and a customer deposits $100, which is the total amount in deposits.
Another customer comes and you loan out $50 for her to start a business.
Fractional reserve banking:
You open a bank and a customer deposits $100, which is the total amount in deposits.
Another customer comes and you loan out $200 for her to start a business.
I probably don't understand all of the nuance of FRB vs. the Australian system but each system produces a multiplier effect.
So in your example Australian banking allows banks to loan out .5x deposits and an FRB bank allows 2x, I don't understand how that example supports any sort of argument or position.
If people are really worried about losing money in the event of a bank run, and not being covered by insurance schemes, they should buy government bonds or bills with terms matching their spending plans (T-Bills for example). If people are worried about the value of those T-Bills then they're going to need to think of another strategy , like investing in commodities, securities, other countries currencies etc. Maybe they can find a place to store hard cash. I guess if you lived in Venezuela or some other economic basket case country this is something that you would spend a lot of time worrying about. Bankruptcy law defines bankruptcy and I don't think all banks are effectively bankrupt at all times. In fact its quite the opposite as far as I can tell.