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To: rabscuttle385
The Federal(not federal) Reserve(No reserves) Bank(Not
a real Bank) loans banks fiat dollars.
The main idea of fractional reserve is a scam whereby
a banker could loan money he didn't have and never had.

It actually permitted banks to create new money, based
not on gold, nor on his own credit, but on the credit
of his customers.

4 posted on 12/14/2009 4:34:12 PM PST by HuntsvilleTxVeteran ((B.?) Hussein (Obama?Soetoro?Dunham?) Change America Will Die From.)
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To: HuntsvilleTxVeteran
The main idea of fractional reserve is a scam

Let's find out whether you've actually thought that through.

Example 1 concerns what Milton Friedman used to call "the life cycle of income." The basic idea is that the need for "stuff" like houses, shoes, etc. is highest in early adulthood when people are forming families and raising the nation's children. The income to pay for all that stuff, however, typically doesn't arrive until later in life when the 'young parents' are in their 40's or 50's and have much better jobs than they could have qualified for in their 20's.

Our society solves this problem through the miracle of "lending," by which younger people essentially borrow the savings of older people, which they will repay when they get older themselves. This allows the nation's children to grow up with shoes, in actual houses. On the whole it works well.

Your plan would cause the banks to have to hold 100% of the older people's savings in reserve. They could lend none of it. Not to put too fine a point on it, but this would make a lot of people unhappy with you in the event you became King and imposed your policy.

For example 2 let's use some bright and ambitious fellow who wants to open a pizza parlor, but whose family, the Monaghans, don't have a lot of money. He goes to the bank for a small business loan, but thanks to you, banks no longer lend money. They're sort of Scrooge McDuck money bins where wealth piles up invested in nothing.

Please don't sell that idea here. It would be the biggest brake on upward mobility and the American Dream since the days of landed gentry, their serfs, and the lack of any way for a serf to open a pizza parlor. Plus it would leave most parents of young children living hand-to-mouth and depriving their children of many things that they can afford, but only out of money they won't earn for twenty more years.


7 posted on 12/14/2009 5:29:40 PM PST by Nick Danger (Free cheese is found only in mousetraps)
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