Posted on 12/23/2023 12:57:24 PM PST by RandFan
According to Von Mises fractional reserve banking is the very definition of all banking. You can find this explained in his “The Theory of Money and Credit”.
When Mises wrote that circa 1912 “money” = specie, i.e. gold. “Credit” was either bank notes printed by banks themselves or checking and savings deposits.
Banks have always created “credit money” in excess of their reserves. That goes back centuries before the Fed or any other central bank came into existence.
” there is little of tangible value that is actually lost. It is primarily a bookkeeping entry”
I guess that sounds like it makes sense if you don’t know how banks work. A loan is an asset for a bank, and a defaulted loan blows a hole in their assets. A loss of assets forces banks to contract their credit. On a wide enough level this can contract the nation’s money supply, which happened on a huge scale 1930-1933, and was a worry in 2008.
People who fall for Griffin’s foolishness appear to know nothing about how America’s banking operated before the Fed. J.P. Morgan was America’s defacto central bank. He arguably had even more concentrated power than the Fed has. Presidents used to take the train up to NYC and ask Morgan to bail out the country.
After the 1907 Panic, Morgan warned that the US financial system was getting too big for one bank to backstop. It was Morgan himself who proposed the National Monetary Commission created by the Aldrich–Vreeland Act of 1908. Their study report eventually led to the Federal Reserve Act.
The issues some critics have with the Fed started under the National Bank Act of 1863, which Lincoln used to finance the Civil War. That act forced banks to buy Treasury debt to hold as their reserves. The Fed basically kept that same framework intact.
A serious rival to the monetary/banking system that we have used since 1863 could be “asset currency”. The banking cartel may have killed the idea. George Selgin has written about asset currency for those whose eyes don’t glaze over when reading banking and monetary arcana.
Congress intentionally puts us into debt. We are paying the debt with interest to the fed. It’s a bad system.
The Fed owns less than $5 trillion in federal debt.
What do you think they do with the profits they earn?
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