Talk:Fractional-reserve banking/Archive 3

message: Articles on fractional-reserve banking and Federal Reserve and any other major central bank make no sense whatsoever without explaining how the rules of the Bank for International Settlements constrain these practices in these institutions.  This is the global rulebook.  Criticisms of fractional-reserve banking are sometimes specific to the US because they affect events in the US, and the same for any other central bank:  you can't separate criticism of such a fundamental practice from the context in which it has its effect.
:I think you're exaggerating.  It can make perfect sense to talk in general terms about fractional reserve banking without mentioning the BIS, as fractional reserve banking existed long before the existence of the BIS.  Capital ratio regulations are largely based on the work of the Basel Committee on Banking Supervision, and this may be worth a mention, but whilst that committee's work is supported by the BIS, they are not formally a BIS institution.  The BIS does not, as far as I'm aware, have any formal power at all over the world's central banks.  -  Crosbiesmith 20:17, 12 January 2006 (UTC)
thread_title:  worthless without explaining [[Bank for International Settlements]] 

message: I've added a couple of tags to this article, which appears to have been somewhat overrun by monetary eccentrics.  As the intro points out that this is a "near-universal practice", in such a vital and historical area as banking, the fact that over half the article is devoted to "Criticisms" raises a red flag to me as a general reader that something is amiss.  Specifically, the "History" section seems to have no reference or consistency with the History of banking article, while the "Inadequate government regulation" section reads like some sort of anti-Federal Reserve pamphlet, with no indication of the nature of the "critics" or how accepted their views are. - Quietvoice 18:10, 20 August 2006 (UTC)
thread_title:  Tags added 

message: I have a dispute tag becourse the article contains two different views that make the article contradict it self in numerous of ways.
In the correct view the first banks had a reserve in gold. For every bar of gold the bank holds the bank could write a bank note for the value of that gold and lend it to loan takers and receiving interest. This is a full reserve system. The bank can only lend out the save amount of bank notes as it has in gold.
Fractional reserve banking is when the bank gives out more banknotes than it has reserves in gold. This causes a multiplier of circulated capital and a inflation. With the hope that all the loaner do not cancel the loans at the same time and tries to get the gold back. This would cause a bank run. Yhe bank don not have gold for all customers.
100% backing means that every bank note has a 100% backing in gold (or other value)
10% backing means that 10% of the bank note has backing in gold. The other 90% is fiat money and has no backing. this is fractional reserve banking.
The wrong view try to imply that it the bank gets $10 in deposits it can gives out $9 in loans. It is impossible to create inflation using this version: The bank actually creates deflation as it keeps money from circulation. Under this model it is impossible to use full reserve banking (100% reserves). Sense that would mean that the bank holds $10 of the $10 in deposits and have $0 dollars to use for loans and thus cannot operate at all. (This is obvious nonces)
This article is a mix of both models resulting in contradictionary statements.
The history part is partly correct, but most of the other parts is totaly wrong.
Sources:
*http://elib.suub.uni-bremen.de/diss/docs/E-Diss1237_Dis_Money_upside_down.pdf
*http://www.jamesrobertson.com/book/creatingnewmoney.pdf
*http://users.cyberone.com.au/myers/werner-princes-yen.html
--Crash site 23:01, 9 September 2006 (UTC)
thread_title:  Disputed 

message: I will take on the task of re-writing this page from the start. With the numerous edits that have been made it has become inherently self-contradictory and impossible to understand as a result, as many on this talk page have commented.
I should just add that my background is in banking operations and audit, so I do come from a fractional reserve background and agree with it in principal. I am also fully aware of the objections to the system, particularly those made by Murray Rothbard and, while I disagree with them, I can understand them and will incorporate them into the piece.
The point I will emphasise, however, is that fractional reserve is almost universal in developed country banking systems and so the objections to it should not predominate over Wikipedia conveying a full understanding of the system, with critisisms noted and analysed, but contained as critisisms.
The other point to make is that, while the US a large part of the financial global system, it is not the majority, so discussions of US policy, while useful for examples, should be in other, more relevant and focussed, articles. These will be linked to where appropriate.
Please hold off any further major edits until I have re-written this. I will have it completed by Saturday 28 October.
Andrew Reynolds 02:43, 25 October 2006 (UTC)
thread_title:  Page re-write 

message: Not to make your lives more difficult, but I think one of the dominant assumptions of the discussion on Fractional Reserve Banking needs to be called into question: the notion that fractional reserve banking leads to a multiplying effect.  Apparently, the effect is generated in the following fashion: money gets deposited and then a hefty proportion of that deposit leaves the bank in the form of a loan; in time, this loan amount ends up returning to the banking system in the form of a deposit, and then the process is repeated with this incrementally smaller deposit, and so on.  Use any ratio you want, but the one that seems current, here, is 1/10.  Consequently, as the process repeats itself, the limit of factorial expansion approaches the value of the denominator of our ratio, which is 10.  Thus a $100.00 deposit would become in time $1000.00, and a $1000.00 deposit would become in time $10,000.00, and so on.  At least, this is what the ongoing discussion, here, seems to be asserting concerning the multiplying and inflationary effect of fractional reserve banking.  I contend that this assumption is completely erroneous.  Let me attempt to clarify: the slight of hand that the resoning in this discussion is playing on you lies in ignoring what happens to the moneys loaned, namely, that it enters into a process of exchange for goods and/or services, and that as such the circuit of its travels through the money system is thereby brought to a halt.  To quote an email I sent to a friend of mine, "...the $900.00 that the bank loans out from the original $1000.00 deposit is not the same as the $900.00 that comes back to the banking system as a result of the first $900.00’s getting spent.  The two are logically distinct categories; there is no identity at issue.  Here is how the process actually transpires:  I deposit $1000.00.  The bank loans out $900.00 of that $1000.00.  Yes, on deposit, in reserve, there remains only $100.00.  But that isn’t my $100.00, it’s the bank’s.  From my perspective, I still lay claim to my original $1000.00 plus, in addition, the interest that I will make by lending my money to the bank.  Here, it is important to note that the substance of the transaction is not the travel that the tokens of money or bullion will make, but the contract that says that my account at the bank is worth $1000.00 and whatever interest the bank has agreed is mine for putting my cash in circulation as a loan, not to anybody, but to the bank itself.  Now comes the bank’s loan:  someone borrows $900.00 from the bank, which my original deposit underwrites.  The money that I had taken out of circulation by depositing it was $1000.00; the money that is now going back into circulation is $900.00, for a net loss out of (not an increase in) the circulating money supply of $100.00.  Now the $900.00 gets spent, that is, $900.00 worth of goods and/or services comes into the possession of the borrower.  An exchange has taken place: $900.00 worth of real (because originally earned by my labour, which produced that much in goods and/or services) potential goods and services is swapped for an immediate rendering of actual goods and services.  Nothing has been created or annihilated in this transaction.  Still, there remains only $1000.00 of currency at issue.  Now the seller who receives the $900.00 is not receiving "MY" original $900.00, but "HIS" $900.00 "IN EXCHANGE" for goods and/or services that he has just sold.  Nothing has been created or annihilated here, only exchanged.  Now the seller takes his cash to the bank, with the emphasis on "HIS CASH."  Like me, he gets the same deal: the bank borrows his money and pays him interest, and the cycle is repeated.  I still have my original $1000.00 plus interest; the first borrower still owes $900.00 plus interest to the bank, and holds $900.00’s worth of actual goods and/or services; and the seller who sold to the borrower got his $900.00 in exchange for goods and/or services rendered.  Nothing has been created, here, and nothing has been lost.  The money in circulation still matches its equivalence in goods and/or services actually in existence in the market, and the loan’s eventual repayment corresponds to goods and /or services as yet but eventually to be produced by the borrower. This, however, is not to say that money is not sometimes created out of nothing -- but that is perhaps for some future comment. 
Norm, 15November 2006, 15h43
209.167.194.156 19:56, 15 November 2006 (UTC)
thread_title:  Just a general comment 

message: I paraphrase much of this from the book "Debt Virus: A Compelling Solution to the World's Debt Problems"  by Jacques S. Jaikaran.  The most common misconception, that I still observe to be present here in this discussion, is that a typical bank loans out its customers' deposits.  This is simply not true.  Let's say a member bank of the Federal Reserve System (any national bank, for example Bank of America) has never made a loan.  They collect ten $10,000 USD deposits for a total of $100,000.  Pretend at this moment that the bank has a zero balanced account open with the Federal Reserve.  They can take the $100,000, and deposit it into their account with the Federal Reserve.  This is now their "reserve" amount.  At a 1/10 minimum reserve level, I can walk into this bank, request a loan for $1,000,000, and receive it. The one million is created "out of thin air" and added to the M1, which is the transactional liquid money supply of U.S. dollars.  If someone else then walked into the bank for a $10,000 loan, the bank, without another $1,000 deposit on hand, could do one of the following:
1. Sell assets (including U.S. bonds) to gain the $1,000 and deposit this into their reserve account
2. Borrow $1,000 from another bank or lending institution and deposit this into their reserve account.
3. Borrow $1,000 directly from the Federal Reserve at the discount rate (5.25% in April 2007).
4. Deny the potential borrower their funds.
Going back to the one million dollar loan; as I pay back the principle that money is REMOVED from the M1.  The bank keeps the interest on this loan.  So, without inflation in the picture, after paying back on a zero percent interest rate loan the money supply remains the same.  The problem occurs at the macroeconomic level with interest.  If the bank chooses option 3, or even the governments of the U.S. (both state and federal) choose to borrow money from the Federal Reserve, this money is made out of thin air by the Fed.  The fed does NOT debit any account; they're making money out of nothing and lending it at interest.
The problem comes in the fact that if there are $1 Billion USD in existence (the [Money_supply#United_States M3] ) and ALL of this billion is created as debt at 10% interest to the Fed then where in the world can $1.1 Billion come from at the end of the year? There are, of course, only two options, borrow another $100 Million from the Fed (again, at interest) or default on the loan.  Dr. Jaikaran contends that since the Fed will not introduce debt-free money into the economy, except small amounts used to pay its own expenses, not even to the U.S. government by which it obtained its charter to operate, that this is the root cause of the boom-bust economic cycle of expansion, inflation, recession, and depression (repeat ad infinium).  Another issue to think about is "who owes the Federal Reserve."  They are a privately held corportation which sells shares of stock. To whom do they sell these shares?  The member banks.  The U.S. government usually orders most of the Fed's yearly net income to be given back to congress; most not all.  So, after our national banks accure interest on money that cost them little to nothing (just the cost of processing a loan application, which is usually a fee anyway) to create from zero raw resources, and after the national banks charge other fees to their customers, they also end up getting a share of the net income generated by what? The Fed loaning a zero resource, zero expense, intrinsically valueless object at interest to the national banks and the government (i.e. the tax payers; the Fed extends credit to the U.S. government based on the security that they can pay back the loan because they collect revenue from tax payers).  So the larger national banks, those who hold more of the Fed's stock, recoupe the interest they lost in borrowing from the Fed at the discount rate, AND get a little extra by taking some of the interest that the governments owe.
That ends the paraphrase.  Now, can anyone validate that banks actually loan out customer deposits?  This tends to not make sense to me.  How would the money supply grow by such a large amount if this were the case?  In other words, if the only way the M1 grew was by the Fed giving loans to the member banks, this could not explain the rapid, huge increases in the M1.  Not only that, but it doesn't make sense by the fact that the Fed destroys the principle that the member banks and the government pay back.  Basically, if only the Fed could create money out of thin air, then the M3 money supply would be:
M3 = (The amount of M3 on hand at the end of 1913) + (the principle owed by the member banks) + (the principle owed by the governments of the U.S. and any foreign lenders).
That amount is too small to be true...
--Blue666man 20:46, 19 April 2007 (UTC)
thread_title:  Supposed loaning of demand deposits and national banks reserve accounts with the Fed 

message: The addition of Murray Rothbard's assertion that fractional reserve banking is fraudulent and inflationary completes the degradation and corruption of this article. Rothbard and his followers see no difference between fractional reserve banking and counterfeiting, despite the fact that the bank puts its name on the money it issues, recognizes that money as its liability, holds assets against that money, and stands ready to buy back that money with its own assets.
=== All bank notes are redeemable in lawful money on demand ===
It is irrelevant that the bank recognizes the money as a liability if it doesn't have the funds to meet the obligation.
A bank might issue $100 in a checking account, against which it holds $25 in greenbacks and $75 in bonds. The bank can use the $75 in bonds to buy back $75 of its checking account dollars. Then it will have $25 in greenbacks backing $25 in the checking account. The bank has $25+$75=$100 in funds backing $100 in checking account dollars. Furthermore, customers voluntarily do business with the bank, knowing that it operates on fractional reserves, and knowing this means that sometimes the bank won't have enough cash on hand. A counterfeiter, on the other hand, issues $100, against which he holds nothing. In spite of this, Rothbard's followers stubbornly, foolishly, and fanatically insist that fractional reserve banking is tantamount to counterfeiting.
=== Fractional lending is a powerful tool ===
A hammer can drive in nails or cause your thumb to throb. Counterfeiting is ancient, some of the first artifacts of money are fakes. Bonds are nothing but formal IOUs. Fractional lending --whether it be in gold, dollars, sheep, or salt-- means that an economy has a greater value in IOUs than the value of the property they represent. That is why it is called FRACTIONal reserve banking. These are the facts, and believe or not the Earth does revolve around the Sun. It seems Murray Rothbard's argument against the practice creating money out of nothing is rooted in simple economics. 
If I gave you an IOU for $50000 would you accept it, probably not from a stranger. However, just to continue this line of thought, lets say that you do accept it. A few weeks pass and you want the dollars, well as it turns out, I do not have, nor have I ever had the money. You would be angry. What just happened was fraud. If anyone did this it would still be illegal, and  banks are no different. If banks had the property assets to back ALL their liabilities, no one would care that worthless paper was the medium of trade. If the government than gave the banks a line of credit to cover emergency government spending (here is where the bonds come it), few would care. 
What makes it "counterfeiting" is that lenders, whether they are banks or not, create notes (IOUs) in the form of government issue fiat currency in excess of the net total of all the property they possess, including government bonds. This is counterfeiting, keep in mind that governments have always been a prime counterfeiter of money; whether it was debasing the coins, or printing notes like they were going out of season. Just because the government wants to spend its self into an abyss of debt and lets the lenders off the hook, does not magically change the economics. I am not supporting any point of view, just listing the facts. It is a fact that fractional-reserve banking is, for lack of a better word, fraud.
All that being said I do not blame the banks. Accrual capitalistic economics is, not in it's self evil, just powerful. N0 D1C4 16:12, 2 September 2007 (UTC)
thread_title:  Rothbard on Fractional Reserves 

message: A hammer can drive in nails or cause your thumb to throb. Counterfeiting is ancient, some of the first artifacts of money are fakes. Bonds are nothing but formal IOUs. Fractional lending --whether it be in gold, dollars, sheep, or salt-- means that an economy has a greater value in IOUs than the value of the property they represent. That is why it is called FRACTIONal reserve banking. These are the facts, and believe or not the Earth does revolve around the Sun. It seems Murray Rothbard's argument against the practice creating money out of nothing is rooted in simple economics. 
If I gave you an IOU for $50000 would you accept it, probably not from a stranger. However, just to continue this line of thought, lets say that you do accept it. A few weeks pass and you want the dollars, well as it turns out, I do not have, nor have I ever had the money. You would be angry. What just happened was fraud. If anyone did this it would still be illegal, and  banks are no different. If banks had the property assets to back ALL their liabilities, no one would care that worthless paper was the medium of trade. If the government than gave the banks a line of credit to cover emergency government spending (here is where the bonds come it), few would care. 
What makes it "counterfeiting" is that lenders, whether they are banks or not, create notes (IOUs) in the form of government issue fiat currency in excess of the net total of all the property they possess, including government bonds. This is counterfeiting, keep in mind that governments have always been a prime counterfeiter of money; whether it was debasing the coins, or printing notes like they were going out of season. Just because the government wants to spend its self into an abyss of debt and lets the lenders off the hook, does not magically change the economics. I am not supporting any point of view, just listing the facts. It is a fact that fractional-reserve banking is, for lack of a better word, fraud.
All that being said I do not blame the banks. Accrual capitalistic economics is, not in it's self evil, just powerful. N0 D1C4 16:12, 2 September 2007 (UTC)
thread_title:  Fractional lending is a powerful tool 

message: The two "views" of fractional reserve banking are not equivalent. [true, rothbard is correct] If person A deposits $1000 into an account at bank A, then bank A can loan out up to $980 of that (with a 2% reserve requirement) to person B. Person B is taking the loan out to buy something, not to just have extra cash laying around. So person B gives there money to person C for goods and services. Person C wants to deposit his money, but in order for the two "views" of fractional reserve banking to be equivalent, person C would have to deposit his money into bank A. Person C might find that bank A gives too low an interest rate on his deposit, or he might find that bank A has excessive fees, and person C could very well decide to put his money on deposit with bank B. [but there is nothing to stop c putting it in bank a...] So what? Bank A is still competing for person C's deposit with other banks, its really not relevant what the source of person C's money is. which is why bank a can use the money issued by itself as a deposit for more loans
The amount of deposits that a bank has is related to their ability to compete in the market for depositors, not some magical ability to conjure up money. For every credit there is an equal an opposite debt, you can't just create credit out of nothing [if we all paid back our debts what would happen to the money supply?]. That won't happen. There isn't enough money for us to pay back all our debts. ok, if we paid back some of our debts what would happen to the money supply? For the federal reserve to make money they have to exchange that money for federal bonds for which they receive no net payment in interest. And when that money is created, it goes into the account of the person who deposited the bond, not the bank itself. [the money creation part happens when the bank starts lending based on that bond...] Money is also created by the purchase of bonds by the Fed. yes, but not as much as by the member banks
If you want a real financial catastrophe lets get back on the gold standard. Imagine years and years of deflation, what do you think that will do to debtors? Inflation is good for people who owe money, [and bad for everyone else] bad for people who are owed money [unless you are a bank who has borrowed the money]. If you'd truly like to hand the country to the robber barons then returning to the gold standard is the way to go. [you can have fractional-reserve-banking with a gold standard and full-reserve banking without a gold standard] And if you don't think loans can be a good thing, try to start a business bigger than a lemonade stand without one. [perhaps businesses should pay the market rate instead of being subsidised by the state]
I'm not quite sure what you're getting at there. When a person takes out a loan to start a business they generally get the loan from a private bank or investor, not the state. we are subsidising low rates with the reduced purchasing power of the dollar
And fractional-reserve banking with the gold standard reduces to the same thing - you're still going to end up with their being more money than there is gold to back it. If I deposit $1000 worth of gold in the bank, then the bank loans lout $900 worth of gold to a customer who then spends the money, both myself and the person who receives the money from the loanee will have a certificate representing a claim on $900 of that gold. With a 10% reserve, there could be as many as 10 times as many claims on the gold as there is actual gold. Fiat money just takes this to the next logical step - get rid of the gold. It makes the system a lot more flexible, and if you want to keep your money saved in gold or other things with intrinsic value, you're still quite free to do that. yes, but you can get rid of fractional reserve banking without having a gold standard
At least one of the editors of the 'fractional reserve' article has based his contribution on conspiracy theory mythology (as opposed to the conspiracy theories which really are true) [why does there need to be a conspiracy?]
User:SpidermanTUba 01:51, 20 September 2007 (UTC)
thread_title:  Two 'views' of fractional reserve banking are not equivalent 

message: Please edit from this version carefully.  This is a very clear version that has recently been altered/vandalized.  Removing the first section (with graphic) in particular is destructive as this first section is one of the best, clearest explanations of frb in existence.  —Preceding unsigned comment added by 210.87.15.130 (talk) 07:27, 16 December 2007 (UTC)
thread_title:  Vandalism and Mindless Trivial Edits 

message: Should Debt-based monetary system be merged here? -- Kendrick7talk 03:39, 3 January 2008 (UTC)
replies: text: There's a lot of the same conspiracy stuff in both. For example, the entire article above calls credit money (i.e., bank notes that aren't representative money) by the nonstandard and unlinked term "debt money". Sort of like pessimists insisting a thing be called "half-empty". SBHarris 17:35, 5 January 2008 (UTC)
thread_title:  Merge 

message: I think the article is ruined beyond salvation, so I will not even attempt to clean it up. I got a question for the conspiracy theorists, Ron Paul fans and proponents of full-reserve banking: How would a bank loan money to consumers and businesses if it had to keep everything in reserve? As for the article, it would probably be better off being blank or linking to a Google search on the topic. Ekonomics geek (talk) 20:19, 5 January 2008 (UTC)
replies: text: If the bank is unable to make the loan itself, it would ask depositors if they wished to lend money to the business. Orangedolphin (talk) 19:42, 8 January 2008 (UTC)

text: The banks in a "full-reserve" system back all loans up by "hard" assets such as gold.  The reserves for "full-reserve" banking are different than the reserves for "fractional-reserve" banking.  I think the proponents of fractional-reserve banking wish to return to the Gold Standard, which would be financial suicide. --EGeek (talk) 20:22, 5 January 2008 (UTC)
replies: text: I think you are confused about both of these. Fractional-reserve banking: you give the bank $10 for safe-keeping, it loans $9 to someone else at interest. Full-reserve banking: you give the bank $10, it's required to hold all of it. Gold standard is a somewhat orthogonal issue, but modern banking systems are fractional-reserve and not on gold standard. Ekonomics geek (talk) 23:24, 5 January 2008 (UTC)
replies: text: The first sentence in the Full-reserve banking article does a little better explaining this, but the source is not an easy read to most people. I'll try to find something a little better. --EGeek (talk) 03:18, 6 January 2008 (UTC)

text: Ekonomicsgeek - don't give on wikipedia just yet.  I've been trying to learn how this stuff works and I believe I can contribute to this article in an objective way that also includes sources to explain things.  Wikipedia is still relatively young and I think many things throughout wikipedia will improve as time passes. Analoguni (talk) 01:01, 6 January 2008 (UTC)

text: Banks are supposed to earn revenues through service fees and investment returns. Once these revenues are the bank's priopriety, it can lend it at whoever it wishes. --Childhood's End (talk) 19:43, 11 January 2008 (UTC)
thread_title:  How would a bank loan money to consumers and businesses if it had to keep everything in reserve? 

message: Could someone start the archiving process here? Perhaps an automated process?--Gregalton (talk) 18:20, 11 January 2008 (UTC)
replies: text: See Help:Archiving a talk page. --Foggy Morning (talk) 06:09, 12 January 2008 (UTC)
replies: text: Thanks muchly. Is there any objection to (consensus for) using an automated archiver on this page?--Gregalton (talk) 15:39, 12 January 2008 (UTC)
replies: text: Sounds fine to me. Thanks for the good work. Orangedolphin (talk) 16:52, 12 January 2008 (UTC)

text: Trying with the Miszabot template. We'll see if it works. I've set it to 45 days so this will only clear out really old stuff (for clarity - only parts of the talk discussion that have not been touched in 45 days will be archived). We'll see how it goes. If any problems, please leave a note here. I have not put an archive box on this page yet - want to see how it goes, but if someone else puts the box up, all the better. Thanks.--Gregalton (talk) 17:20, 12 January 2008 (UTC)

text: I'm afraid I seem to have done the bot request okay, but screwed up the archive box. Any ideas on what I did wrong?--Gregalton (talk) 08:37, 13 January 2008 (UTC)
replies: text: Think I fixed it with a cludgy hack. Hope this is acceptable (I don't think it should require any fixing).--Gregalton (talk) 19:32, 13 January 2008 (UTC)
thread_title:  Archiving of discussion here 

message: "Since loans are paid back with interest, there is not enough money available in the money supply to pay back all of the loans. New money must be created outside of the money listed in the table in order for all of the loans to be paid back in full plus interest. "
Now, I'm no expert, but I'm fairly sure that this is a very non-mainstream view held only by a small number of people.  Others? --Jason Catlin  —Preceding unsigned comment added by 72.43.26.238 (talk) 16:11, 27 January 2008 (UTC)
replies: text: How would the interest be paid if there is no money in the system to pay it? Orangedolphin (talk) 00:23, 28 January 2008 (UTC)

text: Agree. It's nonsense.--Gregalton (talk) 17:16, 27 January 2008 (UTC)
thread_title:  problem in "How it works" 

message: Sorry if I am entering really late, but the two articles deserve separate spaces, beacause:
# One is a system with a structure and the other is a property. Treatment has to be different and it'll be hard to frame an article to accomodate both (I believe the above topics spring from this difficulty).
# Both have their own history and complexities.
# Both are different at different places (in the world).
One again, sorry if I am entering this discussion too late, and what I mentioned has already been gone over.
Nshuks7 (talk) 19:33, 26 January 2008 (UTC)
replies: text: Two articles sounds like a good idea to me. What do others think? Orangedolphin (talk) 00:56, 27 January 2008 (UTC)

text: what 2 articles are you referring to?  What is the system with structure and what is the property?  Analoguni (talk) 03:30, 27 January 2008 (UTC)

text: I love riddles! Okay, one is a "system" and the other is a "property", and both are treated differently. Both have separate histories. Both are different in different areas of the world. I want to say fractional reserve banking and money supply, but both of those already have articles. What are the two articles? --EGeek (talk) 05:35, 27 January 2008 (UTC)
replies: text: Proposal for merger of Fractional-reserve banking and Reserve requirement redirects here, to this talk page. In that context. Nshuks7 (talk) 06:34, 27 January 2008 (UTC)
replies: text: Okay, I fixed the discuss link so that it redirects to this section. I also agree on two separate articles. --EGeek (talk) 07:36, 27 January 2008 (UTC)

text: I would support - this would allow us to have one core article, and then another that split off all the different interpretations, that was clearly identified as non-mainstream. There have been too many POV forks under quasi-respectable names (more editors on Monetary policy of the USA would be helpful, for example).--Gregalton (talk) 14:09, 27 January 2008 (UTC)

text: I think that this article can be maintained as a single article with both views being covered. It simply needs a big cleanup (especially sections 3 to 8 imo) and some more info/clarifications on the core rather than on the "examples". --Childhood's End (talk) 14:49, 31 January 2008 (UTC)
replies: text: Is there a template for articles of this category? We should stick to a template. If there is no template, different sections for definitions, machinations, explanations, examples and critical views should suffice to give structure to this otherwise chaotic article. Nshuks7 (talk) 11:47, 7 February 2008 (UTC)
thread_title:  Should [[Reserve requirement]] merge into this article? 

message: Since fractional-reserve banking is the basis for financial systems worldwide, I think it would be necessary to include information about this in the intro.  Analoguni (talk) 00:29, 25 February 2008 (UTC)
replies: text: I do not consider worldwide use of fractional-reserve banking synonymous with its worldwide importance. There is also evidence on the Full-reserve banking and Islamic banking articles that not all banking systems in the world use fractional-reserve banking. --EGeek (talk) 01:18, 25 February 2008 (UTC)

text: The lead should not add anything more to the article. It should be a summary of the article. A short explanation of the fractional-reserve system's link to bank runs and the money multiplier as well as the criticism that the subject enjoys would work well. --EGeek (talk) 04:48, 25 February 2008 (UTC)
replies: text: While I don't think it's necessary to have it in the lead, the evidence on full-reserve banking and Islamic banking is weak - most reviews I've seen have said that they are "in principle" full-reserve, but rarely in practice - just like Islamic banking is not supposed to have interest, almost every analysis says something like "if it looks like, smells like, acts like and tastes like interest - even if it's called something else - it's interest.--Gregalton (talk) 08:18, 25 February 2008 (UTC)
thread_title: Include the worldwide importance of fractional-reserve banking

message: I figure that definitions other sources use should help.  Here are a few.
*A banking system in which only a fraction of the total deposits managed by a bank must be kept in reserve. The amount of the deposits equals the amount of the reserves times the deposit multiplier. In the U.S., this system is maintained by the Federal Reserve Board.  Source: http://www.investorwords.com/5581/fractional_reserve_banking.html
*Monetary policy at the basis of the modern banking system. Under FRS, banks are required to hold only a fraction (typically 12 percent) of the depositors' funds as cash reserves. The remaining 88 percent of deposited funds can be loaned out to create new deposits which in turn create new loans ... and so on, exerting a multiplier effect on the total money supply. However, in case of a bank run, this policy can cause banks to suffer huge losses and may even push them into bankruptcy.  Source: http://www.businessdictionary.com/definition/fractional-reserve-system-FRS.html
:*Definition of credit on the same site:  Purchasing power created by banks through lending based on fractional reserve system. Banks literally 'create' money with their bookkeeping entries.  Source: http://www.businessdictionary.com/definition/credit.html
*A banking system in which only a fraction of bank deposits are backed by actual cash-on-hand and are available for withdrawal. This is done to expand the economy by freeing up capital that can be loaned out to other parties. Most countries operate under this type of system.  Many U.S. banks were forced to shut down during the Great Depression because so many people attempted to withdraw assets at the same time. Today there are many safeguards in place to prevent such an instance from occurring again, but the fractional-reserve banking system remains in place.  Source: http://www.investopedia.com/terms/f/fractionalreservebanking.asp
*In a fractional-reserve banking system, banks hold a fraction of the money deposited as reserves and lend out the rest. Reserves are deposits that banks have received but have not loaned out. Source: http://www.whcbridge.com/ec7290.html
*The practice of holding (only) a portion of overall assets in cash or cash equivalents (required reserves) in order to meet short-term obligations immediately upon demand. Money which is not held in reserve is invested, usually loaned out so as to generate interest income. Some reserves support savings accounts and time deposits (deposits which earn interest but don’t allow you to write cheques on). Banking evolved so as to also permit a fractional reserve for “checkable deposits”. The majority of world banking systems today follow this model of fractional banking. Source: http://www.bankintroductions.com/definition.html
There is also a definition of full-reserve banking: 
*a full reserve bank is a bank that backs up all its loans and deposits with 100% of the funds promised to others, also called bank reserves. On the face of the definition, this would appear to be the same thing as today’s banking system, but it isn’t.  Today’s banking system is called a fractional reserve banking system. The difference between a fractional reserve and a full reserve is huge. In the simplest terms, a fractional reserve bank is allowed to promise the same money to two people at the same time. Source: http://www.fullreservebanking.com/what-is-full-reserve-banking/definition-of-full-reserve-banking/
Analoguni (talk) 21:36, 5 March 2008 (UTC)
replies: text: Good work, plenty of better material than what's currently in the lead. My choice would be "The practice of holding (only) a portion of overall assets in cash or cash equivalents (required reserves) in order to meet short-term obligations immediately upon demand. Money which is not held in reserve is invested, usually loaned out so as to generate interest income." --Childhood's End (talk) 00:55, 6 March 2008 (UTC)
thread_title: Definitions from other sources

message: Single sentences are inappropriate and it uses technical terms which aren't appropriately explained.
I expanded it. For any gold bugs here or for Karmaisking's sockpuppets which have yet to be caught, this:
is just a non-technical reiteration of the first sentence and doesn't need to be sourced.
This is common knowledge:
And thus doesn't need to be sourced either. Thanks. ☯  Zenwhat (talk) 22:11, 7 March 2008 (UTC)
replies: text: This last sentence needs to be sourced. It's usually true in Western economies, but Wikipedia must hold a worldwide perspective. --Childhood's End (talk) 13:21, 13 March 2008 (UTC)
thread_title:  The lead is too small. 

message: Wikipedia is not an appropriate venue for extended debate between "experts" nor for attempts to educate uninformed editors.  Please archive this talk page and avoid extended discussion that is not constructive to this encyclopedia.  Thank you. 64.181.90.43 (talk) 03:06, 29 March 2008 (UTC)
thread_title:  Please archive this page and restrict discusion 

message: If the net redemption demands are unusually large, the bank will run low on reserves and will be forced to raise new funds from additional borrowings (e.g. by borrowing from the money market or using lines of credit held with other banks),
is "borrowing from the money market or using lines of credit held with other banks" different from borrowing from the central bank? Chendy (talk) 22:07, 9 April 2008 (UTC)
replies: text: In my understanding, borrowing from the central bank is last recourse, although there may be other cases. Note that, except if the bank's liquidity crisis is due to bad management, it is likely that other banks face pressure on their liquidities when one does. It might then be difficult to borrow from the market. --Childhood's End (talk) 13:59, 10 April 2008 (UTC)
replies: text: This is correct to the best of my understanding as well.  I'd link you to an explanation from the fed's website but they are hopelessly pedantic.Protonk (talk) 07:27, 18 April 2008 (UTC)
thread_title:  Clarification 

message: What is this silliness?
Austrian economics is not just "universally accepted." It's marginalized, because it's heterodox. The passage above treats it like mainstream economic theory, worthy of the Nobel Prize. The ABCT and the mainstream business cycle theory are literally contradictory to one another, because the former assumes a classic relationship between saving and borrowing, while the latter assumes Keynesian theories on interest that are so old and well-accepted (about 75 years now) that they're standard economics and taught in Econ 101.
There is no citation to support this, but there won't be. Just as you won't find a citation for the non-existence of unicorns in Biology. The reason (similar to the unicorns example) is that there is no dialogue between Austrian economists and mainstream economists, because the former reject the the modern scientific method in favor of ancient Greek philosophizing to the point that they're shunned.
Anyone here who disagrees, please cite any modern econ 101 textbook (I have my own I could cite) and just tell me: What, in the glossary, mentions Austrian economics? You won't find it. ☯  Zenwhat (talk) 22:21, 7 March 2008 (UTC)
replies: text: Zenwhat's strange obsession with deleting Austrian economics from the face of planet earth continues...--Lagrandebanquesucre (talk) 06:42, 8 May 2008 (UTC)
replies: text: His actions and motivations have been clearly explained: there seems to be an obsession in spamming Austrian points of view out of all proportion to their prevalence in academic studies.--Gregalton (talk) 07:06, 8 May 2008 (UTC)
thread_title:  Austrian soapboxing 

message: Correct me if I'm wrong, but doesn't most central bank money exist only as a digital record, rather than as actual paper and coins? <eleland/talkedits> 01:19, 10 May 2008 (UTC)
replies: text: This section of the article is actually quite bad ("the cumulative effect" bit needs to be looked at, and the M1 definition does not look right). That said, both M0 and M1 are wikilinked and you can check in their main articles.--Gregalton (talk) 01:40, 10 May 2008 (UTC)

text: Also, Gregaltron, I disagree with your assessment that this section is "quite bad".  I can agree that it can use some more improvements but it is sourced and gets to the heart of what fractional reserve banking is all about.  Saying that it is "quite bad" gives me the impression that it needs undergo a significant overhaul, which I don't think it does since it is sourced by the Federal Reseve, the Bank for International Settlements, and the European Central Bank.  Analoguni (talk) 00:49, 16 May 2008 (UTC)
replies: text:  I do agree  with Gregalton that "the cumulative effect" could be expanded upon. both the images [1] and [2] show currency increasing at something greater than linear. This is an artifact of Fractional-reserve banking and lending money at interest. --Zven (talk) 22:48, 16 May 2008 (UTC)
thread_title:  M0 

message: The main article is full of riddles and deliberately confusing, even quoting a fractional reserve of 20%, when in fact it is 10% (even easier to calculate and far more profitable!); the "bank balance sheets" require even less (as currently being printed in financial newspapers 5% - 8%). This article is continuing making a very simple (scandalous) system into an unnecessary enigma (which is what the financial system does best). 10% fractional reserve is very easily to explain: £100 is leant by the central bank (BOE, Federal Reserve etc.), to commercial banks, who can then create £900 in loans (on the strength of the £100 they borrow!). They can then CHARGE INTEREST ON the full £900 (created out of thin air) not the initial £100 (go figure!). So, in fact, a person borrowing £900 for a year, who pays back the capital and interest at 5% will be paying £45 interest on the £100 (initial) central bank loan NOT THE £900 sum. The initial "£100" central bank loan was money (created out of thin air) borrowed by the government to pay for services not covered by taxation (usually a bond of some description - which pays interest to the buyer). The interest people are paying for money borrowed from banks (mortgages etc.) is just a hidden form of tax, with bankers taking a nice fat slice, colluding in the action. This example is simplified, but explains how money is created from thin air, but how it is controlled (from the top). Fiat currency (money backed by nothing but good will)is only good while it is trusted. We are now seeing 100 years of usury coming unraved, it is a flawed system for the majority. The result, when it finally collapses, will be mass starvation or the death and destruction due to (probably a global) war. While it lasts; enjoy the ride!  —Preceding unsigned comment added by 79.121.186.28 (talk) 09:14, 17 July 2008 (UTC)
replies: text: You're right. When editors continuously come to this page and think that fractional-reserve banking means that banks can make a £900 loan off of only £100, then the article is not communicating the principles of fractional-reserve banking very well. Before getting into the mathematical meat, fractional-reserve banking needs to be fully defined, because the readers are not getting it. --EGeek (talk) 20:29, 17 July 2008 (UTC)
thread_title:  Unnecessary riddles! 

message: I think Martycarbone was trying to add the entire section taken out of a subcommittee paper from 1964.  [I was not trying to put up a Google book. Off hand I forget where I got the material I have on my site -- but I could probably dig it up again. Martycarbone (talk) 01:07, 7 August 2008 (UTC)
thread_title:  Money Facts from U.S. subcommittee 

message: Here is some stuff that was put into the article.  I took it out and am pasting it here.  Please make sense of this information:(I will try Martycarbone (talk) 14:20, 26 August 2008 (UTC)
thread_title:  please make sense of this first 

message: This user wants to promote his website (I do not want to "promote" my site. I want to offer the information on that site for consideration Martycarbone (talk) 14:31, 26 August 2008 (UTC)
replies: text: Martycarbone, please post new comments at the end of sections or right after the signature of other editors.  It may not seem like there is a problem at this time, but after a while the discussion will be confusing to other readers. -- EGeek (talk) 18:54, 26 August 2008 (UTC)

text: This article does not state the reserve ratio requirements for banks.  It only explains the money creation/multiplier concept due to fractional reserve banking and shows examples the concept using different ratios.  Reserve requirements differ between countries around the world; therefore, resources that state specific details of reserve requirements of one country does not represent a world view for a general topic such as fractional reserve banking.  The information you provided is better presented on the Federal Reserve System article. -- EGeek (talk) 18:54, 26 August 2008 (UTC)

text: Also, Analoguni's comment is correct.  Personal websites are not deemed a reliable source of information.  This is due Wikipedia policy that the article's content must be verifiable. -- EGeek (talk) 18:54, 26 August 2008 (UTC)
thread_title:  promotion of personal website   (Is mentioning a personal website in violation of wikilaw? [[User:Martycarbone|Martycarbone]] ([[User talk:Martycarbone|talk]]) 14:31, 26 August 2008 (UTC) )