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It just exposes how messed up the fiat system is. You have to disallow full reserve banks because they would be better (safer) and would suck in most of the dep

It just exposes how messed up the fiat system is. You have to disallow full reserve banks because they would be better (safer) and would suck in most of the deposits. It is really disgusting how this highly leveraged system is kept alive by the state benefiting everyone who takes unreasonable risks on behalf of others

arcticbull 3y ago
Fractional reserve isn't some scam, it's where money comes from. Not only that, all the bank failures had their entire equity value zeroed out so no, the people who mismanaged the bank didn't walk out like bandits. It's not 'highly leveraged.'
- WanderPanda 3y ago
  It‘s not a secret that bank equity does not yield the best returns because most of the excess returns that come from the risks taken are siphoned off in form of inflated salaries and „prestige“ (e.g. the most pristine office real estate). I agree that fractional reserve banking can be efficient but only if the incentives are aligned. And this is only the case if the depositors are at risk and forced to choose banks with good track records for their savings to be invested profitably, yet safely (risk/return profile).
  - arcticbull 3y ago
    > And this is only the case if the depositors are at risk and forced to choose banks with good track records for their savings to be invested profitably, yet safely (risk/return profile). Barely anyone is qualified to assess the quality of a bank. It's difficult even for auditors. It shouldn't be your uncle's responsibility, it should be the responsibility of regulators. That's really nothing to do with fractional reserve and more of an assessment of the US banking system.
    - monero-xmr 3y ago
      You have a presumption that experts should be believed. However the roots of my own success are based on ignoring “experts”, from my college professors to my bosses, until I was so successful that I became the “expert”, and others started listening to me. The concept of “expertise” is bullshit. If something is difficult to understand, even for so-called “experts”, that is a sign of severe dysfunction. All topics can be distilled into simplistic understanding. Once you speak in academic gobble-dee-gook you are done for.
      - arcticbull 3y ago
        > You have a presumption that experts should be believed. Yes, my guy, I happen to believe that people who know what they're talking about should be listened to. I suspect most won't find this controversial. The world is far too complex for anyone to be sufficiently competent in every field, and yes spending time working in a field gives you more expertise than an average rando you pull off the street. Experts aren't always right, and the consensus isn't always right, which is why we have the scientific method. It's totally fair to question these folks but to blanket dismiss them is silly. > All topics can be distilled into simplistic understanding. Simply false. > Once you speak in academic gobble-dee-gook you are done for. lol. This would be a good candidate for a Reddit-like 'flair' concept so I wouldn't waste my time responding to someone who doesn't believe in the concept of people who know what they're talking about. It's fine, I'll make a note of your screen name for next time.
- rolisz 3y ago
  I'm pretty sure money existed before fractional reserve banking....
- than3 3y ago
  Its not fractional. Its 0%, see FDIC website on monetary policy. Also, the executives from those banks received compensation packages and structured equity sales prior to the banks failing. They did make out like bandits, and congress was looking at options to claw it back, but nothing was ever finalized. Retirement funds which were invested heavily in index weighted stocks took the biggest hit net worth wise.
  - JumpCrisscross 3y ago
    > Its not fractional. It’s 0%, see FDIC website on monetary policy. This is nonsense. Reserve requirements were deprecated in favour of finer-grained capital and liquidity requirements [1]. They serve the same purpose, but with a broader consideration than reserve requirements’ “is it a reserve” binary test. Banks’ ability to create money is still constrained by their capital requirements. We are on a fractional reserve system. [1] https://www.federalreserve.gov/monetarypolicy/0693lead.pdf https://www.federalreserve.gov/monetarypolicy/0693lead.pdf 1993
    - than3 3y ago
      What's nonsense is Basel III using market capitalization as fulfilling capital reserves. Those asset classes are heavily collateralized. If you want to get technical, what really happens when you convert the same underlying asset to be collaterilized multiple times and aggregate it in a single security or several steps removed so no one is the wiser?
      - JumpCrisscross 3y ago
        > Basel III utilizing leveraged market capitalization as fulfilling capital reserves Are you referring to SLR? In America, this is a second test [1]. Also, this is a total non sequitur. [1] https://www.newyorkfed.org/medialibrary/media/banking/international/10-08-15-Tilghman-Hill.pdf https://www.newyorkfed.org/medialibrary/media/banking/intern...
        than3 3y ago

arcticbull 3y ago

Fractional reserve isn't some scam, it's where money comes from. Not only that, all the bank failures had their entire equity value zeroed out so no, the people who mismanaged the bank didn't walk out like bandits. It's not 'highly leveraged.'

WanderPanda 3y ago
It‘s not a secret that bank equity does not yield the best returns because most of the excess returns that come from the risks taken are siphoned off in form of inflated salaries and „prestige“ (e.g. the most pristine office real estate). I agree that fractional reserve banking can be efficient but only if the incentives are aligned. And this is only the case if the depositors are at risk and forced to choose banks with good track records for their savings to be invested profitably, yet safely (risk/return profile).
- arcticbull 3y ago
  > And this is only the case if the depositors are at risk and forced to choose banks with good track records for their savings to be invested profitably, yet safely (risk/return profile). Barely anyone is qualified to assess the quality of a bank. It's difficult even for auditors. It shouldn't be your uncle's responsibility, it should be the responsibility of regulators. That's really nothing to do with fractional reserve and more of an assessment of the US banking system.
  - monero-xmr 3y ago
    You have a presumption that experts should be believed. However the roots of my own success are based on ignoring “experts”, from my college professors to my bosses, until I was so successful that I became the “expert”, and others started listening to me. The concept of “expertise” is bullshit. If something is difficult to understand, even for so-called “experts”, that is a sign of severe dysfunction. All topics can be distilled into simplistic understanding. Once you speak in academic gobble-dee-gook you are done for.
    - arcticbull 3y ago
      > You have a presumption that experts should be believed. Yes, my guy, I happen to believe that people who know what they're talking about should be listened to. I suspect most won't find this controversial. The world is far too complex for anyone to be sufficiently competent in every field, and yes spending time working in a field gives you more expertise than an average rando you pull off the street. Experts aren't always right, and the consensus isn't always right, which is why we have the scientific method. It's totally fair to question these folks but to blanket dismiss them is silly. > All topics can be distilled into simplistic understanding. Simply false. > Once you speak in academic gobble-dee-gook you are done for. lol. This would be a good candidate for a Reddit-like 'flair' concept so I wouldn't waste my time responding to someone who doesn't believe in the concept of people who know what they're talking about. It's fine, I'll make a note of your screen name for next time.
rolisz 3y ago
I'm pretty sure money existed before fractional reserve banking....
than3 3y ago
Its not fractional. Its 0%, see FDIC website on monetary policy. Also, the executives from those banks received compensation packages and structured equity sales prior to the banks failing. They did make out like bandits, and congress was looking at options to claw it back, but nothing was ever finalized. Retirement funds which were invested heavily in index weighted stocks took the biggest hit net worth wise.
- JumpCrisscross 3y ago
  > Its not fractional. It’s 0%, see FDIC website on monetary policy. This is nonsense. Reserve requirements were deprecated in favour of finer-grained capital and liquidity requirements [1]. They serve the same purpose, but with a broader consideration than reserve requirements’ “is it a reserve” binary test. Banks’ ability to create money is still constrained by their capital requirements. We are on a fractional reserve system. [1] https://www.federalreserve.gov/monetarypolicy/0693lead.pdf https://www.federalreserve.gov/monetarypolicy/0693lead.pdf 1993
  - than3 3y ago
    What's nonsense is Basel III using market capitalization as fulfilling capital reserves. Those asset classes are heavily collateralized. If you want to get technical, what really happens when you convert the same underlying asset to be collaterilized multiple times and aggregate it in a single security or several steps removed so no one is the wiser?
    - JumpCrisscross 3y ago
      > Basel III utilizing leveraged market capitalization as fulfilling capital reserves Are you referring to SLR? In America, this is a second test [1]. Also, this is a total non sequitur. [1] https://www.newyorkfed.org/medialibrary/media/banking/international/10-08-15-Tilghman-Hill.pdf https://www.newyorkfed.org/medialibrary/media/banking/intern...
      - than3 3y ago