4 ms·

Let's make the reserve ratio 100% if any other business did what banks did they'd be prosecuted for fraud.

by dantheman 17y ago

mediaman 17y ago
And no business should ever get a loan?
- dantheman 17y ago
  You can have loans without a fractional reserve system.
  - m_eiman 17y ago
    E.g. http://en.wikipedia.org/wiki/JAK_members_bank http://en.wikipedia.org/wiki/JAK_members_bank
    - mediaman 17y ago
      I read through the link a few times and it seems not to support your point at all. This bank is not actually a ful-reserve bank; they still issue loans, and therefore the deposits immediately available are less than the total deposits owned by customers. They just replace "interest" with "savings points" in an attempt to address the perceived evils of usury. Like Sharia-compliant banking, it's a deceitful shell game of syntax to comply to the letter of a principle. Can someone explain how a bank can issue a loan and still maintain 100% of its deposits in cash on hand? A full-reserve bank merely becomes a storage business for a customer's cash; there can be no loans.
philwelch 17y ago
Actually, they would be prosecuted for banking without following the relevant regulations. That's like saying, "if any other professional did what proctologists do, they'd be prosecuted for sexual assault".
- dantheman 17y ago
  If you put gold in wharehouse and they say that you can retrieve it at anytime, and then turn around and give it to others -- how is that not fraudulent? It only works because they hope that not everyone will demand their gold back at the same time, so they can give you other peoples gold. My issue is only with demand deposits; if you put the money in an account like a CD where you agree to take it out in X amount of time, then they can lend it out.
  - philwelch 17y ago
    Your argument seems to hinge on the idea that nobody knows about fractional reserve banking. The fact is, not only is it well-known and fully regulated that banks use fractional reserves, but there is even FDIC insurance and similar programs to guarantee the safety of deposits. Now, if there was a legally regulated system where you could do fractional reserve banking of gold, complete with a government insurance program, then it would be perfectly fine and not fraudulent at all. As it turns out, no countries have a gold standard anymore. Comparing some guy with a warehouse of gold who doesn't tell you what he's doing with a publicly insured and regulated system with published reserve ratios is not a particularly honest or fair argument.
    - dantheman 17y ago
      I'm arguing against fractional reserve banking, and the continued bailout by the government of banks - FDIC is bankrupt and will need tax dollars or new dollars (inflation). Also, I wasn't using gold because I'm advocating a gold standard (even though I do), I used it because it can be used as substitute for dollars in the example. The problem we were discussing was one of the points from the article: "requiring higher capital ratios on larger banks to ensure the firms’ safety" I was advocating that instead of tinkering with this system, we should fix it. Just because the something is legal and "well regulated" doesn't mean that it is not fraudulent.
      - pyre 17y ago
        Just curious, do you have some sort of justification for the idea that a gold standard is somehow better than fractional reserve other than the out-dated idea that your dollar has something 'physical' to back it? Gold is just an object the only value that it gets is the value that humans give it. It's not like gold has some 'inherent' value just for being gold; a value the is constant and unquestionable. Most people that I've talked to that support bringing back the gold standard only have some vague idea of not wanting their money to be 'just paper' and needing to have something 'physical' that backs it. But their thinking never goes any deeper than that. Most of their ideas come off as lacking in thought. Much along the lines of people that keep all their money in cash in a mattress because they "don't trust the banks;" never mind that it makes it easier for any corner street thug to break your window and steal all your money.

Let's make the reserve ratio 100% if any other business did what banks did they'd be prosecuted for fraud.

mediaman 17y ago

And no business should ever get a loan?

dantheman 17y ago
You can have loans without a fractional reserve system.
- m_eiman 17y ago
  E.g. http://en.wikipedia.org/wiki/JAK_members_bank http://en.wikipedia.org/wiki/JAK_members_bank
  - mediaman 17y ago
    I read through the link a few times and it seems not to support your point at all. This bank is not actually a ful-reserve bank; they still issue loans, and therefore the deposits immediately available are less than the total deposits owned by customers. They just replace "interest" with "savings points" in an attempt to address the perceived evils of usury. Like Sharia-compliant banking, it's a deceitful shell game of syntax to comply to the letter of a principle. Can someone explain how a bank can issue a loan and still maintain 100% of its deposits in cash on hand? A full-reserve bank merely becomes a storage business for a customer's cash; there can be no loans.

philwelch 17y ago

Actually, they would be prosecuted for banking without following the relevant regulations. That's like saying, "if any other professional did what proctologists do, they'd be prosecuted for sexual assault".

dantheman 17y ago
If you put gold in wharehouse and they say that you can retrieve it at anytime, and then turn around and give it to others -- how is that not fraudulent? It only works because they hope that not everyone will demand their gold back at the same time, so they can give you other peoples gold. My issue is only with demand deposits; if you put the money in an account like a CD where you agree to take it out in X amount of time, then they can lend it out.
- philwelch 17y ago
  Your argument seems to hinge on the idea that nobody knows about fractional reserve banking. The fact is, not only is it well-known and fully regulated that banks use fractional reserves, but there is even FDIC insurance and similar programs to guarantee the safety of deposits. Now, if there was a legally regulated system where you could do fractional reserve banking of gold, complete with a government insurance program, then it would be perfectly fine and not fraudulent at all. As it turns out, no countries have a gold standard anymore. Comparing some guy with a warehouse of gold who doesn't tell you what he's doing with a publicly insured and regulated system with published reserve ratios is not a particularly honest or fair argument.
  - dantheman 17y ago
    I'm arguing against fractional reserve banking, and the continued bailout by the government of banks - FDIC is bankrupt and will need tax dollars or new dollars (inflation). Also, I wasn't using gold because I'm advocating a gold standard (even though I do), I used it because it can be used as substitute for dollars in the example. The problem we were discussing was one of the points from the article: "requiring higher capital ratios on larger banks to ensure the firms’ safety" I was advocating that instead of tinkering with this system, we should fix it. Just because the something is legal and "well regulated" doesn't mean that it is not fraudulent.
    - pyre 17y ago
      Just curious, do you have some sort of justification for the idea that a gold standard is somehow better than fractional reserve other than the out-dated idea that your dollar has something 'physical' to back it? Gold is just an object the only value that it gets is the value that humans give it. It's not like gold has some 'inherent' value just for being gold; a value the is constant and unquestionable. Most people that I've talked to that support bringing back the gold standard only have some vague idea of not wanting their money to be 'just paper' and needing to have something 'physical' that backs it. But their thinking never goes any deeper than that. Most of their ideas come off as lacking in thought. Much along the lines of people that keep all their money in cash in a mattress because they "don't trust the banks;" never mind that it makes it easier for any corner street thug to break your window and steal all your money.