Bank of England Head Mervyn King Proposes Eliminating Fractional Reserve Banking

[pmbug]

Getting rid of fractional reserve banking would mean having no reserve requirements so banks could loan out as much money as they have if they wanted to.

I think you are confused. We have zero reserve requirements here in the States right now.

The only guarantee you have on bank deposits is a bankrupt FDIC/government (essentially taxpayer bailouts as needed).

 

[Zippyjuan]

Depends on the country.

Here in Canada, there is NO reserve requirement for banks. That's LEGALLY. What they impose on themselves I'm not sure. Outside of that banks are regulated more then in the USA.

Curious that some people cry out against fractional reserve banking on the basis that they can "multiply" money and say that getting rid of the reserve requirement would get rid of that- a non-fractional reserve bank. But that gives the contrary result- removing the reserve requirement means that if they want to they can loan out up to 100% instead of 90% of their deposits which would INCREASE the mulitplier effect. Increasing the reserve requirement REDUCES the multiplier.

I think you are confused. We have zero reserve requirements here in the States right now.

You are mistaken, There is still a ten percent reserve requirement on most banking institutions.

 

[Seraphim]

Curious that some people cry out against fractional reserve banking on the basis that they can "multiply" money and say that getting rid of the reserve requirement would get rid of that- a non-fractional reserve bank. But that gives the contrary result- removing the reserve requirement means that if they want to they can loan out up to 100% instead of 90% of their deposits which would INCREASE the mulitplier effect. Increasing the reserve requirement REDUCES the multiplier.



You are mistaken, There is still a ten percent reserve requirement on most banking institutions.

no reserve requirement= potential 0 reserves. Meaning they can theoretically multiply by infinite.