How can a bank exist under a full reserve system? How would they make money? They would not be using deposits to make loans so they would have to be fee based- charging fees for everything including fees to keep your deposits for you (they have to cover the costs of their employees and property and equipment). But would you put your money into a bank where you had to pay them to keep it for you? Perhaps if you were worried about theft you might.
100% reserve banking means that banks would have to keep 100% of demand deposits available for withdrawal. They can still lend out time deposits, like CDs or what have you, where your money isn't available to withdraw for a period of time. They could charge fees for checking accounts and what not, and lend out the time deposits to make money on the interest. The bankers wouldn't starve. Don't worry.
This is not necessarily the model that would be followed.
As an example, I offer the Making Homes Affordable programs. I'm looking into this ( which I have no moral problem with because a) they've been taking my money for most of my life and b) anything I can do to speed up the bankruptcy I consider a public service ).
These programs have not been in existence very long. My carpool buddy is involved with one already, and after having signed up for one, he's getting cold calls from other private actors offering access to other programs.
Some people see parasites: I see the market in action.
Within what, three years, the market has adapted to a new situation and figured out a way to squeeze some pennies out of it while offering consumers a valuable service.
It's what it does. It's what it always does.
Who could have foreseen that market actors would descend on these federal programs this way? This is another thing the market does: it adapts in ways most of us could never have anticipated.
So when people say "The market will figure this out", it's not a cop out and it's not really even faith. It's just an admission that we don't know. If we knew, if anyone could know up front what the best allocation of dollars is for the purpose of getting more dollars,
then central planning might actually work. But central planning
doesn't work, and market forces
do work. The fact that we don't know what would happen is the entire point of advocating for market forces.
I don't know how the market would make profits from full reserve banking. I just know it would work.
you notice how you keep asking the wrong question? Why do you assume we NEED loans and credit?
What happens, if starting tomorrow, we had no car loans, home loans, credit cards?
THIS X 1000 and +rep!
Some people actually save for big purchases still, despite it being a losing proposition.
With fractional reserve banking, the purchasing power of money is diluted.
Add in the standard Keynesian mantra about how inflation is good. Now you have a diluted money which is also guaranteed to lose even further value over time. (The only discussion about this is ever "how much".)
Who is going to save for a car purchase in this environment, considering that the time you're saving is time you don't have possession of the thing you want, and the longer you save, the longer you have to save? You hit a point of diminishing returns at some point, where it's actually more cost effective (supposing you actually value having the thing you want) to finance it.
If the money retains value over time, it's much easier to save for the thing you want. If the money is actually **SHOCK!!!!** slightly deflationary, then it becomes a
much better idea to save for it than to finance. Which I suspect is why deflation is vilified more in the public sphere than Satan himself: it would render an entire mega-billion dollar industry moot, and millions of financiers would have to figure out how to make an HONEST living.
If bankers had to earn their money rather than "create" it out of nothing, then producers/workers would have a lot more money. That's the thing. Bankers don't "create" money out of nothing ... debasement of currency through fractional reserve banking is pure unadulterated theft. Plain and simple.
Agreed 100%!
One question I get is how are large projects going to be funded without large banks?
Large projects like what?
Aquaducts that deliver water reliably for the better part of a millenium?
800-year-old Cathedrals which in their time were the largest indoor enclosures in the world?
Cities like Amsterdam, where they had to basically build up islands on top of water before they could put houses on it?
How about 800 foot long rigid airships?
The list of free market supplied large projects is pretty long, if you look prior to 1913.
Or are we talking about the empire type projects?
Thousands of miles of stone wall designed not to keep Mongols at bay, but to be nothing more than a gigantic civic works project?
Pyramid shaped tombs for the guys who beat you?
Rockets to deliver men to the moon, which are really only a demonstration of the ability to put warheads anywhere desired?
Unconstitutional interstate systems that encourage sprawl and have us spending our lives in tiny metal boxes?
The situation you describe could happen and cause trouble for one particular company. But it does not explain why the same mistake could be committed by thousands of companies simultaneously. It's the clusters of mistakes that need to be explained.
Why do they need to be explained? Prior to central banking, the examples I'm familiar with of boom/bust cycles (like the Dutch tulip craze in the early 17th century) are all pretty benign. Did a few people get ruined? Sure. Do we have a pre-central-banking version of the Great Depression? Not that I've ever seen.
Is it interesting to examine booms/busts prior to central banking? I think so. I also think getting rid of them is an anti-market and, frankly, stupid idea.... so I'm not seeing figuring them out as a vital need.
It would be even better if you were in a car crash on the way home. That way, you could also talk about the fractional ambulance system, fractional emergency room system, and the fractional pharmacy system.
If you died, you could add the fractional morgue system, fractional funeral home system, fractional floral system, and the fractional cemetery system.
I'm not sure where you're going with this. If I owned three funeral homes, and I entrusted them to someone else, and went back to claim them only to find them gone, and the state had to get involved with an insurance program which would only give me back two funeral homes, then you'd have an analogy going.
PLEASE learn some history before you make such baseless claims!
