New Swiss Initiative Would Ban Fractional Reserve Banking

[DamianTV]

If a bank charges too high an interest rate, it will lose its customers to a competing bank.

If a bank maintains too few reserves, it's vulnerable to a bank run.

Easy. Banking operates as a closed system. Minimum agreed interest rates, and outlaw Bank Runs so the victims become the criminals. Banks should NEVER be allowed to operate a money system of any society. I highly doubt it will ever happen, so may as well add in something else to my wish list: outlaw Usury (interest) as well. Any arguments against either only support the corrupt nature of banks.

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[DamianTV]

(redacted)

 

[r3volution 3.0]

Easy. Banking operates as a closed system. Minimum agreed interest rates

That describes the existing banking system (i.e. a state-sponsored banking cartel), not a free banking system.

It would be impossible for banks to collude on setting interest rates without government support.

and outlaw Bank Runs

Again, you're describing government interference in banking, not a free banking system.

A good representation of the current banking system: but nothing whatsoever to do with free banking.

 

[DamianTV]

Fine, lets call it for what it is. Fractional Reserve is Keynesian Economics. Thus, bad, mkay?

 

[r3volution 3.0]

Fine, lets call it for what it is. Fractional Reserve is Keynesian Economics. Thus, bad, mkay?

Huh?

No, that makes no sense at all.

 

[Madison320]

What do you mean exactly?

In a free banking situation, banks choose their own reserve ratios, on the basis of their own tolerance for risk.

If a bank overextends itself, and defaults on its liabilities to its depositors, that's not fraud, just stupidity.

...and it goes bankrupt, its assets get bought up by a more competent competitor, and the problem solves itself, as in any other industry.

If a banks claims to have 50% of its deposits on reserve, but really only has 10%, that would be a crime.

 

[r3volution 3.0]

If a banks claims to have 50% of its deposits on reserve, but really only has 10%, that would be a crime.

Ah, my mistake. I thought you meant that banks should be legally obligated to keep a certain reserve ratio.

Yes, I agree that they should be prohibited from lying about their reserve ratio (or any other aspect of their business).

They shouldn't be required to disclose any particular information (caveat emptor), but whatever they do disclose must be truthful.

 

[Madison320]

Ah, my mistake. I thought you meant that banks should be legally obligated to keep a certain reserve ratio.

Yes, I agree that they should be prohibited from lying about their reserve ratio (or any other aspect of their business).

They shouldn't be required to disclose any particular information (caveat emptor), but whatever they do disclose must be truthful.

Exactly.

My guess is that if we had a totally free market banking system, most of the people that complain about fractional reserves, would freely choose to keep their money in banks with fractional reserves because of the higher rate they would offer.

 

[r3volution 3.0]

Exactly.

My guess is that if we had a totally free market banking system, most of the people that complain about fractional reserves, would freely choose to keep their money in banks with fractional reserves because of the higher rate they would offer.

No doubt.

...people have a righteous hatred of the current banking system, but confusion over how banking actually works has caused them to misidentify the villain.