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Re: Fatal Flaw in Logic of the Crash Course?

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  • Sat, Feb 21, 2009 - 04:31pm

    #142
    Peak Prosperity Admin

    Peak Prosperity Admin

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    Re: Fatal Flaw in Logic of the Crash Course?

I have two bank accounts: a demand account, and a savings account. Now I find it objectionable that the bank loans out money that I hold in my demand account, because I keep it there to be able to spend it whenever I need. But the savings account is another story. I expect the bank to invest that money, or to loan it out, so that they can pay me a bit of interest, at least enough to counter inflation. I really don’t understand why banks should be obliged to hold any of my savings in reserve, as long as they don’t throw it away, and as long as they keep their hands off my debit.

I would say that the main business of banks is to loan out the money of their depositors, and in a full reserve system, this is simply prohibited. Therefore full reserve banking is no banking at all.