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Re: How I Learned to Stop Worrying About Fractional Reserve …

  • Fri, Jul 10, 2009 - 07:37pm

    #65
    Peak Prosperity Admin

    Peak Prosperity Admin

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    Re: How I Learned to Stop Worrying About Fractional Reserve …

Baywork: right.

Gold limits the amount of saving/leverage the economy can tolerate. This limits growth (bad) but also limits debt (good)  at the expense of regular deflationary depressions.

My preference is to recognise that commodity money does nothing to ensure economic stability (it prevents the worst of bubbles but on the flip side it unreasonably constrains growth even in good times leading to unnnessecary depressions), and that instead perfect economic stability can only be ensured by eliminating any arbitrage which prevents the savings/loans market from being cleared.

That arbitrage is cash and other 0% anonymous bearer instruments. I see no reason why savers should be treated preferentially to borrowers and therefore -ve nominal interest rates should be allowed under true free market conditions.