|
HI John
The 100% reserve
system would result in an instant collapse of our present financial system,and
consequently finacial chaos of an unprecedented nature, unless you accept that
the present system DOES actually create the money it "lends" out of thin air. TO
make any system work you have to divorce the two purposes of a bank namely 1] as
a depository for the thrifty to place their "savings", and 2] as an organisation
that provides finance to organisations in the form of "loans or overdrafts" to
keep commerce moving. The two functions are distinct and different and cannot be
related together. In NZ it is illegal for any Bank to "lend out" funds placed in
it on deposit as savings. Thus if any bank is placed into receivership in NZ,
the first duty of the receiver is to reimburse all people who habve placed funds
in that b ank as "savings". Other creditors like other banks have to wait until
this is done. Unfortunately past history has confused to two functions either
accidentally or deliberately I suspect the former because of insufficient
understanding of how the monetary system really works. Many people still believe
that banks actually "lend out" the money placed in them on deposit, a practice
that has been outlawed. Nevertheless the "fractional reserve system" perpetuates
this myth to the advantage of the bankers'
BIll MCG
----- Original Message -----
Sent: Friday, May 15, 2009 2:47 PM
Subject: [socialcredit] 100 percent
reserve system
At 02:07 AM 15/05/2009, William Ryan wrote:
Firstly, there is a serious
question that such a system could work even in theory.
What is a 100
percent reserve system?
by William
Hummel
A 100 percent reserve system is not
simply a special case of the fractional reserve system. It would
dramatically transform the monetary system and the role of banks, as
summarized in the following:
In a 100 percent reserve system, banks
would be required to hold reserves equal to their demand deposits. Banks
could no longer create deposits out of thin air by lending, as in a fractional
reserve system, because there would be no reserves backing those
deposits. The entire money supply would consist of base money – demand
deposits which are proxies for central bank funds, and cash in
circulation. Bank credit money would no longer exist. The money
supply could change only as a result of open market operations or lending by
the central bank.
Banks would play two quite independent
roles: (1) depositories providing payment services to the public,
and (2) profit-seeking enterprises we can call financial service
companies (FSC). In its role as an FSC, a bank could only lend what it
holds on deposit itself. Such lending would transfer ownership of funds
from its own account to the borrower’s account, in the same way a non-bank FSC
now lends.
Banks could acquire funds to lend by selling
interest-earning securities such as money market funds. However they
would have little incentive to seek new demand deposits because such deposits
offer no opportunity to create profitable investments for themselves. In
principle, banks could continue to offer CDs and savings deposits to acquire
funds. However without federal insurance coverage, those deposits would
be functionally redundant with other instruments offered by FSCs, and are best
eliminated.
With the depository operations of little value to banks in
a 100 percent reserve system, it makes sense to consolidate all deposits into
a single national depository run by the central bank. It could be called
the national bank, but should not be confused with the central bank itself,
which is not a public depository and has other important functions to
perform. All deposits at the national bank would be non-earning
transaction deposits which exist as entries in a single computer system.
Verifying balances and making payments could be done instantly. Deposit
insurance would be eliminated since there is no risk when all deposits are
held in a national bank.
Addendum:
I don't think there
is the slightest chance the U.S. Congress would enact the necessary
legislation, considering the political power of the banking business.
But if it did, It would certainly change the landscape in the financial
world. Milton Friedman and a few other reputable economists have
proposed a 100% reserve system, but I have never seen anything to suggest they
understood the full implications.
The
fractional reserve system puts enormous leverage in the hands of large banks,
which is often misused. Far too much lending now goes to support purely
speculative activity in the financial markets. That distorts the
markets, inflates asset prices, increases the fragility of the banking system,
and serves no useful purpose in the real economy. The single national
depository version of a 100% reserve system, which I describe in more detail
in http://wfhummel.net/nationaldepository.html,
would be a definite improvement in my opinion.
---------------------------------------------------------------------
Some introductory materials to the discussion topic of this list are at
http://www.geocities.com/socredus/compendium
You're subscribed to this list with the email wmcgunn@maxnet.co.nz
For more information, visit http://www.eListas.com/list/socialcredit
|
Re: [socialcredit]
Reply to this message
