Archive for the 'Full Reserve Banking' Category
Full Reserve Banking and Home Mortgages
Date: December 19th, 2007, Filed under Full Reserve Banking
One question I hear often about full reserve banking is how a bank would supply capital (money) for a person borrowing a mortgage, or a loan towards buying a house. Since the bank can only loan out money that is deposited, and untouched, by others, some people see a problem in depositing money that is tied up for 30 years. Hopefully this article explains how such a system would work, and why it would be better than the current fractional reserve banking and central banking system.
Read the rest of this article at the full reserve banking site.
Credit Cards and Full Reserve Banking
Date: December 10th, 2007, Filed under Full Reserve Banking
In a fractional reserve banking system, credits cards and other unsecured lines of credit are not very different from how a bank handles the financial end of mortgages and loans: because it only needs to keep a small reserve from depositors in their vaults (digitally or physically), it can loan out the rest in the form of loans and lines of credit. If the reserve was set to 10%, the bank could use 90% of a deposit for credit cards or mortgages and other loans.
In a full reserve bank, credit card lines of credit (unsecured) would still be available, but the process at which the bank covers purchases made on the credit cards is directly tied to depositors who want a higher return on their investment. In the case of a mortgage or loan secured with an assets (say, a house, car or business), the interest rate paid to investors is lower as there is an asset backing the deposit. In the event of a delinquency from the borrower, the bank would repossess the asset, sell it, and pay back the depositor based on what the asset sold for. Since credit cards are unsecured, a depositor would want a higher interest rate to overcome the risk of delinquencies.
Read this entire article at the full reserve banking site.
Negative Interest Rate
Date: December 6th, 2007, Filed under Full Reserve Banking
Since all businesses must make a profit to survive, a bank’s ability to make a profit sets its ability to stay in business. Modern, fractional reserve banks make their profits in a multitude of ways: fees, profits from investing people’s deposits, and other collections they receive. Since a fractional reserve bank makes its profits from investments by using other people’s money (even without them knowing it), I don’t believe it is a moral profit.
A full reserve bank, on the other hand, is not allowed to use your deposits to make itself money, without your approval and commitment to also taking a risk. If you deposit US$10,000 in a full reserve bank, the bank has to be able to pay you your US$10,000 on demand, as well as all other depositors if they want their money as well. A fractional reserve bank would have to borrow money from other banks, or the Federal Reserve, if everyone wanted their money — a fractional reserve bank doesn’t have to actually save your money from loss.
Read the rest of this article at full reserve banking
Full Reserve Banking: What is a reserve?
Date: December 5th, 2007, Filed under Full Reserve Banking
In both full reserve banking and fractional reserve banking, we have the adjective of “reserve.” It is this adjective that is part of the fraudulent aspect of fractional reserve banking, as its definition can vary from country to country and even bank to bank.
At the simplest definition, a reserve for a bank defines what the bank holds as security against a depositor’s balance. In a full reserve bank, if you deposit US$10,000, the bank physically stores US$10,000 for you against theft, fire and other calamity. In a fractional reserve, the bank is regulated (usually by the government) in how much it must reserve, but it doesn’t have to reserve the total amount. If the official regulated reserve ratio is set to 10%, the bank must keep at least 10% of your deposit in reserves, but is free to do what it wants with the rest. If you deposit US$10,000 in a fractional reserve bank with a 10% regulated reserve ratio, the bank must keep US$1000 in reserves, but can loan out the other US$9,000.
Read this entire article at the Full Reserve Banking site.
Government market control without the Federal Reserve
Date: December 3rd, 2007, Filed under Full Reserve Banking
One concern that people who are against full reserve banking have is the idea that the government would not be able to control economic situations that are causing so-called recessions or depressions. In the nearly 100 year history of the Federal Reserve in the United States, the outcome of near recessions has been for the Federal Reserve to create new money/credit (monetary inflation), which has postponed recessions only to create bigger problems through asset or investment bubbles. The Federal Reserve acknowledges its own responsibility in creating the Great Depression (first by creating too much money, and then by destroying that money too quickly, causing banks, borrowers and the poor to go bankrupt). Now, the Federal Reserve’s policy is to create new money to keep markets and economies “stable,” but in the long run just continues to create bigger and bigger asset bubbles. The dotcom bubble was “fixed” by the Federal Reserve, leaving us with a housing bubble. The housing bubble might be “fixed” by creating more money, which will create a new bubble in other markets.
Read this entire article at the full reserve banking site.
Or use RSS:
Subscribe in a reader
Get Daily Updates:
