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.

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