Could this be the beginning of the end of Fractional Reserve Lending??? A major Revolution in the way we do banking is already underway. Since WW2 Credit has been running rampant all over the world. In 1971 all major world currencies became 100% fiat. Since 1971 credit (debt) has expanded to unsustainable levels. In my modest opinion what we are facing is a very economic philosophical questionâ¦â¦â¦..Can we continue to do banking the same way as before??? All over the world people know we need a âFinancial Revolutionâ â¦â¦â¦â¦â¦â¦already in Latin America six countries (Venezuela, Uruguay, Paraguay, Argentina, Bolivia and maybe Colombia) have given birth to the âBank of the Southâ â¦â¦â¦..we are going to see a major monetary integration there. REGARDLESS OF WHAT HAPPEN IN THIS CRISIS SOMETHING WILL CHANGE FOREVERâ¦â¦â¦â¦â¦â¦.WHAT WILL IT BE???
The Bank of the South is a development bank, sort of a south american World Bank. SA is not becoming a common currency area, too much petty infighting, and Keynesianism-Socialism-Statism is too ingrained in almost everyone's minds, nevermind the "capitalist" rethoric of the right. About the left... well you know... Chavez, Morales, the Kirchners... Panama is the only Latin American country that "gets it".
No. At least should not be. Fractional Reserve Lending makes complete sense... so long as the leverage isn't egregious... something like 8 or 12-to-1 is reasonable for mortgage lending. The problem comes in when loans are made at 40x to 100x leverage and not against "real" collateral. THAT aspect should change and probably will.... at great expense to all of us taxpayers and our progeny, of course.
You'd have to wait for a total collapse of central governments everywhere. Only when they are totally broke and powerless they will stop messing with the economy, money and banking. I don't think it's an impossible scenario.
Fractional reserve banking is insane as it has become to exist in the world today b/c the basic requirement of tethering something of inherit value to currencies is non-existent. We're all living in the matrix, where currency is created out of nothing and flows like just so much binary code... I'm sure Dr. Ron Paul could weigh in right about now...
Modern fractional reserve banking was basically invented by John Law, the 18th Century Bernie Madoff. He thought that financial pyramids (Ponzi games) did not necessarily had to go bust, rather, they could go on and on for a long time, if the promoters did not become too greedy. Well, Bernie Madoff had exactly the same thought.
Fractional Reserve Lending has NOTHING to do with currencies. Here is how it is supposed to work... A bank takes in $1 Million is deposits from savers. It can make loans of $8-$12 Million based upon the $1 Million in deposits... because it is unlikely that more than 8-12% of the deposits will be withdrawn over any reasonable time. That's OK... has worked satisfactorily that way for decades. But when it comes to lending 40x or 100x of the deposits to the "suspect" collateral of "loans to make a derivative play"... that's an entirely different story.... as we are now experienceing... and as W. Buffett has described as "Weapons Of Mass Destruction"...
Fractional Reserve Banking has everything to do with currencies when the initial capital base the financial institutions are lending out, regardless of the margin, is created out of thin air, with nothing of provable, inherent value, supporting it, as infused by a government; Over and over and over again...