why should i educate you about history? use google. there were many more boom and bust periods before the creation of the fed.
Free Thinker, you do not know what a 100% reserve standard is. It is NOT what existed prior to the Fed. You can't name a period in history that had a financial crisis under a 100% reserve standard because it does not exist. Sad to see people jump to conclusions and label others ignorant when they indeed do not even comprehend what has been proposed. Educate yourself my friend. And learn some manners.
central banks with the exception of possibly the Bundesbank are handmaidens of the political ruling class. therefore they have no choice but to be a source of instability as they attempt short term solutions to economic problems which require solutions other then loose credit.. they attempt to revoke the business cycle which also includes a down part. the results are artificial booms followed by the inevitable busts as the natural forces of the market regain the upper hand. ps if you insult somebody be prepared to prove your argument or be ready to accept the inevitable ridicule, written or unwritten.
A good article about a 100% reserve system. http://en.wikipedia.org/wiki/Full-reserve_banking And as far as the Fed goes. The economy and markets have actually been more stable since the Fed was introduced. Read Kindleberger's "Manias, Panics, and Crashes â A History of Financial Crises" and you'll quickly learn that boom and bust cycles were common place before the Fed was introduced and before the Gold Standard was abandoned. This is not to suggest I'm a proponent of the Fed. http://www.amazon.com/Manias-Panics...1_fkmr0_1?ie=UTF8&qid=1303247175&sr=1-1-fkmr0
The Wikipedia article is on Full Reserve banking so it partially applies to the case for 100% gold full reserve banking. Basically every unit of money lent out would represent a unit of actual savings, ie, a bank checking account would simply be a warehouse for money. Loans would be made exclusively via time deposits rather than credit creation (like bank CDs) and would rightly be viewed as a form of investment. In other words, a bank panic or deflationary collapse would be technically impossible as would an inflationary bubble. (though naked fraud of course still, as always, would be). Of course, for this to happen it would mean the financial sector and government would need to give up a HUGE lever of power, which is unlikely to happen. I have not read the book in a long time, but what first got me interested in the idea is this book: http://mises.org/daily/1829 It is a brief read (skip the preface) I believe it goes into the benefits as well as counters specific arguments. It is not a popular notion which is why i was 95% sure that rude fellow did not have a clue as to what I was talking about.
"Of course, for this to happen it would mean the financial sector and government would need to give up a HUGE lever of power, which is unlikely to happen." Nail on the head.
Fantastic post. A question: what makes you think interest rates under a 100% gold-backed full-reserve system would be low to nil? If rates are market determined between a pool of willing lenders (savers) and borrowers (with banks playing broker for commission), relative to our current system, lenders would be in much shorter supply. The inference being rates would be higher. The deflationary nature of full reserve banking is much more appealing and allows society to benefit from production efficiencies and new technology via enhanced purchasing power. Really the way economies were meant to function, imo. If there was a case where fractional reserve systems benefit the whole is during periods of rapid industrialization where capital is the step limiting factor to growth. In most post-industrial economies, the preponderance of debt creation is used towards consumer and Government financing - buying crap. It's an epic battle. The Bankers and Government are the biggest mafia in history and will kill to preserve their money monopoly.
If Vegas was offering odds on these Utah politicians being arrested for 'financial terrorism' I'd place a few bets. Governments worldwide, at least those that have lacked proper leadership for the last 40 years, which is most western ones, are starting to turn on their people or in this case small time politicians who are not toeing the main party line.