http://econpapers.repec.org/paper/wpawuwpma/0203005.htm Fractional Reserve Banking as Economic Parasitism: A Scientific, Mathematical & Historical Expose, Critique, and Manifesto Vladimir Z. Nuri Macroeconomics from Economics Working Paper Archive at WUSTL Abstract: This paper looks at the history of money and its modern form from a scientific and mathematical point of view. The approach here is to emphasize simplicity. A straightforward model and algebraic formula for a large economy analogous to the ideal gas law of thermodynamics is proposed. It may be something like a new ``F=ma'' rule of the emerging econophysics field. Some implications of the equation are outlined, derived, and proved. The phenomena of counterfeiting, inflation and deflation are analyzed for interrelations. Analogies of the economy to an ecosystem or energy system are advanced. The fundamental legitimacy of ``expansion of the money supply'' in particular is re-examined and challenged. From the hypotheses a major (admittedly radical) conclusion is that the modern international ``fractional reserve banking system'' is actually equivalent to ``legalized economic parasitism by private bankers.'' This is the case because, contrary to conventional wisdom, the proceeds of inflation are not actually spendable by the state. Also possible are forms of ``economic warfare'' based on the principles. Alternative systems are proposed to remediate this catastrophic flaw.
Thanks for the link. You might also consider reading Stiglitz: "A new approach to monetary economics" (if you haven't yet, of course).
yeah, well, economies are made up of people, not gas molecules. gas molecules aren't productive or creative. they don't invent things that make being a gas molecule more efficient, productive, or enjoyable. gas molecules don't multiply themselves into more and more productive, creative gas molecules that continue to do the same. so what exactly is the point of trying to make the behavior of dumb molecules an anology for the behavior of intelligent human beings?
well,sorry I read the article by now and it's bullshit. It's the odd game, you create a model without bankruptcy and you end up in nirvana. But economics is basically the science of BANKRUPTCIES. Yeah, private banks create money and get rich. First somebody has to repay their credits. If they really find somebody who invests money intelligently to be able to do so, we have what we all want: progress, innovation. If anything goes wrong you get a credit crunch, small size, big size, global, depending on the resources wasted without payback. Credit crunches happened every ten years or so in the 19th century during global gold standard (Kindleberger 1978). But the real horror would be all of this money staying in an endless consumer cycle, everybody works, produces, but nobody willing to risk his funds for fancy investments. There you have a stable currency and perpetual stone age. It's a catch 22, but there's more complex stuff to it: asymmetric information, open predator-prey systems under stochastic evolution, etc.... If it just were so easy.
it flies as long as people buy our treasuries...but, the system is what it is, so you have to know the rules and play by those rules in order to get anywhere in the long run. If you are generating huge returns year-in and year-out, there is nothing to be concerned about. Our future generations will just have to carry-on the legacy of generating the huge, consistent returns if they want to maintain their wealth...I don't think that is too much to ask of them. Here's some money go make some more and support yourself/family!