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Replying to Avatar Low Information Voter

Truth, but there are systemic risks, and more importantly, fragility, usually not discussed.

Issuing new debt in a fractional reserve paradigm requires continuous underlying growth in production and consumption to pay the return creditors require.

It also requires continuous underlying growth in government coercive capacity and willingness to enforce the rules of the game.

This ends in tears every time. But is very good while it lasts, for those close to power.

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H 7mo ago

Fractional reserve in the US is 0% and banks create money for loans out of thin air

https://www.federalreserve.gov/monetarypolicy/reservereq.htm

This is also the case in Australia (though this was implemented much earlier).

https://www.rba.gov.au/publications/bulletin/2018/sep/money-in-the-australian-economy.html

There are still many regulations including capital adequacy requirements though.

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