Quote:
Originally Posted by takeahnase
So on the one hand you want to get rid of banking (by introducing 100% reserve requirements) and at the same time you are critical of OTC trading/lending?
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I was going to let this go but you seem to like my posts so...
Full reserve banking is a different model than what we have today but there's no reason why it won't work. Banks would lend out of paid-in capital and retained earnings only. If investors don't want to put their savings at risk, then there's little lending. Lending would become much more sensitive to the underlying fundamentals of the economy. Of course I'm talking about a system with a stable money supply where the market sets the interest rate.
I realize it won't work in our present credit-based system -- in fact it would destroy it -- however I merely want to point out an alternative to what we have today. Having said that, there's no reason reserve requirements can't be raised from the present 10% level. If excessive credit creation and leverage led us to this point, the obvious solution would seem to be more conservative banking practices.
My criticism of the derivative markets has to do with excessive leverage. I'm a fiscal conservative and think the risks created in structured finance far outweigh the benefits.