Bank of England Head Mervyn King Proposes Eliminating Fractional Reserve Banking

[Anonymous]

http://www.zerohedge.com/article/bank-england-head-mervyn-king-proposes-eliminating-fractional-reserve-banking

Ironically, while King is proposing the potential elimination of fractional reserve banking (i.e. a return to 100% reserves), Ben Bernanke has proposed the elimination of all reserve requirements (i.e. requiring no reserves):

        The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system.

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[grondilu]

The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system.

[/quote]

Yeah it's true. Why bother about requiring some reserves, hum ?

I actually agree :  let's abandon all this crap.  Then the federal reserve will have no reason to exist, and we'll go to a free banking industry.  Everybody will have the right to be his own bank :  and in this scheme, I'm sure bitcoin will be the best money ever.

[hugolp]

Yeah it's true. Why bother about requiring some reserves, hum ?

I actually agree :  let's abandon all this crap.  Then the federal reserve will have no reason to exist, and we'll go to a free banking industry.  Everybody will have the right to be his own bank :  and in this scheme, I'm sure bitcoin will be the best money ever.

The problem is that what Bernanke is proposing is nowhere near free banking. Its more like lets get away with the small and inefficient check and ballances that exists right now to keep credit expansion in check. I mean, they dont work, the bubbles show it, but at least they make the process somehow slower.

Btw, this could be moved to the economics subforum, dont you think?

[ribuck]

The linked article clearly says that "King does not advocate any of these radical plans".

So although Mervyn King is discussing the abolition of fractional reserve banking, it's only as a straw man to be knocked down.

[em3rgentOrdr]

       The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system.

How do they impose distortions?