Do you Australians actually love "Full - Reserve Banking?"

DennisTate · Feb 6, 2019

Well this is certainly interesting!

This is all new information to me and the best way for me to begin researching this is to begin a topic and a poll.

Do you Australians actually love "Full - Reserve Banking?"

Are you perhaps glad that the USA isn't on the same system?

I ask this because the USA has done us Canadians a massive favour by carrying the brunt of the cost of policing the earth especially since WWII.

The Chicago Plan ~ Dan Denning

The Austrians Love Full-Reserve Banking

If full-reserve banking sounds like hocus pocus—money created by the government and backed by the government — trust me, it gets weirder. Austrian economists like Ludwig von Mises, Friedrich Hayek, and Murray Rothbard all expressed strong support for full-reserve banking. But there’s a catch!

The Austrians advocated a “pure commodity standard” for the backing of all money (including bank deposits). Rather than the full faith and credit and taxing power of the government (sovereign money), the Austrians said that for money to be sound and credit to not exceed available savings, the money had to be backed by a tangible, physical, and scarce commodity (namely, gold).

All the benefits of the banking system under a pure commodity standard would be the same: a more stable financial system, sound money, and the taming of the business cycle.

But the quantity (and quality) of money would be fundamentally tied to the cost of finding and mining gold. You could not, as with the Chicago Plan, increase the money supply with a stroke of a government pen.

Ricardo and the Bank of England

The economics of full-reserve banking go back to economist David Ricardo. In 1823, Ricardo wrote a “Plan for the Establishment of a National Bank.” The main idea was to separate money creation from money lending and make sure that whenever money was issued or credit was created, it was backed 100%.

In Ricardo’s plan, reserves were 100% backed by gold. This was the origin of the pure commodity standard for full-reserve banking. Ricardo based his standard on gold because, like Adam Smith, he believed that the need for physical money arose when human beings replaced the barter system. To do that, money had to be a real, physical thing that you could exchange.

But we already illustrated why a gold-backed currency is highly unlikely. So that means a government-debtbacked currency is the only remaining method of implementing Ricardo’s plan.

Today, monetary theorists argue that money is really just a social technology. It can be whatever we want it to be, as long as we all believe in it. What matters, in this theory, is that money is backed by trust (not a real commodity, like gold).

England’s Bank Charter Act of 1844 was based on Ricardo’s plan. The Act required that all bank notes were 100% backed by reserves. The British twist was that government debt could be used to back notes as well as gold.

The Act was regularly suspended — allowing the issuance of non-backed notes — when there was a financial panic or a war.

Monetary standards that limit credit growth have a tendency to limit the state’s capacity to make war. That’s why the first golden age of globalization was based on a gold standard and sound money.

It’s also why governments are so keen to change the nature of the money system over time: It gives them greater capacity to spend money they don’t have and fight wars they otherwise wouldn’t be able to afford." (Dan Denning, The Chicago Plan).
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Do you Australians actually love "Full - Reserve Banking?"

Do you Australians love "Full - Reserve Banking?"

No

Yes

Somewhat..... we have observed worse methods.

DennisTate Well-Known Member Past Donor

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Do you Australians actually love "Full - Reserve Banking?"

Do you Australians love "Full - Reserve Banking?"

No

Yes

Somewhat..... we have observed worse methods.

DennisTate Well-Known Member Past Donor

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