Quote:
Originally Posted by Arne
You sure have no idea what Rothbard was talking about. A little hint: time deposits. - If you want interest on your money you have to give it to a bank for a predefined period of time, or you have to make a loan yourself.
The basic principle lies in property rights. Either you believe in property rights or you don't.
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I wasn't quoting Rothbard, I was quoting Alex. Fractional reserves are what enable a bank to lend out money.
CDs already are figured differently... a bank does not have to reserve as much against a CD as they do against a demand deposit. But in both cases they do have to reserve SOME, but not 100 percent. Somewhere in between 0% and 100% is the optimal reserve amount. I am willing to accept arguments that the current (recent) level was too low, PARTICULARLY in the face of all the the technical innovation that was taking place. CDOs and the like DID in fact help to diversify risk, but they were not really stress tested (until now) so HOW MUCH they diversified risk was uncertain... PARTICULARLY because they fundementally altered the behavior of both borrowers and lenders, rendering historical statistical analysis basically useless.
BUT the fact remains, some reserve level between 0 and 100 is optimal...
I find it shocking that it is the libertarians of the group that want the government to essentially universally outlaw banking as we know it (by mandating 100% reserves) in the face of a market misallocation. Do the Austrian theorists really know THAT MUCH better than the individuals that have actually put their $$$ on the line?