Last weekend, I watched a video on the US monitory system, and the concept of fractional reserve banking. The video was opposing the idea of abolishing the gold standard. It suggested that the cycle of compression-expansion of economy, inflation and then inevitable depression are all inherently present in the current model of Federal reserve in USA.
Fer-Res has not made their balance-sheet public since 1980s. Each time the US government wants extra money for either internal infrastructural developments, or for a war, they take it from Fed. as a loan, which un-necessary inflates the currency.
In USA, other commercial banks can legally have the fractional reserve ratio as 1:10, which means if a bank has $100 as a deposit, they can lend around $900...which actually are coming from thin air..there is no base for this $900.
After watching the video, I understood the disadvantages of having the fractional reserve system, but the video never talked about any advantages, which I believe it must have. What are your views on abolishing the gold standard. Any comments?
The link to the video is
http://uk.youtube.com/watch?v=iYZM58dulPE
देशाचे भवितव्य
4 weeks ago
