A nuanced look at Fractional Reserve BankingSubmitted by Johny-Boy on Sat, 03/23/2013 - 02:36
Please. I don't fully understand this and hope that minds sharper than mine might penetrate its validity.
"Does Fractional Reserve Banking Involve Counterfeiting?
"A new dispute has flared up between protagonists and detractors of fractional reserve banking. This is a welcome development because the burning issues under the ashes jeopardize the success of the honest money movement.
"Joseph N. Tlaga challenges the long-standing position of the Austrian School of Economics, reflecting the views of Ludwig von Mises, that the commercial banking system is creating money "out of thin air" when it issues note and deposit liabilities backed by fractional reserves of gold, so that if all depositors and note-holders presented their claims simultaneously, then the banks would go bust. In the view of the Austrians this "counterfeiting process" is at the root of the boom-bust cycle."