Answer To Cyprus? 100% Reserve Banking!Submitted by Robert Timsah on Mon, 04/01/2013 - 15:33
ROUGH EXPLANATION OF FULL RESERVE BANKING:
If you deposit $5000 (in a full reserve bank) then the bank must keep the $5000 there. The bank can ASK you if they can lend out - say $500 of it and you and the bank receive any dividends from that investment.
The money the bank lends out, you cannot spend. Thus - the amount of money supply in the system is stable.
However the rest of your $4,500 they must keep on-hand and cannot lend out. The bank can/will charge fee's, for those who won't let them lend anything out, for holding their money.
So you'll have a choice - let the bank lend out some as a way to reward the bank for protecting ALL OF your money or PAY THEM to hold it without lending it out.
This works much better because any losses will be much smaller and less catastrophic than what happens today. It'll also help create a more stable money supply.
And anyone who loses money - agreed to take on that risk. Those who did not agree to, can't lose any money unless the bank commits fraud. But this potential exists in virtually every transaction. If the bank commits fraud then you can sue them to get your money.
I really love the concept of 100% reserve banking, especially in light of the Cyprus deal. Can you imagine if a 100% reserve bank started popping up now? Surely people would be interested, especially people with over $250,000. I'm just doubtful that the Fed, Treasury and Congress won't try to annihilate such a bank.
U.K. EXPLANATION VIDEO (PRETTY GOOD)
FULL RESERVE BANKING:
WEAKENSSES OF FRACTIONAL RESERVE LENDING: