Comment: Fractional reserve banking is not fraudulent

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Fractional reserve banking is not fraudulent

The suspension of species payment is what is fraudulent. If I was given the task of designing the system here is how I would do it.

1. Must have an anchor to the issuance of credit……i.e. a gold standard. In this book “Money Meltdown” the writer lays out an outstanding plan to return to the gold standard. Why try to improve on perfection. Read it,learn it, use it.

2. The anchor cannot EVER BE BROKEN……NO MORE SUSPENSION OF SPECIES OF PAYMENT.

3. Allow anyone that raises the capital to enter the market as a “Free Bank”. “Free” banking can only refer to a system in which banks are treated as any other business, and that therefore failure to obey contractual obligations—in this case, prompt redemption of notes and deposits in specie—must incur immediate insolvency and liquidation. Now here is where the fractional reserve part comes in. Allow banks to issue credit on the basis of “Real Bills Doctrine”. This is self-liquidating debt…..an example is when a framer needs capital to plant in the spring he borrows from the bank….. Pays it back at harvest time. If his crops fail his collateral is his farm. You could do all kind of self-liquidating loans, but it would get the commercial banks out of the speculation business and re-erect the Glass Steagull Act and make investment banks partnership again…..no more publically traded investment bank.

4. Free Market Central Bank……with the advent on the internet this could be (and even better then we have ever had) way for the free market to control over issuance of debt.

A FREE-MARKET “CENTRAL BANK”
It is a fact, almost never recalled, that there once existed an American private bank that brought order and convenience to a myriad of privately issued bank notes. Further, this Suffolk Bank restrained the over issuance of these notes. In short, it was a private central bank that kept the other banks honest. As such, it made New England an island of monetary stability in an America contending with currency chaos. Chaos was, in fact, that condition in which New England found herself just before the Suffolk Bank was established. There was a myriad of bank notes circulating in the area’s largest financial center, Boston. Some were issued by Boston banks which all in Boston knew to be solvent. But others were issued by state-chartered banks. These could be quite far away, and in those days such distance impeded both general knowledge about their solvency and easy access in bringing the banks’ notes in for redemption into gold or silver. Thus, while at the beginning these country notes were accepted in Boston at par value, this just encouraged some faraway banks to issue far more notes than they had gold to back them. So country bank began to be generally traded at discounts to par, of from 1 percent to 5 percent. City banks finally refused to accept country bank notes altogether. This gave rise to the money brokers.These brokers would buy up a mass of
depreciated notes of nominally specie-paying banks, and then
travel to the home office of the bank to demand redemption in
specie. But it also caused hardship for Boston merchants, who had to accept country notes whose real value they could not be certain of. When they exchanged the notes with the brokers, they ended up assuming the full cost of discounting the bills they had accepted at par.

Along with implementation the fair tax and closing the IRS I have just laid out the 6 point plan to cure all our financial problems…….you’re welcome.