Why We'll Still Never See a 100% Reserve Economy
"When Lucas casually starts a discussion by assuming a 100 percent reserve economy, then, he’s assuming a world in which banks are required to keep 100 percent of their capital on reserve." This is an article speaking on the topic of a 100% reserve economy. It is interesting to see how things would work in our society if we were to switch to this ideal. What would happen with debt? Would the purchasing power change at all? Would the consumer confidence be shaken by this change? There are a lot of interesting points that come up in the article, making one wonder if this is a possibility in the future when people realize the perks.
I would just like to bring up a couple points for discussion in regards to this topic since I found the article pretty interesting.
ReplyDeleteFirst off, Greeley is saying that due to how our current system works, we would not switch our current system for one that is a 100% reserve economy because not only would be too structured (in that inner workings within the economy would be incredibly predictable and controllable) but this shift would have to cause other radical changes to the structure of our economy. What would this change in monetary control do to investment?
The second is more of a general statement; if we were even to reach a time where a 100% reserve economy would be the most effective option, the way Congress has been, there is no way that anything this huge would ever pass all at once. At least, definitely not right now. And even if there was a willingness to change, the lobbying done by banks would also probably slow the process further.
I'd like to think about this concept in the context of America's economic history. As businesses, banks and consumers have evolved, the US economy has risen over the long run. However, this steady increase has not been without turbulence; in the short run, the American economy displays rapid fluctuations.
ReplyDeleteWith a 100% reserve economy, these short term fluctuations would likely be much less severe. But what about the long run? If we had been operating under 100% reserve over the last century, where would our economy be now?