@ Lateralus - Fractional reserve banking. Your earlier post covered quite a bit of ground,
and I won't claim to have the answer to everything economic, but just for the laughs, lets
suppose we are fractional reserve bankers. I'm the Bank of England and I have £1 in gold,
and that means I can lend you £10. You are the Federal Reserve Bank, so if we have £:$
parity, you can lend me $100. With that as a reserve .... you can see where this is going.
:-)
To have fractional reserve banking, you need to be working on a Gold Standard, or a near
equivalent. That's not how todays banks work. So what constrains bank lending?
Risk. More precisely, Perceived Risk. Which is why I wrote up the thread
"Unlimited Banking and Problem Banking" which got too long, but you may want to skim
through it.
I'm trying to put together something on Banning Usury, but for the moment that solution
looks worse than the problem that needs fixed, so no rush to finish there.
If you didn't have the ability to turn $1 into $100 there would be a huge credit crunch. So we need to unravel the mess by slowly shifting away from the leverage and allowing banks easy profits off of the free spread between central and commercial banks off of the interest rates. I'm not sure but in a cryptocurrency world would there still be a need for a pyramid of interest rates to create insensitives for banks to lend, or are we are own banks and we can lend with some type of escrow or insurance to others earning interest in a decentralized scheme?