Bernanke Wants To Eliminate Reserve Requirements Completely
Pepe Silvia
Posts: 3,758
http://www.businessinsider.com/now-bern ... ely-2010-3
Now Bernanke Wants To Eliminate Reserve Requirements Completely
Up until now, the United States has operated under a "fractional reserve" banking system. Banks have always been required to keep a small fraction of the money deposited with them for a reserve, but were allowed to loan out the rest. But now it turns out that Federal Reserve Chairman Ben Bernanke wants to completely eliminate minimum reserve requirements, which he says "impose costs and distortions on the banking system". At least that is what a footnote to his testimony before the U.S. House of Representatives Committee on Financial Services on February 10th says. So is Bernanke actually proposing that banks should be allowed to have no reserves at all?
That simply does not make any sense. But it is right there in black and white on the Federal Reserve's own website....
The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system.
If there were no minimum reserve requirements, what kind of chaos would that lead to in our financial system? Not that we are operating with sound money now, but is the solution to have no restrictions at all? Of course not.
What in the world is Bernanke thinking?
But of course he is Time Magazine's "Person Of The Year", so shouldn't we all just shut up and trust his expertise?
Hardly.
The truth is that Bernanke is making a mess of the U.S. financial system.
Fortunately there are a few members of Congress that realize this. One of them is Republican Congressman Ron Paul from Texas. He has created a firestorm by introducing legislation that would subject the Federal Reserve to a comprehensive audit for the first time since it was created. Ron Paul understands that creating money out of thin air is only going to create massive problems. The following is an excerpt from Ron Paul's remarks to Federal Reserve Chairman Ben Bernanke at a recent Congressional hearing....
"The Federal Reserve in collaboration with the giant banks has created the greatest financial crisis the world has ever seen. The foolish notion that unlimited amounts of money and credit created out of thin air can provide sustainable economic growth has delivered this crisis to us. Instead of economic growth and stable prices, (The Fed) has given us a system of government and finance that now threatens the world financial and political institutions. Pursuing the same policy of excessive spending, debt expansion and monetary inflation can only compound the problems that prevent the required corrections. Doubling the money supply didn’t work, quadrupling it won’t work either. Buying up the bad debt of privileged institutions and dumping worthless assets on the American people is morally wrong and economically futile."
The truth is that the financial system that we have created makes inflation inevitable. The U.S. dollar has lost more than 95 percent of the value that it had when the Federal Reserve was created. During this decade the value of the dollar will decline a whole lot more.
That doesn't sound like a very good investment.
But that is what happens when you give bankers power to make money up out of thin air.
And things are only going to get worse.
Especially if Bernanke gets his way and reserve requirements are eliminated entirely.
The U.S. economy is a giant mess already, and we have got a guy at the controls who simply does not have a clue.
It's going to be a rough ride.
Read more: http://www.businessinsider.com/now-bern ... z0kfoDTcYr
Now Bernanke Wants To Eliminate Reserve Requirements Completely
Up until now, the United States has operated under a "fractional reserve" banking system. Banks have always been required to keep a small fraction of the money deposited with them for a reserve, but were allowed to loan out the rest. But now it turns out that Federal Reserve Chairman Ben Bernanke wants to completely eliminate minimum reserve requirements, which he says "impose costs and distortions on the banking system". At least that is what a footnote to his testimony before the U.S. House of Representatives Committee on Financial Services on February 10th says. So is Bernanke actually proposing that banks should be allowed to have no reserves at all?
That simply does not make any sense. But it is right there in black and white on the Federal Reserve's own website....
The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system.
If there were no minimum reserve requirements, what kind of chaos would that lead to in our financial system? Not that we are operating with sound money now, but is the solution to have no restrictions at all? Of course not.
What in the world is Bernanke thinking?
But of course he is Time Magazine's "Person Of The Year", so shouldn't we all just shut up and trust his expertise?
Hardly.
The truth is that Bernanke is making a mess of the U.S. financial system.
Fortunately there are a few members of Congress that realize this. One of them is Republican Congressman Ron Paul from Texas. He has created a firestorm by introducing legislation that would subject the Federal Reserve to a comprehensive audit for the first time since it was created. Ron Paul understands that creating money out of thin air is only going to create massive problems. The following is an excerpt from Ron Paul's remarks to Federal Reserve Chairman Ben Bernanke at a recent Congressional hearing....
"The Federal Reserve in collaboration with the giant banks has created the greatest financial crisis the world has ever seen. The foolish notion that unlimited amounts of money and credit created out of thin air can provide sustainable economic growth has delivered this crisis to us. Instead of economic growth and stable prices, (The Fed) has given us a system of government and finance that now threatens the world financial and political institutions. Pursuing the same policy of excessive spending, debt expansion and monetary inflation can only compound the problems that prevent the required corrections. Doubling the money supply didn’t work, quadrupling it won’t work either. Buying up the bad debt of privileged institutions and dumping worthless assets on the American people is morally wrong and economically futile."
The truth is that the financial system that we have created makes inflation inevitable. The U.S. dollar has lost more than 95 percent of the value that it had when the Federal Reserve was created. During this decade the value of the dollar will decline a whole lot more.
That doesn't sound like a very good investment.
But that is what happens when you give bankers power to make money up out of thin air.
And things are only going to get worse.
Especially if Bernanke gets his way and reserve requirements are eliminated entirely.
The U.S. economy is a giant mess already, and we have got a guy at the controls who simply does not have a clue.
It's going to be a rough ride.
Read more: http://www.businessinsider.com/now-bern ... z0kfoDTcYr
don't compete; coexist
what are you but my reflection? who am i to judge or strike you down?
"I will promise you this, that if we have not gotten our troops out by the time I am president, it is the first thing I will do. I will get our troops home. We will bring an end to this war. You can take that to the bank." - Barack Obama
when you told me 'if you can't beat 'em, join 'em'
i was thinkin 'death before dishonor'
what are you but my reflection? who am i to judge or strike you down?
"I will promise you this, that if we have not gotten our troops out by the time I am president, it is the first thing I will do. I will get our troops home. We will bring an end to this war. You can take that to the bank." - Barack Obama
when you told me 'if you can't beat 'em, join 'em'
i was thinkin 'death before dishonor'
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Comments
Zero Reserve Requirements, if not meaning the ability to loan out infinite the amount of money that you have on reserve, might mean that banks can literally loan out all of their money at once, which is inevitable, and when people need it-- too bad. Bank runs and bank holidays could be a very annoying norm until it becomes self-destructive.
This is why true Libertarian / Conservatives hate on it heavily when people scream about "regulations." It's because it's ultimately these regulations (zero reserve requirements) that get written. Basic laws against fraud, stealing, extortion, and counterfeitting are the only rules that need be enforced, and they need to be enforced across the board for banks, insurance companies, credit card companies, etc.... It's regulations that allow these otherwise criminal activities legal for some special types of business.
This is worth all of our attention, and really needs to be fought. Even in the event that it sparked wild competiton between banks, they still will only be dealing in a fake currency that can be inflated to no end. It's time to revamp the banking system, yes. Zero Reserve Requirements is the first step to guaranteed failure.