Talk:Full-reserve banking

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The article states that a full-reserve banking system eliminates the incentive for banks to lend money. Doesn't it in fact make it impossible for a bank to lend money? If $100 in total are deposited to bank A, for instance, it cannot lend a single dollar without infringing on the full-reserve rule. The only exception to this would be term deposits, which could be lended because they are not counted when calculating the reserve ratio.

The bank could only lend out of it's own profits, rather than lending their clients cash. Banks would have to charge customers for safe storage of their deposits. At least that's how I think it would work. --nirvana2013 14:14, 9 February 2006 (UTC)

We made a compilation of FAQ with professor Joseph Huber:

FAQ

Paul Nollen 11 feb 2006

What is the direct source for this long Q&A? If there is a link we should simply provide that. If there is no source we shouldn't mention it at all. Either way, it doesn't belong here. -Will Beback 20:29, 11 February 2006 (UTC)

This FAQ is within the authorized limits and an answer to the question above. There is for the moment no direct link. The FAQ is compiled in cooperation with professor Huber. joseph.huber@soziologie.uni-halle.de

Paul Nollen 12 feb 2006

ok I made a link to the FAQ. Better so?

Paul Nollen 12 feb 2006

Yes, much beter thanks. -Will Beback 19:46, 12 February 2006 (UTC)

In response to --nirvana2013 14:14, 9 February 2006 (UTC)

That isn't quite correct. What it means is that commercial banks become analogous to "Mutual Funds" or other investment organizations. Banks would lose their money creation capability. Please see the wikipedia article at http://en.wikipedia.org/wiki/Money_creation

Note that this does not mean that there is no incentive to lend money. The incentive is still there, and is the same as that under a fractional reserve system: to earn interest on the money lent.

While one might argue that commercial banks might then be inclined to charge their customers to hold money for them, this is already the case for many small accounts. Many banks charge monthly or yearly fees for the mere existance of a checking account, regardless of whether any checks are actually drawn on the account during the period. At least they do in the Southeastern United States of America.

Deposit multiplier equals zero or one? The linked page does not quite define the multiplier, but multiplication by zero seems to imply deposits disappear... Doktor 21:20, 13 March 2006 (UTC)