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Comment by riffraff | Hacker News Reader

> Welcome to fractional reserve banking!

I don't think that is fractional reserve banking.

FRB is the system where a bank is required to have a reserve of X% before it can issue money, while in the current system the banks first emits money and then (in the US) it attempts to get a reserve[0] for that (and in the EU, it doesn't either, tho there are liquidity requirements).

[0] https://en.wikipedia.org/wiki/Reserve_requirement

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Doesn’t really matter, as the requirements were set to 0% recently

I think there's a mixup between what most people who have no idea what they're talking about (almost everyone including self) mean when they say fractional reserve banking and the technical meaning.

People mean: Bank has less "hard cash/assets" than deposit liabilities Technical meaning: The bank is legally/practically constrained to a fixed minimum reserve fraction of liabilities to harder assets

So banks DO have a "fractional reserve" even when not practising technical "fractional reserve banking"... I think

It's still fractional reserve banking. zero fraction reserve banking. /s

It's called fractional because that X% is smaller than 1.

I do agree that, 0 being an integral, that name lost its meaning, but it's still the same thing, so people keep using the same name.

So you think this is not fractional reserve banking because instead of having the fractional reserve of X% beforehand they get the fractional reserve of X% right afterwards?

According to Steve Keen[1] based on research by Kydland & Prescott[2] it's up to a year before the fractional reserve catches up.

[1] https://www.deflation.com/Articles/The-Roving-Cavaliers-of-C...

[2] https://researchdatabase.minneapolisfed.org/concern/parent/b...

Thanks for the reference.

Edit: I've just briefly skimmed it [1], but "The creation of credit money should happen after the creation of government money." would be true if the system was working at capacity. The fractional reserve requirements are not really a limiting factor, the banking system in aggregate is operating well below that limit if I remember correctly.

[1] The 2012 article, for a few seconds; I didn't look at the 30-year-old paper beyond noticing the date in the cover

He first published that article in 2009 right after the markets imploded with the GFC. He's also generally acknowledged as one of the few who predicted the crash which he predicated on the buildup of private debt.

His articles make for interesting reading even now given his general rejection of mainstream models being inadequate.

https://theconversation.com/i-predicted-the-last-financial-c...

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