"...there's nothing stopping banks today from essentially holding their customers' cash in safekeeping (for which a fee would be charged) rather than in a deposit account. It's not done because there's no market for it; the customers don't want that service. And who can blame them, when the government is guaranteeing the safety of deposits? The heavy hand of government is 99.999% of the problem. Eliminate that, and let the market work, and the problem would be solved. Even with fractional reserve banking."
Thursday, 16 September 2010
Criticizing Fractional Reserve Banking Criticism
Samizdata back to its best: an absorbing thread on the merits of the Cobden Center's proposal, in the form of a Ten Minute Bill pushed by Douglass Carswell MP and Steve Baker MP, for reform of commercial banking practices in the UK. Understood in a narrow context, the problem lies not simply with public ignorance on the legal status of their deposits in the event of a bank run, a la Northern Rock in 2007, but with the government backing for deposit insurance. Laird owns the thread; choice quote:
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