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HomeEconomyWeekly Commentary: Pondering Modern-Day Runs

Weekly Commentary: Pondering Modern-Day Runs

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“In 1939, a brief proposal auspiciously titled ‘A Program for Monetary Reform’ was circulated among economists in the United States. Written in the wake of The Great Depression by a group of prominent American economists which included Irving Fisher and Paul Douglas, it included a stark criticism of the fractional reserve banking system in the United States, referring to it as ‘a chief loose screw in our present American money and banking system’ (Fisher et al., 1939). Despite this, the fractional reserve system remained then, and continues to remain status quo for all developed banking systems in the world. It has gathered many more critics over the years that attribute to it many disadvantages, such as a tendency for bank runs and moral hazard on behalf of lending institutions, among other negative externalities.” Sergey Alifanov, “On the Dangers Inherent in a Fractional Reserve…

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