Mitchell Langbert: The Banking System Has Caused Economic Slowdown
Posted by The Interest on January 23, 2009
Mitchell says this:
Not that money supply is independent of the banking system. Much of the money supply is created by the banks. But if the money supply is the reason for depressions and recessions, there is an argument to maintain the current banking system–the Fed can counter panics and so fractional reserve banking’s chief problem (the threat of runs) can be countered. But not if the banking system itself is faulty. Then the argument for the current fractional reserve system is attenuated. Then, fractional reserve banking is in part responsible for misallocation and slowdowns, and money supply (itself a product of fractional reserve banking) is only partly to blame. In that case, a clear thinking public (sans the New York Times, pro-bank “liberals” and the like) ought to ask why the the banking is perpetuated given its dismal performance.
And this clear thinking public should also be asking, “Where’s the Interest?”
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