Saturday, 27 June 2009

My experience with Wikipedia

I recently had a go at making a couple of edits of some disingenuous statements in the "Fractional Reserve Banking" section in Wikipedia. Now maybe I need to R.T.F.M., but the F.M. of Wikipedia seems just endless... It seems that after you make an edit you are supposed to explain your changes in a single line of text... which I duly did. But in no time at all someone undid my changes giving no explanation whatsoever. Then I tried to contact him through Wikipedia so that we could perhaps resolve the disagreement between us, but I found that I was barred from doing so because I wasn't a sufficiently established user. I was stumped. So now I have just tried making one of my edits again, stating that I'd like some explanation if anyone wanted to undo it. I wanted to add as part of my explanation that anyone about to undo my change should contact me but it seemed that the space Wikipedia allowed me was not big enough for such a sentence! I'm sure I have something wrong here - if anyone would like to explain to me the error of my ways please do.

Thursday, 25 June 2009

One of many flaws in fractional reserve banking

With our current fractional reserve banking system system, if the government want to create P new dollars in order to fund an emergency project, it is inevitable in the long run, whether they like it or not, that the money supply will grow by 10 times P, or should I say M times P, where M is the money multiplier (currently rumored to be around 10 ish). Is this really desirable?

While I'm on the subject, can anyone point me in the direction of a really good argument in support of fractional reserve banking (as opposed to 100% reserve banking)? I've seen all sorts of articles saying "it ain't as bad as people think" in response to criticisms, but I'm struggling to find an article which positively says "its really good and here's why".

Friday, 19 June 2009

Did the Fed double the money supply?

I just watched this YouTube video in which Ron Paul said the the Fed had just doubled the money supply. But (thinking out loud here), I suspect that what the fed have just done is doubled the monetary base, which is not the same thing at all. The money supply can only expand up to is maximum (as allowed by fractional reserve limits) if the banks can find enough people who are both willing to borrow and a good enough bet that they can pay back. Now it strikes me that if there is a sustained period in which people are reluctant to borrow, then we may not get hyperinflation after all. We may instead end up in a situation like Japan with a combination of near zero interest rates combined with close to zero inflation.

The banks would of course hate this scenario with a passion because with no borrowing their profits will dissapear. So they will try every trick in the book to get people to borrow more.

Friday, 12 June 2009

World's biggest financial news story

It seems that this story is being kept quiet. I wonder why?

Stop press: I've just heard an exceptionally good analysis of this story by Max Keiser in this broadcast - its all to do with "Peek-a-boo accounting". Youtube vid here.

UPDATE 21st June: here.