It is my understanding that there is a conflict in opinion among Austrians and libertarians as to whether 100% full reserve banking should be the way to go, or the free banking system.
"Free banking refers to a monetary arrangement in which banks are subject to no special regulations beyond those applicable to most enterprises, and in which they also are free to issue their own paper currency (banknotes). In a free banking system, market forces control the supply of total quantity of banknotes and deposits that can be supported by any given stock of cash reserves, where such reserves consist either of a scarce commodity (such as gold) or of an artificially limited stock of "fiat" money issued by a central bank. In the strictest versions of free banking, however, there either is no role at all for a central bank, or the supply of central bank money is supposed to be permanently "frozen." There is, therefore, no agency capable of serving as a "lender of last resort" in the usually understood sense of the term. Nor is there any government insurance of banknotes or bank deposit accounts. "-http://wiki.mises.org/wiki/Free_bankingI tend to agree more with those like Hayek and Selgin that support Free Banking. Of course I am certainly not hostile to those such as Rothbard and Irving Fisher who propose Full Reserve Banking."Full-reserve banking is a banking practice in which the full amount of each depositor's funds are kept in reserve (as cash or other highly liquid assets) when each depositor has the legal right to withdraw them. In other words, deposits available for immediate withdrawal would not be lent out for extended periods but rather would be retained by the bank to allow the depositor immediate access to the funds. Only certificates of deposit (or term deposits) would be used for normal lending activity. Full-reserve banking was practiced historically by the Bank of Amsterdam and some other early banks but was displaced by fractional reserve banking after 1800.[1] Proposals for the restoration of full-reserve banking have been made,[2] but are generally ignored or dismissed by mainstream economists, who believe that the costs of such a change would outweigh any benefits.[3]"-http://wiki.mises.org/wiki/Full_reserve_banking
Any thoughts and opinions on this?
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