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Is fractional reserve banking unhealthy for an economy?

Paulie

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I don't like the multiplier effect in lending. To avoid bad inflation after money supply increases during debt monetization, the Federal Reserve has to be absolutely precise in how it exits its asset holdings to reduce the money supply when it raises the target fed funds rate. They don't have the greatest track record in that department as it is. On top of that, the whole system is based on a monetary policy where money supply increases are done without congressional representation.

At the end of the day, the inflation we become subject to is simply another version of taxation without representation.
 

expat_panama

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I don't like the multiplier effect in lending...
That's the only kind of lending there is.

Money is created out of thin air by banks and that's how it's been for hundreds (if not thousands) of years. It doesn't mean everyone has to like it. There are fanatics --often with a pseudo-religious bent-- that condemn all interest/lending as inherently evil. They're morons.
 

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