“Central bankers think too much saving is a problem that must be solved with more money creation. But the real problem is the Keynesian–style fractional reserve banking system.
This Keynesian nonsense about hoarding has been around for nearly a century and has led to some very bad economic decisions over the last eighty years…
The government fear is that a recession will increase bankruptcies, nonperforming loans, and induce banks to cut back on lending, or essentially allow the money in checking accounts to revert to its intended function as a store (or reserve) of purchasing power. The money supply will then contract, leading to the Keynesian nightmare scenarios described above. But this money contraction results not from hoarding, but from fractional reserve banking. It is this process which leads to swift contractions in the money supply when recessions strike. This problem would be mitigated by more real saving, including the type of saving that Keynesians call ‘hoarding.’”
SEE PRIOR POSTS:
“Thus, fractional reserve banking is at one and the same time fraudulent and inflationary…”-Rothbard
Promises to pay on demand in excess of the amount of goods…is simply fraud…[fractional reserve banking]-Rothbard
“It should be clear that modern fractional reserve banking is a shell game, Ponzi scheme, a fraud in which fake warehouse receipts are issued and circulate as equivalent to the cash supposedly represented by the receipts”–Rothbard
Joe Salerno on Economic Calculation, Fractional Reserve Banking, and Stories of Rothbard as White Knight-The Bob Murphy Show