Friday, 21 January 2011
Bailouts are normal if Fractional-reserve banking is legalised
If the deposit insurance is to be maintained and not reneged upon then the Government has no choice but to bail out the banks. Neither is it the fault of the banks, they are merely exploiting their ability to lend deposits which would otherwise be held in the vaults. Instability and bailouts are a natural consequence of endorsing this system of banking. Bailouts are a normal part of (State-endorsed) Fractional-reserve banking. There is no reason to be angry at the banks for a normal consequence of the (legalised) banking system.
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