Friday, 22 March 2013

Fractional reserve banking requires a state

The state can protect the banks. If there is not a state then banks must fail if there is a bank run and there are not sufficient reserves... fractional reserve banking is impossible if there is not a state. It is only if there is a state and subsequently deposit insurance that banks can be immune from failure. Banks can fail if there is not a state.

If there is a state there can be deposit insurance. There can be no deposit insurance without a state.

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