Reply to post: Re: Fractional reserve

So why the hell do we bail banks out?

Tom 7

Re: Fractional reserve

Whatever fractional reserve you have above the natural level of growth (historically 2%Pa for several hundred years - its really hard to tell of late) you add a positive feedback loop which leads to instability unless you match it with inflation. If the finance sector grows faster than the economy as a whole it becomes parasitical rather than potentially beneficial.

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