Talk:Fractional-reserve banking/Archive 13

Money supplies around the world
This section is mis-titled and confused - I intend to remove altogether unless it can be edited into a state that actually contributes to the article as a whole. Any objections? Reissgo (talk) 11:44, 14 August 2017 (UTC)


 * I have restored the section. It's sourced, and consistent with the rest of the article. I don't see the problem you describe: "mis-titled and confused". If anything needs reorganizing, it's the sections on regulation, and the sections on criticisms.  There are currently two each of those sections.  The sections should be consolidated. Also, some of the sections should be subsections, to better organize the article, so that the article as a whole, tells a coherent story line. LK (talk) 14:43, 16 August 2017 (UTC)

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Not fringe view
User:Lawrencekhoo removed my additions claiming an "overweight of fringe views". If you study the recent literature you will find that this is no longer a fringe view but endorsed by publications from IMF, Bank or England and many others, and my addition is sourced by peer reviewed literature. Removing arguments from a criticism section should be considered POV censorship. Bolarno (talk) 05:42, 17 September 2018 (UTC)


 * You're pushing advocacy of a fringe view. There's a consensus of economists that full reserve banking is a bad idea. And stating things in Wikipedia's voice based on one single fringe author is against guidelines, specifically, WP:FRINGE. LK (talk) 12:07, 17 September 2018 (UTC)


 * I am not pushing a fringe view. I am citing new research and new findings that are not contradicted by other studies. Even those economists that want to preserve fractional reserve banking now acknowledge that the credit determines the money supply. The theoretical question of how the money supply is generated is independent of the political question of which banking system we want. Evidently, you haven't read the new literature. Please see these references:


 * Benes, Jaromir, and Michael Kumhof. 2012. “The Chicago Plan Revisited.” IMF Working Paper, no. 202.
 * Deutsche Bundesbank. 2017. “Die Rolle von Banken, Nichtbanken Und Zentralbank Im Geldschöpfungsprozess.” Monatsbericht.
 * Kumhof, Michael, and Zoltán Jakab. 2016. “The Truth about Banks.” Finance & Development 53 (2).
 * McLeay, Michael, Amar Radia, and Ryland Thomas. 2014. “Money Creation in the Modern Economy.” Bank of England. Quarterly Bulletin 54 (1): 14–27.
 * Standard and Poors. 2013. “Repeat After Me: Banks Cannot And Do Not ‘Lend Out’ Reserves.” Ratings Direct.
 * Werner, Richard A. 2016. “A Lost Century in Economics: Three Theories of Banking and the Conclusive Evidence.” International Review of Financial Analysis 46 (July): 361–79.
 * This may differ from what you have learned at university, but science is developing. A view that is voiced by IMF, Bank of England, Deutsche Bundesbank, Standard and Poors, and leading economists is not a fringe view. The WP:FRINGE label

is a catchall for censorship. Bolarno (talk) 05:33, 18 September 2018 (UTC)
 * From that IMF working paper: "This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate." You probably shouldn't describe it as "A view that is voiced by IMF." --tronvillain (talk) 14:24, 18 September 2018 (UTC)
 * I agree that the political view about money reform is that of the authors. But the theoretical analysis of where the money supply comes from has not been contradicted. Anyway, it is certainly not a fringe view, as User:Lawrencekhoo thinks. Bolarno (talk) 14:39, 18 September 2018 (UTC)
 * The theoretical analysis of the money supply doesn't appear to be fringe, but looking above, Lawrencekhoo seems to be talking about advocacy for full reserve banking. Are you two actually disagreeing, or are you just talking about different things? --tronvillain (talk) 18:53, 19 September 2018 (UTC)
 * Please explain what's happening? Has somebody anonymously posted a lot of copied text? Thank you for responding promptly. Bolarno (talk) 16:29, 19 September 2018 (UTC)
 * , A sockpuppet account copied a 330 kB article from another wiki into this page. It's been fixed now, and the sock blocked. Alpha3031 (t • c) 16:49, 19 September 2018 (UTC)
 * Thanks Bolarno (talk) 17:44, 19 September 2018 (UTC)


 * User:Lawrencekhoo: You keep reverting my edits without proper discussion, and I simply don't understand why. You are inventing a new reason every time. Please explain what you mean by abuse of sources. The sources are indeed saying that the textbook descriptions are wrong. Whether you agree with these sources or not is irrelevant. The German central bank and and peer-reviewed article by a well-known professor are indeed relevant sources. Bolarno (talk) 15:00, 23 September 2018 (UTC)

Why hide the money creation in 3rd paragraph: It is kind of important that this is how banks produce money out of thin air...
Especially since 2nd paragraph is misleading: "Fractional-reserve banking allows banks to act as financial intermediaries between borrowers and savers". There is nothing magical about FRBS that enables this, in fact the lower reserve requirements the banks are less of an intermediary and more a money printing organization. — Preceding unsigned comment added by 217.103.125.18 (talk) 12:39, 7 April 2019 (UTC)
 * Re: "There is nothing magical about FRBS that enables this" - I fully agree. Loans can be made in a full reserve banking system. Reissgo (talk) 10:13, 19 May 2019 (UTC)
 * I second this, the word "intermediaries" is vague, and they are just as "intermediate" if they run solely on reserve capital. What I think they are really trying not to say is that "Fractional reserve banking allows private banks to create money out of nowhere without the state bank having to take responsibility". --121.221.199.84 (talk) 12:01, 24 July 2021 (UTC)

WP:weazel
When the article says: " the country's central bank may act as lender of last resort to provide banks with funds to cover this short-term shortfall.[3][need quotation to verify][5][need quotation to verify]" I believe the plain English is "National banks may bail out private banks". And furthermore, if nobody has a citation for the banks bail outs being "short term" I will remove this assertion. It is not often that I hear of a private fractional reserve bank repaying a state bailout in the short term --121.221.199.84 (talk) 11:57, 24 July 2021 (UTC)

I believe there is a significant difference between "acting as a lender of last resort" and "a bailout". A lender of last resort lends to a solvent bank that is experiencing a liquidity crisis (as per Mankiw), whereas a bailout is a more pejorative term and generally issued to a bank which is experiencing a solvency crisis. This is a distinction that goes back to Bagehot and has been well-supported by the subsequent 150 years of economics. 86.18.193.252 (talk) 17:22, 12 August 2021 (UTC)

Requested quote
I have added a quote from Mankiw as requested on the article page. I have always found the Wikipedia citation system quite confusing, so I apologise if the quote I have selected is excessive.86.18.193.252 (talk) 17:25, 12 August 2021 (UTC)
 * It is excessive, so I am removing it. SPECIFICO talk 18:08, 12 August 2021 (UTC)

Section: "Criticisms of textbook descriptions of the monetary system"
Whether this whole section belongs here I don't know; but my understanding of Wikipedia policy (I may be wrong) is that content that is acceptable, but doesn't have a better "home" (independent article) can be put in a related article until it gets too big. Is there a policy regarding this? Thanks!!--- Avatar317 (talk) 21:44, 8 September 2021 (UTC)
 * The content is WP:UNDUE for this article. A violation of WP:NPOV. It might be interesting to write an article about the pedagogy associated with money and banking, but these IPs and Single Purpose Accounts that are waging war on the monetary articles have not invested the time and effort in anything so constructive. This section is off-topic for this article, and not well-sourced. The aside "who coined QE" is irrelevant and is intended to elevate his view. Maybe in a different article. SPECIFICO talk 22:15, 8 September 2021 (UTC)
 * Unsurprisingly, the IP making the recent edits has a somewhat familiar geo-location, and the temperament is also familiar. To the point, most of the section could probably be summarized as various economists find faults with the textbook descriptions due to over-simplification of the process, inaccuracies, etc, etc.  with sources as appropriate.  There probably is a better article for this, just not really sure of the right "home".  Ravensfire  (talk) 22:55, 8 September 2021 (UTC)
 * What's pathetic about this decade+ long crusade is that the topic of how banking is taught, and the old multiplier model, could make for an interesting article. I'm not aware that the recursive fractional reserve story is still in use, but there's no reason not to document this little bit of academic history. But, of course, that would require hard work.... SPECIFICO talk 23:32, 8 September 2021 (UTC)
 * The money multiplier story is discussed on at least three wiki pages, here, money creation and money multiplier. In all three there is very clear discussion of how the story is not relevant in practice today. Does anyone want this page to be the odd one out? With regard "I'm not aware that the recursive fractional reserve story is still in use" - maybe some editors that have purchased economics textbooks recently could comment. --Reissgo (talk) 07:14, 9 September 2021 (UTC)
 * Yes, mobilize the kiddie corps. You mean the IPs' hobby is collecting undergraduate textbooks? Cute. Not helpful for you to auto-cite the list of articles you and the SPAs have bludgeoned over the years.  SPECIFICO talk 09:30, 9 September 2021 (UTC)

The destruction of money when loans are repaid
I just made this edit which was reverted by  with the comment: "UNDUE header and self-published citation. Find an integrated treatment from a widely cited RS reference if you wish to add this or related ideas". This baffles me. If it's OK to point out that money is created when loans are made, surely it is equally important to mention than the money goes back out of existence when the loans are repaid. This is not controversial. For the avoidance of doubt SPECIFICO, can you confirm that you agree that it is both true and uncontroversial that when loans are repaid then that money disappears out of existence? Reissgo (talk) 20:37, 11 September 2021 (UTC)

Academic treatment section
This section is off topic for this article, but more importantly I see no secondary RS citations -- just self published working papers or speeches. This section needs to be removed. As I've said previously, there could be a separate article on how money and banking has been taught or on the evolution of thinking on monetary policy. But this section is just a COATRACK that doesn't even make a cogent point. SPECIFICO talk 22:38, 16 September 2021 (UTC)


 * The section acts as a warning to the reader that there is a conflict between many of the textbooks that describe FRB and how the system works in practice. This is an unusual situation and it is perfectly reasonable to inform the reader of this. Reissgo (talk) 16:14, 17 September 2021 (UTC)
 * You have a right not to incriminate yourself. That's not the purpose of an encyclopedia. This article is not a billboard for fringe agendas or off-topic polemics. SPECIFICO talk 16:47, 17 September 2021 (UTC)
 * The wiki page on the solar system mentions that it used to be thought that the earth was at it's center. The wiki page on light mentions that it used to be thought that light was a wave in the aether. Do you think those facts are off topic and should be removed? Reissgo (talk) 17:52, 17 September 2021 (UTC)
 * Similarly, this page covers the history and evolution of Fractional-reserve banking. Unless there is substantial support and independent non-self-published RS provided by other editors, I'm going to remove the UNDUE content. SPECIFICO talk 18:31, 17 September 2021 (UTC)
 * I'm going to have to go with SPECIFICO on this one. This article is about providing a basic textbook introduction to the concepts of fractional-reserve banking, not presenting novel thoughts. We are not here to WP:RIGHTGREATWRONGS. It is not even very clear what this added paragraph is trying to say when quoting what some "Former Deputy Governor" said in a speech. We are not necessarily here to present novel thoughts or alternative perspectives that are not widely considered important by independent reliable sources. If this is about something that is not described in "many of the textbooks that describe FRB", then it is not something we need to include here on Wikipedia. We don't even have enough space in this article to cover FRB at the depth that such textbooks already explore, much less try to explain some alternative non-mainstream perspective that would not be covered in most textbook treatments. —&#8288;&#8202;&#8288;BarrelProof (talk) 22:40, 4 October 2021 (UTC)

Someone reversed my minor edit of "Explanation" "without explanation"
I made a minor edit to clarify what I think was the intention of the last section which was mysteriously entitled "Explanation" and someone has reversed it "without explanation". Prosopon (talk) 10:58, 25 October 2021 (UTC)
 * Unless I'm missing something, you changed "Descriptions" to "Alternative theories", with the summary this heading seems inappropriate. Changed it to 'Alternative views'. SPECIFICO then changed it back with the summary ce. "Alternative" is OR. IOW, the above is rather less than completely and utterly truthful. Would you care to explain the discrepancy? Kleuske (talk) 11:38, 25 October 2021 (UTC)

Sorry I confused "description" with "explanation"... I described it correctly in explaining the edit (getting recursive here). The point remains that the heading "Descriptions" had nothing to do with Lord Turner's quote, so still not clear why my edit was reversed "without explanation".Prosopon (talk) 22:10, 25 October 2021 (UTC)
 * You are the editor who told our readers that Fractional Reserve Banking has "little credence" among the central bankers who oversee the world's Fractional Reserve Banking institutons? No response is necessary. SPECIFICO talk 22:31, 25 October 2021 (UTC)

Definition in lead
I made this change to address the concern, which I see has been repeatedly raised, that the idea that banks lend their reserves is disputed by people who are well positioned in the industry. It's not clear that the Abel/Bernanke source even says that; it says that FRB is a regime where the reserve ratio is less than one. As to whether the prior version was "more understandable," nearly the same financial terms are used: "liquid assets", "deposits", "liable", with minor difference that deposit liability is given a little more explanation. 67.180.143.89 (talk) 14:56, 12 July 2022 (UTC)
 * I think it would help to work on the language of your new text, since that was the reason given for its having been reverted. I think the concern that lay readers might find your language obscure is somewhat valid, although I think that I understand the improvement you were trying to accomplish and agree that the old language needs improvement/replacement.<b style="color: #0011FF;"> SPECIFICO</b> talk 16:06, 12 July 2022 (UTC)
 * Banks don't lend their reserves, that's why they are called "reserves". I don't understand what "problem" you are trying to solve by rewording here? What do you feel is not clear/confusing? --- Avatar317 (talk) 23:11, 12 July 2022 (UTC)
 * As laid out in a certain 2014 Bank of England journal article, the popular idea that the banking business is defined by taking money through deposit accounts and then lending that money is an inaccurate simplification. That is what I'm trying to address. 67.180.143.89 (talk) 14:02, 13 July 2022 (UTC)
 * If the WP:MAINSTREAM view is that "the banking business is defined by taking money through deposit accounts and then lending that money" than that's what we say in Wikipedia. If ONE source says that that is not correct, that source is what we call a WP:FRINGE view, and per policy, doesn't get mentioned. ---''' Avatar317 [[User talk:Avatar317| <span

style="background:#7B68EE; color:white; padding:2px;">(talk) ]]''' 21:13, 13 July 2022 (UTC)
 * If a dozen journalists write simplified descriptions of banking and then three central bank economists say it doesn't work that way, but somewhat differently, some deference may be due to the economists. SPECIFICO suggested that it "should be easy" to fix the wording I offered, but if that requires reading his mind amid badgering comments, I'm not up for it. 67.180.143.89 (talk) 04:09, 15 July 2022 (UTC)

The definition I'm working from in the Abel/Bernanke source is "reserve ratio less than one" and trying to put that into the requested layperson's terms. If the wording "not enough" is a problem, then how about this: under which banks keep sufficient money to pay out some portion of their deposits, while supporting the rest with assets other than money. 67.180.143.89 (talk) 17:32, 12 July 2022 (UTC)
 * I think the central point is not what supports the deposit liabilities, but rather that it's not necessary to support 100% of the liabilities at all times, since (except in rare circumstances) that does not occur and is not expected to occur nowadays due to other restrictions, such as deposit insurance and gov't takeovers of mismanaged or insolvent banks.<b style="color: #0011FF;"> SPECIFICO</b> talk 17:39, 12 July 2022 (UTC)
 * Please see my edit summary. It sounds as if banks don't have "enough money" in general.<b style="color: #0011FF;"> SPECIFICO</b> talk 23:20, 12 July 2022 (UTC)


 * Well, they don't, right? Enough assets overall, but not money. It's difficult to provide the framing that you suggest, while also adhering to the source. 67.180.143.89 (talk) 01:28, 13 July 2022 (UTC)
 * That is certainly not the crucial point, as I said above, so either you are picking out a part of the source that's not the main point or you need to examine more sources to evaluate the central point among them. It is not the mainstream view, or even a significant minority view to state that banks -- routinely and systematiclly -- don't have enough money, enough liquidity, or enough of anything else for their normal operations.<b style="color: #0011FF;"> SPECIFICO</b> talk 01:33, 13 July 2022 (UTC)
 * I didn't say anything about "enough for normal operations." I know you get goldbugs here, but I'm not one. 67.180.143.89 (talk) 01:37, 13 July 2022 (UTC)
 * This article is about the normal operation of the banking system. There can be coverage reflecting mainstream narratives as to anomolies, failures, and crises, but we must be sure not to suggest that there is -- as I've now said 5 times -- not enough money or liquidity or currency or whatnot.<b style="color: #0011FF;"> SPECIFICO</b> talk 01:41, 13 July 2022 (UTC)

A barrage of new content inserted into article
@WokesterSupplyChainChaos: This edit you made added a total of 300k bits(!) to the article. So, a few problems there. First, the content you inserted made the whole thing too lengthy to be readable, and furthermore, gives undue weight to criticism of the topic. Not saying that we aren't allowed to talk about criticisms here - we just need to do it in summary style, and giving due weight to mainstream critiques of the topic while making sure not to spend too much time discussing fringe POVs. Lastly, sources like The Federalist are not reliable. Please keep these in mind before inserting such content again. <b style="font-family:Georgia;border-radius:3em;padding:4px;background:#962c2e;color:white;">‍ ‍ elias. 🧣 ‍ </b> ‍ <span style="display:inline-block;margin-bottom:-0.3em;vertical-align:-0.4em;line-height:1.2em;font-size:80%;text-align:left"><sup style="font-size:inherit;line-height:inherit;vertical-align:baseline">💬reach out to me <sub style="font-size:inherit;line-height:inherit;vertical-align:baseline">📝see my work 08:44, 15 July 2022 (UTC)
 * That is a banned user. Just revert and ignore. You could also request the page be semi-protected.<b style="color: #0011FF;"> SPECIFICO</b> talk 09:48, 15 July 2022 (UTC)

Money supply exceeding actual supply of money?
The third paragraph of the introduction states:

"Because banks hold in reserve less than the amount of their deposit liabilities, and because the deposit liabilities are considered money in their own right (see commercial bank money), fractional-reserve banking permits the money supply to grow beyond the amount of the underlying base money originally created by the central bank."

This statement seems flawed to me. The idea that "the deposit liabilities are considered money in their own right" is a simplification - a sort of rounding up of the truth. In reality, the deposit liability has a marginally less than 100% chance of yielding when the customer desires to withdraw their money. And even if you disregard bank runs, it's still not quite 100% because there is the chance that the bank fails. The difference is small, granted, but it is very real and it very much invalidates the idea that the money supply may exceed the supply of actual money.

The difference between the true value of the deposit liability and the stated value (this difference being the inferiority of the promise of money to actual money) becomes more drastic as the bank's assets become either less current or less valuable, as the deposit liability requires the provision of a certain amount of value (the deposited amount) to a certain degree of current-ness (instant).

You may be thinking "I bet bank customers can't do all that logic. They merrily deposit their money as if the cashier were gripping the cash in his hand until the customer comes back to collect it". But customers know exactly what the game is. Many preppers in America refuse to store their cash in banks because they know there is a risk that the bank could collapse and then the promise of money would be worthless. Depositors know the risk and at no time do they ever deem the promise of money fully equal to cold hard cash.

One bird in the hand is worth two in the bush, and so the deposited money is never truly duplicated. EditorPerson53 (talk) 14:50, 21 March 2023 (UTC)
 * Editor, this talk page is for the purpose of discussing article improvements based on the weight of coverage of the subject. Your comments appear to be discussing your views about banking without offering any references that could be used to update or improve the article text. Please review our policies and guidelines relating to verificaton and due weight of article content.<b style="color: #0011FF;"> SPECIFICO</b> talk 15:33, 21 March 2023 (UTC)