[aflyax]

>Economic historian Niall Ferguson beautifully describes fractional reserves as one of the greatest innovations of humankind in Ascent of Money. The miseries from bank runs and crashes are real, but even so, the total impact on human welfare from fractional reserves has been overwhelmingly positive.

That doesn’t make any sense. Runs and crashes are an important part of the free market, keeping banks in reign. Fractional reserve banking would be impossible or very limited if runs and crashes were allowed to happen. This would result in non-inflationary currency, improved value of savings, and decreased volatility of the markets (extreme booms followed by extreme crashes and long periods of unemployment due to constant reallocation of resources in the society).

All of this is prevented by central banks.

[irixusr]

The central banks were created to bail out commercial banks who got greedy a la Merry Poppins