And what prevents the arbitrary extension of credit?
The present primary reliance on fractional reserve monetary is not a carved-in-stone requirement of financial systems, only the present norm.
If you're interested in ideas and thoughts on money, I'd suggest William Stanley Jevons writing as a starting point for modern views. A. Mitchell Innis's "What is Money?" (1913) is not entirely mainstream, but strikes me as among the more insightful enquiries I've read:
> The present primary reliance on fractional reserve monetary is not a carved-in-stone requirement of financial systems, only the present norm.
Their is no fractionnal reserve banking in the modern world anymore. And circa 2007, virtually nothing prevented the infinit expansion of credit, with the result we all know.
If you want to learn more about these topics, the keen-krugman debate (more of a controversy than a civil debate) a few years ago was really enlightening.
In the US, there is no limit anymore on how much credit you can lend given the amount of reserve you have, the reserve requirement is on deposit not credit lent.
Their is no fractionnal reserve banking in the modern world anymore. And circa 2007, virtually nothing prevented the infinit expansion of credit, with the result we all know.
If you want to learn more about these topics, the keen-krugman debate (more of a controversy than a civil debate) a few years ago was really enlightening.