We continue our study of money and economics by looking at how banking evolved (and how I contend that it devolved in modern times).
We ask and answer these questions to solve the puzzle of money and banking:
- What is a bank?
- How did banks begin?
- What do banks do?
- How did fractional reserve banking happen?
- What really is wrong with fractional reserve banking?
- What are some possible solutions to fractional reserve banking?
We see from history that “full reserve” banking came first, and fractional reserve banking arose from banking misbehavior.
We see the challenges that keep away full reserve banking today, but we propose how it would work and actually be better for the economy.