Editorial: Fractional Reserve Banking and the Federal Reserve
• American Banking NewsI was reading the other day that the idea of getting rid of the Federal Reserve was based on faulty assertions that the booms and busts we’ve experienced since its inception in 1914, also happened during the 1800s, largely undermining that argument in the eyes of that particular writer. The reason that writer was wrong was he didn’t take into account one of the other main culprits of the boom and bust cycles: fractional reserve banking, which was the cause behind the problems experienced in boom and bust periods during that time period, and still is today. Basically what the Federal Reserve has done in the past, and does today, is protect the fractional reserve banking system from completely failing and its faults being exposed by printing money and bailing them out, which was the original reason it was created by big bankers – for big banks. Just look at who is being bailed out in our current economic environment, and you can see that the smaller banks will be allowed to fail
