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Why the failure of Kaupthing Edge teaches us nothing about full reserve banking (A response to Dow, Johnsen and Montagnoli)

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In their paper "A critique of full reserve banking", Professor Sheila Dow, Alberto Montagnoli and Gudron Johnsen argue that the failure of one of the Icelandic bank's subsidiaries is evidence that full-reserve banking would not make the financial system safer. Here we explain why the case study is not applicable, and teaches us nothing about the impact of full reserve banking.

Donald BealI agree with most of Ben's critique of the Dow et al paper.But I do think it should be pointed out that the comparison of the KSF account with a Sovereign Money system transaction account with 100% backing via the Central Bank is misleading.In the PM-style system only transaction accounts have 100% ...

last month

jamesmurraylawThis objection to Positive Money proposals is an idealexample of how easy it is for the apologists for the Banking System to usefalse 'evidence' to pooh-pooh Full Reserve Banking.Ben Dyson answers the supposed 'evidence' carefully andcomprehensively and so well done to him...However, time and again,...

last month
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Bank of England asks fundamental questions about the future of money

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The Bank of England has set up a new research hub, called "One Bank Research", which is tasked with looking at some of the fundamental question about the future of money and banking. In the past, the Bank's research has often had the aim of backing up the policy decisions of the Governor or the MPC. The One Bank Research initiative's agenda, released last week, asks questions that already start to challenge the Bank's existing policies.

Would stripping banks of their power to create money cause a shortage of money, high unemployment and an economic decline? (Report)

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Some economists and commentators have claimed that Positive Money’s proposals for a sovereign money system, in which banks are not permitted to create money, would leave the economy with a money and credit supply that is rigid, inflexible and unresponsive to the needs of the wider economy. According to one critic, such a system would result in “a shortage of money, high unemployment and low economic activity”.

Increasing Competition in Payment Services (Report)

competition in payment services

Since the crisis the government has been keen to encourage more competition between banks. Their main focus has been making it easier for people to switch their current account between different banks. But we think this misses a bigger opportunity: there is much more potential for competition from technology firms and mobile app developers, who could develop current/checking accounts and more user-friendly ways of handling your money and payments.

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