I thought this is interesting given the focus on money supply and inflation these days- an old essay by Brad Delong-- Milton Friedman supported a heavily regulated banking system, with 100% reserves held by banks, and savings banks separated from investment banks. An interesting read.
http://econ161.berkeley.edu/TotW/counterrev.html
..by reforming the banking system to eliminate every possibility of fluctuations in the money multiplier. Shifts in the deposit-reserve and deposit-currency ratios would be eliminated by requiring 100% reserve banking. Shifts in the deposit-reserve ratio then become illegal. Banks can never be caught illiquid. And in the absence of any possibility that banks will be caught illiquid, there is no reason for there to be any shifts in the deposit-currency ratio either."
I thought this is interesting given the focus on money supply and inflation these days- an old essay by Brad Delong-- Milton Friedman supported a heavily regulated banking system, with 100% reserves held by banks, and savings banks separated from investment banks. An interesting read.
ReplyDeletehttp://econ161.berkeley.edu/TotW/counterrev.html
..by reforming the banking system to eliminate every possibility of fluctuations in the money multiplier. Shifts in the deposit-reserve and deposit-currency ratios would be eliminated by requiring 100% reserve banking. Shifts in the deposit-reserve ratio then become illegal. Banks can never be caught illiquid. And in the absence of any possibility that banks will be caught illiquid, there is no reason for there to be any shifts in the deposit-currency ratio either."