Does fractional reserve banking lead to a cycle of perpetual debt?

The point is that the OP just begged us to address the topic. Nonetheless, despite not understanding what the topic is, you continue to post based on your own agenda. I am personally very interested in hearing folks take on fractional reserve banking, but I don't have much to add right now. My personal view point is that fraction reserve banking, when correctly applied is a great driver of the economy. But perhaps there are some downsides.Edited by NoNukes, : No reason given.

Hunger is a serious issue, but I have difficulty believing that the banking system is much of an issue regarding hunger. The fact is that Western cultures have an excess of food, and that most of them throw away food that would easily feed every hungry person throughout the world. It is also the case that there are hungry folks in the United States as well as in Africa.If feeding the hungry is really your motivation, I think there are easier targets than the one you've chosen.Edited by NoNukes, : No reason given.

If your job is making high performance automobiles, your ability to make those vehicles won't feed you if nobody is buying high performance automobiles (or buggy whips, or pet rocks). Retraining you may be difficult and it may well be that you cannot readily be trained to fill a job valued as high as your previous job. So simply a mismatch between your skills and those valued is enough to make you jobless, and possibly homeless.I don't see how a particular banking system affects those kinds of inefficiencies. I'm sure that there are many sources of inequity in income distribution, some of which are the target of your ire. But certainly not all problems are of that sort.In fact, you have yet to demonstrate to me that fraction reserve banking is the most important problem.

Your accusation is wrong. I provided some arguments that you agreed with in part, and also with respect to your question regarding how folks become unemployed during a recession, I provided a possible answer that you do not appear to have rebutted. I suggest that homelessness and poverty around the world have multiple causes. I am not going to accept mere assertion from you that you have identified the major cause. Gas prices increase too high to make them too expensive to operate? People react to AGW by buying hybrids? Buggy whips fall out of favor because nobody uses horses? Pet Rock fad fades into oblivion because everybody who wants one has one? Online music sales put record stores out of business? There are thousands of reasons why demand in a given market sector might decline and at least some of those reasons involve people just not wanting them anymore.Edited by NoNukes, : No reason given.Edited by NoNukes, : No reason given.

Of course my examples are relevant. An affect on any large sector of the economy can spill over into the other sectors because when folks have no jobs, they don't buy houses (in fact they want to sell them) fancy clothes, or eat out in nice restaurants.The fact of the matter is that there are many causes of economic downturn other than those you are prepared to acknowledge. If you don't want to read answers to your question of how downturns occur, then don't ask such questions in public. That way you can continue to hold your current opinion without having to vet that opinion. There are indeed ways that the government can create economic growth, yes. They could indeed find alternatives other than bonds even if they do not scrap the current system of capitalism. Finding ways to give the money directly to the middle class is what some folks have suggested. Sometimes that is done.Edited by NoNukes, : No reason given.

Nothing wrong with expressing incredulity if that is not all I do. And I gave my reasons for not just swallowing your assertions. Namely that homelessness and hunger have lots of causes.Make your best argument.

In at least some instances, what you say simply is not the case. For example, high fuel prices affect growth across almost all sectors. Once folks start losing jobs because of low demand, they are not going to buy much of anything.And it is not the case that demand is constant. Even uncertainty in a time of high prosperity can encourage saving versus spending, thus killing off demand.Your model is simply too simple. Why not just blame capitalism in general. After all, that is what determines what gets made and who gets fed.Edited by NoNukes, : No reason given.

A sharp increase in the price of oil might have many causes having nothing very much to do with less debt. Fuel prices can increase from sheer speculation about future events in the middle east.What you are doing here is blaming every possible fluctuation in the economy on one factor despite examples that show similar effects from direct causes. For that reason it is easy to demonstrate that you are over generalizing.Now it may well be possible (at least sometimes) to compensate for other factors by increasing the money supply, but to suggest that only the money supply is the ultimate cause is something you have yet to demonstrate. Not to any extent that is apparent to me. Uncertainty can be related to causes having nothing at all to do with banking. For example tax policy or being at war with countries that supply oil cause uncertainty for the economy and each of those might influence the public to save rather than spend regardless of what banking policy is. Thanks. I just wanted to be clear on where you stood with respect to capitalism. You've answered that quite nicely.I agree that capitalism has some unfortunate respects, and I am in favor of polices that reign those things in via regulation. I'm not convinced that fractional reserve banking is the place to do the fixing.

You have not shown any such thing. Do you really think there is some usable economic model that would hold prices steady in the face of a scarcity? And by usable, I mean a model that maintains the capitalist incentives?Shortages and speculated shortages are sufficient cause of price increases and the subsequent effect on the economy as the cost of production also increases. That's with or without fractional reserve banking.