Reserve banking

‘Money, The Unauthorized Biography’, by Felix Martin, supports the full reserve bank.

After spending about ten years, a great deal of time and money, advocating for a full reserve, I am delighted to see that the above book, which was the Financial Times Economics Book of the Year in 2013, also supports the idea.

However, arguing for a total reserve is not the central aim of the book: as the title suggests, the book is a history of money, and it goes back to the beginning. that is, it covers ancient Mesopotamia, ancient China, Greece, Rome, etc. It then moves on to Europe from the Middle Ages to the present day.

It is only towards the end that the author, after looking at the many problems with money, concludes that the best system is the total reserve – quoting in particular (if I remember correctly) Milton Friedman, Irving Fisher and Lawrence Kotlikoff.

The book is brilliant: it combines readability and erudition. For example, there are about 200 articles in the bibliography/references section. The book (at around 120,000 words) is also (at first glance) a bit longer than the average book.

The credit crunch of ancient Rome.

If you want to get a taste of the author’s style before buying, here is a short passage describing the credit crunch in Rome.

“In such a largely monetized economy, it is hardly surprising that the Romans were also well acquainted with another familiar feature of modern finance: the credit crunch. Sometimes the similarities with the modern era are nothing less than By 33 AD, the Emperor Tiberius’ financial officials were convinced that the recent boom in private credit had become excessive. brief examination of the statutes, it was discovered that none other than the father of the dynasty, Julius Caesar, had in his wisdom instituted a law decades before specifying strict limits on how a large part of their heritage, the rich aristocrats could exploit it in the form of loans. In other words, it had introduced a stringent capital adequacy requirement for lenders. The law was clear enough: but not for the first time in history, industrious lenders had been remarkably adept at circumventing it. Their ingenious escapes, reports the historian Tacitus, “although continually repressed by new regulations, nevertheless returned, by strange artifices.

Now the Emperor has decreed that it’s game over: the letter of the former dictator’s law will be enforced. The consequences were chaotic. As soon as the first decision was made, it was realized with some embarrassment that most of the Senate had violated it. All the familiar hallmarks of a modern banking crisis followed. There was a mad scramble to apply for loans in order to comply. Seeing the danger, the authorities attempted to soften the edict by loosening its terms and announcing a generous transition period. But the measure came too late. The real estate market collapsed as mortgaged land was sold on fire to fund repayments. Massive bankruptcy threatened to engulf the financial system. With Rome in the grip of a credit crunch, the Emperor was forced to implement a massive bailout. The Imperial Treasury refinanced overstretched lenders with a 100 million sesterces program of three-year interest-free loans against the collateral for deliberately overvalued real estate. To the great relief of the Senate, all ended well: credit was thus restored, and private lending gradually resumed.”