Fractional Reserve Banking as Economic Parasitism: A Scientific, Mathematical & Historical Expose, Critique, and Manifesto
This paper looks at the history of money and its modern form from a scientific and mathematical point of view. The approach here is to emphasize simplicity. A straightforward model and algebraic formula for a large economy analogous to the ideal gas law of thermodynamics is proposed. It may be something like a new ``F=ma'' rule of the emerging econophysics field. Some implications of the equation are outlined, derived, and proved. The phenomena of counterfeiting, inflation and deflation are analyzed for interrelations. Analogies of the economy to an ecosystem or energy system are advanced. The fundamental legitimacy of ``expansion of the money supply'' in particular is re-examined and challenged. From the hypotheses a major (admittedly radical) conclusion is that the modern international ``fractional reserve banking system'' is actually equivalent to ``legalized economic parasitism by private bankers.'' This is the case because, contrary to conventional wisdom, the proceeds of inflation are not actually spendable by the state. Also possible are forms of ``economic warfare'' based on the principles. Alternative systems are proposed to remediate this catastrophic flaw.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Joseph H. Haslag & Joydeep Bhattacharya, 1999. "Seigniorage in a neoclassical economy: some computational results," Working Papers 9901, Federal Reserve Bank of Dallas.
- Solow, Robert M., 2000. "Growth Theory: An Exposition," OUP Catalogue, Oxford University Press, edition 2, number 9780195109030, December.
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