My latest contribution to the debate on Milei´si banking reform and the 100% reserve ratio has received a response in form of a video by Juan Ramón Rallo who defends a fractional reserve banking system based on real bills. The video is mainly about the question of whether fractional reserve banking necessarily triggers an Austrian business cycle, given that fractional reserves allow banks to create new money (fiduciary media) and channel it into the loan market, thus lowering interest rates. Rallo argues that the credit expansion of fractional reserve banks poses no problems, if it is based on real bills and is even beneficial because it avoids deflation and a change in relative prices.In the following, I would like to make a few brief comments on his argument and the example he employs in
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