Talk:Fractional-reserve banking

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Money multiplier caveat[edit]

As part of a discussion with LK in which we disagreed about many things, but one thing we did agree on was that the statement that the money multiplier puts a cap on the money supply should be paired with a caveat that central banks will supply new reserves at the request of private banks.

LK made the following analogy - "One can say: 'My spending is limited by the amount of money that my mother is willing to give me. As yet, she's never refused any of my requests for money.' The second sentence does not mean that the first is incorrect."...

To which I responded, "perfectly put. The first sentence is true, but if stated without mentioning the second then it would be a misleading indication of the son's spending capabilities. The second sentence needs to be presented as prominently as the first. Can we agree on that?"

To which LK replied "Sure, not a problem."

Later on LK said "The constraint in theory exists. CBs can, and have in the past, attempted to control the supply of money. But if the CB follows an interest rate target (as most do today), it gives up on controlling the quantity of money. Hubbard and Obrien (2013), Economics, Chapter 25: Monetary Policy, p943 can be used as a source for this."

Does anyone object to the caveat being inserted?

Yes, I do. SPECIFICO talk 19:19, 7 May 2014 (UTC)
Any particular reason? Reissgo (talk) 19:22, 7 May 2014 (UTC)
The text violates OR, SYNTH, UNDUE, and V for starters. It's cobbling together a variety of material to advance an argument not contained in the sources. SPECIFICO talk 03:40, 8 May 2014 (UTC)
V? What's that? Reissgo (talk) 08:05, 8 May 2014 (UTC)
Let me get this straight. Jumping straight to LK's last two sentences: "if the CB follows an interest rate target (as most do today), it gives up on controlling the quantity of money. Hubbard and Obrien (2013), Economics, Chapter 25: Monetary Policy, p943 can be used as a source for this." - are you claiming that his first sentence is not supported by the reference, or that the reference is not a RS? Or are you saying that despite the fact that the first sentence is true AND supported by a RS, it is STILL not allowed because it is fringe?... Please be precise in your answer. Reissgo (talk) 08:11, 8 May 2014 (UTC)
Just realised that this document from the BOE can also be used as a reference too. It says (emphasis mine):

Another common misconception is that the central bank determines the quantity of loans and deposits in the economy by controlling the quantity of central bank money — the so-called 'money multiplier' approach. In that view, central banks implement monetary policy by choosing a quantity of reserves. And, because there is assumed to be a constant ratio of broad money to base money, these reserves are then 'multiplied up' to a much greater change in bank loans and deposits. For the theory to hold, the amount of reserves must be a binding constraint on lending, and the central bank must directly determine the amount of reserves. While the money multiplier theory can be a useful way of introducing money and banking in economic textbooks, it is not an accurate description of how money is created in reality. Rather than controlling the quantity of reserves, central banks today typically implement monetary policy by setting the price of reserves — that is, interest rates. In reality, neither are reserves a binding constraint on lending, nor does the central bank fix the amount of reserves that are available. As with the relationship between deposits and loans, the relationship between reserves and loans typically operates in the reverse way to that described in some economics textbooks. Banks first decide how much to lend depending on the profitable lending opportunities available to them — which will, crucially, depend on the interest rate set by the Bank of England. It is these lending decisions that determine how many bank deposits are created by the banking system. The amount of bank deposits in turn influences how much central bank money banks want to hold in reserve (to meet withdrawals by the public, make payments to other banks, or meet regulatory liquidity requirements), which is then, in normal times, supplied on demand by the Bank of England. The rest of this article discusses these practices in more detail

Reissgo (talk) 10:46, 8 May 2014 (UTC)
Well, what is true is that mandatory reserves are largely a thing of the past, while voluntary reserves are just a way for banks to park money as a liquidity tool. The big disadvantage of ùmandatory reserve was in fact that they were illiquid assets. So let us forget about the multiplier notion, nothing to do with modern bank management rules and nothing to do with a money creation parameter as well ! --Pgreenfinch (talk) 21:36, 9 May 2014 (UTC)

──────────────────────────────────────────────────────────────────────────────────────────────────── WP:V
SPECIFICO talk 13:59, 8 May 2014 (UTC)

Thanks for the clarification - but considering the clarity and explicitness (is that a word?) of the BOE document, it appears obvious that the proposed edit does not violate WP:OR, WP:SYNTH, WP:UNDUE, or WP:V. Reissgo (talk) 14:10, 8 May 2014 (UTC)
The blockquoting above makes it hard to follow the discussion. Can someone make a subsection w/ the proposed edit and the sources/justification for it? Protonk (talk) 15:53, 8 May 2014 (UTC)
Hope my little tidy up helps. With regard the precise wording of the proposed edit(s)... I haven't decided yet. Apart from anything, the money multiplier/capping mechanism is discussed in multiple places on the main page, so the required edits may be a a bit messy. I don't mind who does the edits, or the precise wording. I Just added this section in talk to establish whether in principle it should be mentioned that in practice the reserve requirement does not put a cap on the money supply because the central bank is always willing to create more reserves as and when private banks request some. The "sources/justification" is either the BOE document (sample above) or the Hubbard and Obrien book. I suggest the BOE document is better because it is available online and we can all see it. It is also ultra authoritative. Reissgo (talk) 16:40, 8 May 2014 (UTC)
The topic of this article is not recent practices of monetary authorities, current policy views of the Bank of England regulators. etc. It's Fractional Reserve Banking. SPECIFICO talk 17:00, 8 May 2014 (UTC)
That's an interesting point, but if you really want it to be about theoretically pure fractional reserve banking, then about a third or more of the existing content should be stripped out. Why didn't you do that years ago? But apart from anything, central bankers still refer to our monetary system, with all its arcane bolt-on rules, as "fractional reserve banking". Reissgo (talk) 18:00, 8 May 2014 (UTC)
Please don't put words in the mouths of other editors. I said no such thing. The archives here are full of comments as to why your content has consistently been reverted. Please review them. Thanks. SPECIFICO talk 18:21, 8 May 2014 (UTC)
The general reason my edits (on this theme) have failed in the past is lack of RS evidence. But my collection of evidence, much of it quite recent, or recently discovered, is now overwhelming. Reissgo (talk) 18:57, 8 May 2014 (UTC)
I don't have a complete comment on the suggested edit yet, but I'd argue it's not at all accurate to say "apart from anything, central bankers still refer to our monetary system, with all its arcane bolt-on rules, as "fractional reserve banking"". Whatever your view of FRB (as a component of monetary policy or a prudential regulation which has monetary implications), it's certainly not a stand-in for monetary policy. Protonk (talk) 18:36, 8 May 2014 (UTC)

SPECIFICO, let me be sure I understand you... It now appears you are objecting to my edits, not because they are incorrect, or lacking RS citations, or are fringe, but because they're not the kind of thing that should be discussed on the main page. Is that right? (if not, please clarify). And if this is your argument, can you explain what type of information you think should and shouldn't be on the main page. Reissgo (talk) 19:09, 8 May 2014 (UTC)

Protonk, all I am claiming is that if you asked a central banker what do you call our monetary system, they'd most probably say fractional reserve banking. Reissgo (talk) 11:45, 9 May 2014 (UTC)

Reissgo, you're again missing my point. Your edits here consistently violate at least half a dozen content policies, not to mention the behavioral norms for which you've repeatedly been blocked. It's been explained to you by many editors over a period of years. If you care about improving these articles, please read the policies that they've cited to you and try to conform your participation to these WP principles. Otherwise, I don't see how you can be successful here. SPECIFICO talk 13:32, 9 May 2014 (UTC)
It seems to me that you are not constructively taking part in this discussion. You are certainly not answering my questions. Thankfully you are not the only editor on wikipedia, so I will seek some other opinions. Reissgo (talk) 18:44, 9 May 2014 (UTC)
I realise that's all you're claiming, but it's not correct. FRB is one element of central banking, and it's connected to monetary policy because it sets a constraint to prompt inter-bank lending. We could argue that because it influences/defines the money multiplier it's a core element of monetary policy but that part could likely arise without a fixed reserve ratio--if the central bank didn't set one you'd still get the same results from varied ratios (assuming they're all less than one!).
More broadly, I'm still not sure what text you want to add to the page. Both LKs comments and the BoE source indicate that while reserve ratios can influence the money supply, they don't in practice. CBs set reserve ratios and then target interest rates with those ratios as a given. If we accept that, what's the justification for rrr -> money supply? Why devote space on the page to something vitiated by the source we're using? Maybe I'm misunderstanding what you want to add to the page. If so, create a subsection in this discussion w/ a quote for what you want to add and the sources behind it and we can all talk about it more clearly. Protonk (talk) 16:07, 9 May 2014 (UTC)
"Both LKs comments and the BoE source indicate that while reserve ratios can influence the money supply, they don't in practice." - yes, exactly. And that's what I'm attempting to get permission to put on the main page. But SPECIFICO is hell bent on preventing me. He wants the main page to simply say that the reserve requirements place a cap on the money supply with nothing else added. I need some neutral editors to say on this talk page, "yes I agree that it should be stated that the capping does not take place in practice". Reissgo (talk) 13:36, 10 May 2014 (UTC)
Riessgo, please discuss content and not contributors. From time to time central banks have used a variety of tactics and techniques to control the issuance of credit. These have included targeting interest rates, reserve requirements, and money supply measures. Until recently, you would not have read about "quantitative easing" or various other instruments of monetary policy. However, this article is not about those. It's about the topic Fractional Reserve Banking. I'm not going to retrace all the reasons, stated above and in the archive, why your preferred content fails basic WP content policy requirements. SPECIFICO talk 14:08, 10 May 2014 (UTC)

You said: "From time to time central banks have used a variety of tactics and techniques to control the issuance of credit. These have included targeting interest rates, reserve requirements, and money supply measures."... so why are you happy to let the main page give so much emphasis to the specific idea that the a reserve requirement combined with a fixed monetary base is the method by which the money supply is capped? A mechanism which currently is not employed anywhere in the world. Why are you promoting such a biased view? Reissgo (talk) 15:22, 10 May 2014 (UTC)

This article is not about this or that method currently employed by central banks, nor is it about what was most widely employed 20 years ago or 40 years ago. It's about the practice of issuance/acceptance of bank deposits in excess of the quantity of reserves. The article should not confuse normative with descriptive treatment of the topic and should not present current practice of governmental monetary authorities as if it were the determining factor in the practice and functioning of the banking system. Commercial and investment banks have, for at least the past 50 years (perhaps starting with the emergence of the Xenocurrency markets in the 1960's) consistently come up with a series of innovations to circumvent governmental constraints on lending and deposit creation. I've seen nothing in your proposed edits that's germane to this phenomenon, even to the extent that it relates to the topic of the article. Let's stop chasing our tails on this. Let it lie. Your views are clear. I suggest you lie low for a couple of weeks and see whether a policy-based consensus develops to support your preferred content. SPECIFICO talk 15:54, 10 May 2014 (UTC)
You say "Your views are clear." that may be, but I don't understand your views. You seem to be arguing that certain things should not be mentioned, even if true and backed by reliable sources, because they do not fall under the scope of "fraction reserve banking". The following items (which are discussed) are not at all part of the definition of fractional reserve banking. F.R.B. pre-dates all of these...
*central banks
*capital adequacy
*deposit insurance
*minimum reserve ratios
All these things are simply "current practice". I don't see how you can draw a line which allows the discussion of those things while barring my edit. Reissgo (talk) 21:52, 10 May 2014 (UTC)

Proposal for moving forward[edit]

There is almost no disagreement among economists that, in the short run, central banks (CB) set monetary policy by targeting interest rates, and that this implies that CBs do not attempt to control the exact size of the money supply or the amount of base money creation (i.e., CBs have a price target, not a quantity target). It's arguable if the quantity of money creation affects CBs' medium term policies, but lets leave that aside. IMO, this page should mention this issue in passing (any more detail should go in the monetary policy article), and it shouldn't state anything that contradicts this fact. As far as I can see, there is little that needs to be changed on the page. But given all the conflict that's occurred over this issue, can I suggest the following course of action.

  • First, Ressigo, if you could lightly edit (don't remove sections wholesale please) this article in a way that you think would make it better reflect that CBs target interest rates and not the quantity of money, and then leave it for a few days.
  • Second, if anyone objects to the changes, edit them (don't wholesale revert please) to better reflect the sources.
  • Third, if anyone thinks whole sections should be removed or heavily trimmed, please start a discussion proposing the deletion of the article section. LK (talk) 05:21, 13 May 2014 (UTC)
The Reserve requirement article has some comments on reserve requirements as a monetary policy tool in its lede that could be of relevance to our present discussion. Martijn Meijering (talk) 11:41, 13 May 2014 (UTC)
It seems to me that when people talk of fractional reserve banking they are implicitly comparing it to full reserve banking, i.e. stressing that only a fraction of deposits are covered by cash reserves. The lede of our article seems to concur. When speaking of reserve requirements, people are implicitly making the comparison with not having any reserves at all. So in one case we are stressing that the fraction is less than 100%, while in the other that it is more than 0%. Somehow it seems to be that this distinction is not reflected in our discussion. I get the feeling that the real issue is that Reissgo wants to include criticism of fractional reserve banking by proponents of full reserve banking in the article while SPECIFICO for some reason doesn't. I'll be happy to be better informed if that's not the case, and it would be helpful if Reissgo or SPECIFICO would speak up to clarify this. Martijn Meijering (talk) 11:50, 13 May 2014 (UTC)
Its no secret that I am a supporter of full reserve banking in preference to fractional reserves. Though actually my reasons for this are not mainstream enough to get on this page, so I haven't tried to get any criticisms here for a long time. What I have tried to do is to make this page simply more correct. Stating that reserve requirements are not currently used by central banks to cap the money supply is scarcely a criticism of fractional reserves. My position is merely the same position as the BoE recently published here. Reissgo (talk) 12:08, 13 May 2014 (UTC)
I agree that stating that reserve requirements are not currently used by central banks to cap the money supply isn't a criticism of fractional reserves and wasn't criticising you for it. I'm not generally in favour of suppressing minority views, especially if they have well-known proponents, so I'd actually like to have the criticism mentioned. And the sources in the Reserve requirement article appear to support your position, as the BRIC countries do in fact use reserve requirements to cap the money supply, at least if I'm understanding the article correctly. Martijn Meijering (talk) 12:30, 13 May 2014 (UTC)
LK, I support the edit I see you made to the lede. Though now we have a situation where the lede does not reflect the main article. The article states twice that the money multiplier caps the money supply. Once in "history" (what that information is doing in the history, is a mystery to me), and once in the "money multiplier" section. IMHO the mention of it within the history section should simply be zapped, and your "However, rather than directly..." (or an expanded version) comment should be added to the other. Would that be ok? Reissgo (talk) 12:37, 13 May 2014 (UTC)
I agree that currently, the article body doesn't have enough discussion of how CBs use interest rate targets as their main monetary policy instrument, and that they don't try to control the quantity of money. (I thought I saw something before, but its not there now.) A short addition (a few sentences?) should probably be included in the 'Regulation' section. However, a more extensive discussion should probably be in the monetary policy article.
It's not clear to me that this article should discuss monetary policy as it relates to either macroeconomic stabilization- or inflation-related policy. The regulation section begins with what I believe is the correct focus, on solvency of the banks in the fractional reserve system. SPECIFICO talk 03:49, 14 May 2014 (UTC)
Ok LK, I've made my edits. Zapped the "history" anomaly and inserted three sentences, totalling 56 words. I hope people don't consider that overweight. Reissgo (talk) 10:07, 14 May 2014 (UTC)

Seems SPECIFICO has undone all my edits as a job lot. I had felt that there was enough of a consensus here already. Where do we go from here? Reissgo (talk) 10:19, 14 May 2014 (UTC)

I've fixed the text in that section to clarify the association. When an edit of yours is reverted, please do not repeat it unless there's demonstrated consensus for your preferred version on talk. SPECIFICO talk 12:57, 14 May 2014 (UTC)
I have started a new thread called "Money multiplier acting as cap - stated twice - why?" in relation to your last edit. Please comment. Reissgo (talk) 13:20, 14 May 2014 (UTC)

Proposed edit[edit]

SPECIFICO undid my edit (to the "money multiplier" section) on the grounds that there was no consensus for it. So to test this out, I am putting a before and after snapshot here. Please can editors state whether they approve of disapprove of this edit.


The most common mechanism used to measure this increase in the money supply is typically called the "money multiplier". It calculates a theoretical maximum amount of money that an initial deposit can be expanded to with a given reserve ratio and a fixed amount of base money.


The most common mechanism used to measure this increase in the money supply is typically called the "money multiplier". It calculates a theoretical maximum amount of money that an initial deposit can be expanded to with a given reserve ratio and a fixed amount of base money. However, in practice, no central banks attempts to control the money supply in this way in any modern industrialised country.[ref given] Instead, central banks typically pursue an interest rate target to control bank issuance of credit.[ref given] The central bank simply supplies whatever amount of base money is demanded by the economy at the prevailing level of interest rates.[a quote from a BoE doc]

Apparently this is not true of the BRIC countries, at least some of which must count as modern industrialised countries. Martijn Meijering (talk) 09:44, 15 May 2014 (UTC)
I think you have misinterpreted your source for that information. Can I just ask that you double check. By the way, my source was this. See the sentence "Today, it is more broadly understood that no industrial country conducts policy in this way under normal circumstances". Reissgo (talk) 09:54, 15 May 2014 (UTC)
I took it from the lede of the Reserve requirement article. I haven't checked the sources cited there myself and I'm going to a conference tomorrow so I likely won't have time / energy to do that until Sunday. Martijn Meijering (talk) 20:37, 15 May 2014 (UTC)
Just because a country's regulators occasionally change reserve requirements, it does not follow that it has a policy of holding the monetary base constant. Reissgo (talk) 21:13, 15 May 2014 (UTC)
O for 2 as we say in the States. SPECIFICO talk 21:58, 15 May 2014 (UTC)
You have some very strange math going on there. By my reckoning its 1-1, (me vs you + one checking his facts on Sunday). Reissgo (talk) 08:44, 16 May 2014 (UTC)

──────────────────────────────────────────────────────────────────────────────────────────────────── There are 267 people "watching" this page. I presume you are one of those. None of the other 266 has voiced support for your proposal. SPECIFICO talk 09:19, 16 May 2014 (UTC)

Would it address the issue acceptably to simply amplify the BEFORE quote by adding the sentence: "It should be noted that if, as is currently the case in many jurisdictions, central banks provide base money on demand {ref BoE document}, then the theoretical maximum calculated in this way at any given point in time will not in practice constrain the growth in the money supply." This doesn't stray into monetary policy, it simply points to the practical application of a theoretical principle, and surely that is permitted. Sceptical-h (talk) 10:24, 24 May 2014 (UTC)

Alternatively, and more consistently with the existing article, the proposed sentence could be added at the end of this section after "In practice, the actual money multiplier varies over time, and may be substantially lower than the theoretical maximum." Sceptical-h (talk) 11:03, 24 May 2014 (UTC)
Either of those suggestions would be fine by me. That's two in support of a change vs one against. I guess that's a consensus. I'm going to make the edits. Reissgo (talk) 12:38, 24 May 2014 (UTC)
There is no consensus. Start an RfC if you believe there's consensus. Your edit violates core content policy, per this thread. SPECIFICO talk 15:46, 24 May 2014 (UTC)

With regard your accusations of OR and SYN, I addressed that point head on right at the start of "Money multiplier caveat" with that big quote from the BoE paper, which showed that the edits I am trying to make are neither OR nor SYN. You have provided no counter argument whatsoever. With regard consensus, let's have a look at the comments from other editors that have contributed to this thread:

  2. Reissgo: supportive
  3. Pgreenfinch: neutral
  4. Protonk: neutral/supportive.
  5. Martijn Meijering: supportive
  6. LK: supportive (I'm inferring this from his edit in the lede).
  7. Sceptical-h: supportive

So SPECIFICO, you are outnumbered. Reissgo (talk) 16:24, 24 May 2014 (UTC)

Please review policy concerning consensus. Moreover, consensus doesn't override core content policy. You may mount an RfC. SPECIFICO talk 16:54, 24 May 2014 (UTC)
I see you have not undone my latest edit - so I will pause this debate for now. Reissgo (talk) 17:12, 24 May 2014 (UTC)

Undue weight[edit]

Looking through the main page, I see that the concept of the money multiplier placing a cap on the money supply is stated four times, once with a caveat, and three times without:

  • fractional-reserve banking permits the money supply to grow to a multiple (called the money multiplier) of the underlying reserves of base money originally created by the central bank
  • The reciprocal of the reserve requirement, called the money multiplier, limits the size to which the money supply may grow for a given level of reserves in the banking system.
  • The most common mechanism used to measure this increase in the money supply is typically called the "money multiplier". It calculates the maximum amount of money that an initial deposit can be expanded to with a given reserve ratio.
  • Fractional-reserve banking allows the creation of commercial bank money, which increases the money supply through the deposit creation multiplier.

Given that the idea is untrue (or at the very least controversial), it would appear that this is overweight. Why does that same thing need to be repeated four times anyway? I suggest that it should be mentioned at most once with caveat attached. Does anyone have an argument against? Reissgo (talk) 18:16, 23 July 2014 (UTC)

In case you've forgotten, a dozen editors have already told you the answer to that question and explained why they disagree with you. Don't interpret anyone's disinclination to repeat yet again as acquiescence to your agenda. Do not change this text without prior explicit agreement on talk. SPECIFICO talk 19:40, 23 July 2014 (UTC)
Your words do not appear to correspond to reality. Just scroll up a bit and you'll see the seven person list of people's reactions to the idea that the disputed money multiplier theory name needs a caveat. That doesn't appear to correspond to a dozen editors disagreeing with me. Reissgo (talk) 08:38, 24 July 2014 (UTC)
I've gone ahead and cut four down to three just to see if this instigates any response on talk. Reissgo (talk) 10:53, 25 July 2014 (UTC)
I saw that SPECIFICO undid my edit with the comment "conform to article text". My edit is also compatible with the article text, it simply omits one (controversial) aspect of what the text claims. If a textbook says a,b,c and d. But "c" is controversial, or even false, then I see no problem in using the textbook as a reference to support a,b and d. Wiki is not obliged to state c. Reissgo (talk) 12:51, 25 July 2014 (UTC)
After removing the last repeats of the money multiplier statements leaving one main one, SPECIFICO has undone my edit with a comment "rv or". I am guessing (please correct me if I'm wrong) this is a cryptic way of saying revert original research. If that is indeed what SPECIFICO is saying then I would like to ask how on earth do the edits I made correspond to original research? I have simply pointed out that the same (strongly disputed) information is being repeated four times when once is quite enough. Reissgo (talk) 09:23, 28 July 2014 (UTC)

SPECIFICO undid my last edit with the words "You need prior consensus of the editors on talk, not just your own opinion". This is not how wikipedia works. The idea is B.R.D, bold, revert discuss. There is nobody here objecting to my claim that four instances of the same (disputed) concept is too much. If you wish to actually discuss this issue, I will hold fire on my edit until the discussion is complete. But you have not even started to engage on the merits of my edit. Please do not edit war. Reissgo (talk) 22:01, 28 July 2014 (UTC)

The role of the state[edit]

I am splitting the following into a separate topic to avoid muddying the waters of "Banks as intermediaries" Reissgo (talk) 18:42, 7 July 2014 (UTC)

Right, I don't understand why the role of the state as guarantor isn't referred to in these sources. Fractional reserve banking doesn't exist without the role of the state. Aren't there any sources that address that aspect of the system?--Ubikwit 連絡 見学/迷惑 16:45, 7 July 2014 (UTC)

insert Ubikwit, FRB has existed long before there was state regulation of banking. SPECIFICO talk 17:26, 7 July 2014 (UTC) That sounds like a different discussion altogether. Maybe you should start a new topic. Reissgo (talk) 16:52, 7 July 2014 (UTC

@SPECIFICO: Are you suggesting that FRB started without support/permission from the state?--Ubikwit 連絡 見学/迷惑 17:28, 7 July 2014 (UTC)
Yes. That is correct. Why hold 100% reserves? It's not efficient. There's a good deal of narrative available concerning the history of banking. SPECIFICO talk 17:53, 7 July 2014 (UTC)
"Why hold 100% reserves?": To stabilise the money supply and help prevent events like the great depression. Reissgo (talk) 18:01, 7 July 2014 (UTC)
If it were the goal of each banker to stabilize the money supply and help prevent events like the great depression, there would be no governmental regulation. Please stop your WP:SOAPBOX. SPECIFICO talk 18:22, 7 July 2014 (UTC)
(edit conflict) OK, so it was the banking industry, and not the government that implemented FRB, according to what you are saying. How did the development of printed currency, for example, contribute to that? I realize that in the USA the silver certificate system was in effect until fairly recently (1960s?).--Ubikwit 連絡 見学/迷惑 18:24, 7 July 2014 (UTC)
I said no such thing. I'm saying that many/all bankers held only partial reserves against their deposits because they believed that they would not be presented with demands for payment of all their liabilities at one instant. There's extensive discussion and documentation of the history of banking, in the West at least, before the implementation of central banking and governmental control. SPECIFICO talk 18:54, 7 July 2014 (UTC)
I'm sorry I haven't been around and haven't been paying attention to this page. A small note, Specifico is correct in saying that FRB started without state regulation. 'Money lending' as a profession has been around since ancient times (there are references to it in the bible) — money lenders take in deposits (paying interest), and lend out monies charging interest, they acted as FRB institutions. LK (talk) 03:44, 8 July 2014 (UTC)
For future reference, I was thinking of Matthew 25:27. [1][2] LK (talk) 09:08, 21 July 2014 (UTC)
I think that some of the confusion may be due to the fact that some people think reserve requirements force banks to keep more reserves than they otherwise would, while others think it allows them to keep fewer reserves than they might otherwise get away with. Martijn Meijering (talk) 11:21, 21 July 2014 (UTC)
History is pretty clear on this. Left to themselves, banks would keep far less prudential reserves than required by regulations. LK (talk) 04:08, 24 July 2014 (UTC)
And privately issued paper circulated as money long before governments became involved in regulating such practices. SPECIFICO talk 03:46, 8 July 2014 (UTC)
OK, thanks for the clarification. --Ubikwit 連絡 見学/迷惑 06:04, 8 July 2014 (UTC)

"The relending model"[edit]

In the section "Example of deposit multiplication", it mentions "the relending model" three times as if this was a well established term. But I am struggling to find the source of this phrase. Who uses it? Is is a term that Mankiw made up? And why is it called a "model"? Can someone shed some light on this? Reissgo (talk) 06:00, 1 August 2014 (UTC)

Requested move[edit]

The following is a closed discussion of a requested move. Please do not modify it. Subsequent comments should be made in a new section on the talk page. Editors desiring to contest the closing decision should consider a move review. No further edits should be made to this section.

The result of the move request was: to move the page to Fractional-reserve banking, per the discussion below. If this needs to be revisited again in the future, I'd suggest a multimove request so that this and Full-reserve banking can continue to have consistent styling. Dekimasuよ! 00:56, 6 November 2014 (UTC)

Fractional reserve bankingFractional-reserve banking – Move back over redirect to hyphenate the compound modifier for clarity per WP:HYPHEN. The article itself seems to consistently include the hyphen in practically all cases (all except in the last small section at the end of the article). Note, however, that there was a prior move on 09:59, 15 September 2011‎ in the opposite direction (which may have been an undiscussed move, as I have not found an archived discussion about it). At the time, the mover (Lawrencekhoo) said "Unhyphenated term is much more common than hyphenated term". I am open to the other possibility, but the current mismatch between the title and the content of the article seems like a problem and the hyphenated use seems more like clear, readable English. Hyphenation would also be consistent with the hyphenation of Full-reserve banking. --Relisted. Dekimasuよ! 20:00, 30 October 2014 (UTC) BarrelProof (talk) 21:28, 22 September 2014 (UTC)

  • Oppose The article text should certainly conform to the title. I suggest changing the text to remove the hyphen for consistency. However, I still contend that the unhyphenated term is much more common than the hyphenated term, and so we should use the unhyphenated version per WP:COMMONAME. One way to show that the unhyphenated term is more common, is to do a google search on 'fractional-reserve bank' and check the results. I've had a look at the first few pages of results for google search, google book, google scholar. It appears to be more than a 5 to 1 ratio in favor of the unhyphenated term. LK (talk) 03:10, 26 September 2014 (UTC)
  • That sounds reasonable. If consensus is to use the unhyphenated term, we should change both, and change the text for consistency as well. LK (talk) 05:05, 14 October 2014 (UTC)
  • Weak oppose, in these cases the presence or not of a hyphen is a fairly peripheral issue. Never-the-less the over prescriptive MOS pedantry has, in my opinion, little validity in the face of real world usage and a more grounded influence to WP:UCRN. The hyphen is clearly optional and we are best to go with the option most used. Gregkaye 03:58, 15 October 2014 (UTC)
  • Support—It is a profound disservice to readers to remove the hyphen. A professional standard of writing, for the general reader, is expected on en.WP. Some practitioners get lazy about typography because they see compound terms related to their field every day. That's fine for them—they have the benefit of great familiarity. We don't, and do not want to go through the business of questioning in our minds whether it's fractional reserve-banking or fractional-research banking, which are quite different from each other. This "80%" cited above—I doubt it is based on a properly conducted search (there's certainly enough support for the hyphen in published sources. Tony (talk) 07:34, 15 October 2014 (UTC)
  • From the graph linked to, it appears that the unhyphenated term dominates by between 3:1 to 4:1 in books. Compound terms are not necessarily hyphenated. Some are joined to become one word (e.g. chairman, basketball), some remain separate words (e.g. wedding band, cough syrup). Still, I see the point about possible confusion about the term 'fractional reserve bank', not sure if WP:COMMONNAME or the desire to avoid confusion should be the guiding principle here. LK (talk) 11:19, 15 October 2014 (UTC)
  • None of those examples given immediately above include a compound modifier. The first two bullets under item 3 of WP:HYPHEN seem to suggest using a hyphen here (as in "face-to-face discussion", "hard-boiled egg", "little-celebrated paintings", or "government-monitoring program"). To me it seems clear that the hyphen here could "help with ease of reading ... where non-experts are part of the readership". —BarrelProof (talk) 19:34, 15 October 2014 (UTC)
  • A minor point of clarification, just so that readers of this discussion understand it – the user I referred to above as "Lawrencekhoo" is the same user that is appearing in this discussion as LK. That might not have been immediately obvious to everyone here. (I'm not suggesting there is any bad intent in that – I just think it's sometimes desirable to know how many different people are expressing a particular opinion.) —BarrelProof (talk) 19:46, 15 October 2014 (UTC)
  • Support. WP:COMMONNAME does not imply WP:COMMONSTYLE (yes, redlink), and instead WP:HYPHEN (and MOS in general) takes precedence. Generally, we style our titles, including punctuation and capitalization, according to our own rules, not according to haphazard conventions of the external world, which vary by location, field of application and fashion of the day. No such user (talk) 08:39, 29 October 2014 (UTC)

The above discussion is preserved as an archive of a requested move. Please do not modify it. Subsequent comments should be made in a new section on this talk page or in a move review. No further edits should be made to this section.

Example of money multiplier effect confusing[edit]

The chart does not correspond to the numbers on the graph since the graph stops at K bank loans, which makes the entire example confusing. The chart should be altered to note somewhere that eventually the total deposit size reaches 500 in theory, rather than stopping at 457

Which view is now mainstream?[edit]

There have been many arguments on this talk page about which of the two exogenous vs endogenous views are considered "mainstream" (and so be presented most prominently on the main page) and which is the heterodox view, (and so be presented with secondary prominence). The arguments have been based on what we wikipedians have observed in terms of what we've seen in textbooks or assorted papers... but actually this is effectively our own original research. If at all possible we should find a reliable source which actually says "theory A is more widely accepted than theory B"... and actually such a source does exit. It has been sitting under our noses here: => Former Deputy Governor of the Bank of Canada William White said "Some decades ago, the academic literature would have emphasised the importance of the reserves supplied by the central bank to the banking system, and the implications (via the money multiplier) for the growth of money and credit. Today, it is more broadly understood that no industrial country conducts policy in this way under normal circumstances." [33]. So unless someone can find a reliable source which states the opposite, then I propose the main page should be edited to reflect this new status quo. Reissgo (talk) 10:22, 15 December 2014 (UTC)

@SPECIFICO: @Lawrencekhoo: Seeing as you two are (historically) the most likely to undo my edits, I would appreciate your comments before I embark on making these changes. Reissgo (talk) 15:11, 17 December 2014 (UTC)

This has nothing to do with the views of individual editors. The subject is widely covered in mainstream undergraduate college texts, and these can be used to assess what presentation is "mainstream." The presentation in the article, whatever improvements await it, currently presents the subject in a way which reflects those mainstream sources. You haven't found evidence of a "new status quo" so you should not expect your proposed change to be accepted by NPOV editors who watch this article. I suggest you refrain from starting another round of edit warring, and do further research as to what the dominant mainstream sources have to say. SPECIFICO talk 16:45, 17 December 2014 (UTC)
It appears you have no argument against my suggested edits other than your own OR. If you wish to participate constructively to this thread, please find some RS which actually discuss the relative acceptance of the two theories. Reissgo (talk) 17:01, 17 December 2014 (UTC)
As an editor of your long tenure here should know, the WP:BURDEN is on you to justify your proposed change. You would need a much stronger source, per my previous comment, to entirely revise the narrative of this article. SPECIFICO talk 17:28, 17 December 2014 (UTC)
You don't appear to be adressing the main thrust of my argument. I'm going to see what LK has to say before I do anything else. Reissgo (talk) 17:47, 17 December 2014 (UTC)
By the way, you say I need a "much stronger source"... can you give me an example of what might constitute a "much stronger source", on issues concerning the monetary system, than the Deputy Governor of the Bank of Canada? Reissgo (talk) 21:07, 17 December 2014 (UTC)