Modern Banking: Creating Booms and Busts

Deposit banking rests on the bank honoring property rights. Loan banking rests on making good loans that will pay off. But when loan banking and deposit banking merged, the temptation to loan out much more than was actually in the bank arose. Deposits stopped being treated as a bailment. Fractionalized banking is illegal and dishonest under the command of a central bank - the Federal Reserve -that holds a monopoly cartel in money, banking and credit. The Fed's explosive expansion of credit and the money supply is the cause of all booms which eventually require busts to liquidate the malinvestments made in the booms.

Recorded at the Mises Institute on Friday, 19 November 2010. Sponsored by Anastasia Thiele.