Excellent post:
http://spartancapacity.blogspot.com/2012/08/who-money-is-it-anyway.html
Especially this:
"What does a
"pure exchange" medium, controlled by the state, actually mean? It
means that money is created by the state for the purpose of exchange of
tangible goods and assets. It means that banks can no longer generate
profits by exploiting loopholes in the calculations of global stock
markets. It means that your money will never "evaporate" from banks as
the money in circulation would be linked to state backing. It means
that banks can no longer bet on the economy the way a gambling addict
bets on horses because they no longer have the ability to generate
"vitrual" money endogenously using fractional reserve banking.
Fractional reserve banking is another way of saying that a bank lends
out 10 times more money that it actually has so that it can maximise its
profits at the risk of catastrophic cash-flow shortage. Basically
writing cheques that will bounce - and hoping they don't get cashed in
too soon to avoid them bouncing."
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