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Comment by tenuousemphasis | Hacker News Reader

I see it differently. Before the Federal Reserve, any bank engaging in fractional reserve banking was committing fraud. Rather than crack down on this fraudulent behavior, the Fed institutionalized it, which seems like an unquestionably negative thing. Thanks to the Cantillion effect, those closest to the source of money are enriched, I would argue unjustly and at the expense of all others using that money. I believe this to be one of the major sources of wealth inequality in the world today.

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Fractional reserve banking existed in Europe a century or more before the the United States even existed, let along the Federal Reserve. And was not seen as fraudulent -- in that it was a common (not rare) practice, that people knew was going on and were happy to accept the notes. Central banks came into existence to regulate fractional reserve banking before the United States, let alone the Federal Reserve, existed either. the US Federal Reserve did not invent being a central bank.

Your way of seeing it differently is ahistorical, and strangely US-centric for a historical view of banking or currency.

Couldn't it be said that all the wealth inequality created by this system in europe created a massive collection of poor europeans who then decided to sell themselves to indentured sertitude in the America? This situation is the basis for why creating a fundamentally different kind of banking system was so important to the first few generations of Americans, thus the previous comment not being ahistorical at all.

Anything can be said, but I would like to see some citation for "This situation is the basis for why creating a fundamentally different kind of banking system was so important to the first few generations of Americans" -- I have never seen any history suggesting that the American colonists were focused on intentionally creating a novel kind of banking system different from Europes because of thinking Europe's led to inequality; if that's actually a non-imaginary thing colonial leaders were doing I'm interested in reading good history on it.

The internet sometimes seems to think that making up plausible stories is a valid way of understanding what happened historically.

I agree with your last statement, good thing I am not the internet! The question of centralised sovereign banking was one of the first great debates of American politics/economics. For sake of not going into to much depth here, I will start and end with the Bank of Amsterdam, which is considered to be the first central bank. It became insolvent in 1790 due in part of its allowance for irriationally large sums of money to be loaned to big buiness such as the East India Company(the parent comment on CB's helping those closest to the "printing" spiggot). This, even as we say to this day, leaves the big players with assets bought with those loans and poor people with nothing and potentially no job until markets revitalize. Some solutions produced in my country's history includes the free banking system of Massachusetts, with the suffolk bank, and Andrew Jacksons attempt at decentralised sovereign banking. I am not here advocating for either btw. Hopefully this gives you a short, and noncomprehensive start on A: a cause for early distrust of central banks creating monetary favoritism to big buisness and B: the Americans who wanted different solutions. I might add, the parents statement about fractional reserve banking having been considered "fraud" is a bit out there, I'm with you on that. Ill try to scrape url sources later, watching the Masters today. Cheers!

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