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Fractional Reserve Banking as Economic Parasitism: A Scientific, Mathematical & Historical Expose, Critique, and Manifesto

Vladimir Z. Nuri

Macroeconomics from EconWPA

Abstract: This paper looks at the history of money and its modern form from a scientific and mathematical point of view. The approach here is to emphasize simplicity. A straightforward model and algebraic formula for a large economy analogous to the ideal gas law of thermodynamics is proposed. It may be something like a new ``F=ma'' rule of the emerging econophysics field. Some implications of the equation are outlined, derived, and proved. The phenomena of counterfeiting, inflation and deflation are analyzed for interrelations. Analogies of the economy to an ecosystem or energy system are advanced. The fundamental legitimacy of ``expansion of the money supply'' in particular is re-examined and challenged. From the hypotheses a major (admittedly radical) conclusion is that the modern international ``fractional reserve banking system'' is actually equivalent to ``legalized economic parasitism by private bankers.'' This is the case because, contrary to conventional wisdom, the proceeds of inflation are not actually spendable by the state. Also possible are forms of ``economic warfare'' based on the principles. Alternative systems are proposed to remediate this catastrophic flaw.

Keywords: fractional; reserve; banking; money; expansion; parasitism; capitalism; greenspan; gold; thermodynamics; perfect; gas; econophysics; gresham's; law; stiglitz; money; supply; inflation; deflation; growth; price; stability; counterfeiting; energy; radical; polemic; revolution; economic; warfare; religion; doublespeak; gdp; scarcity; fiat; blips; federal; reserve; history; slavery; lassaiz-fair; solow; keynes; keynesianism; cancer; psychology; sociology; politics; analogy; IMF; world; bank; GNP; GDP; digital; cash; money; laundering; pareto; mcfadden; echelon; nsa; free; market; growth; conspiracy (search for similar items in EconPapers)
JEL-codes: A11 A12 A13 A14 B1 B2 B3 C1 C2 C3 C5 E1 E17 E3 E4 E5 E6 F3 F4 H1 H2 H3 H5 H6 I28 J2 J3 K2 K33 N2 N4 O1 O2 O3 O4 P1 P5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe
Date: 2002-03-15
Note: Type of Document - LaTeX2e; prepared on Redhat Linux/gnuplot;
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpma:0203005

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