Do you think fractional reserve banking is responsible for the current economic crisis?

No.

I think it was greed.

I think lying, thievery, and NAFTA are the culprits. Or in other, words, the last 15-20 years of the White House.

And what do you suppose the concept of fractional reserve banking is based on?

Well then... maybe you should have asked me a different question.

No. I think there are a number of factors, including especially the housing bubble and the predatory lending and bad mortgage-backed securities that went along with it. I'm sure there are other important factors, too. It's a complex system and I doubt the current situation can be blamed on any single aspect of it.

No. I guess I can see where this many have contributed to it in a subtle way. But, I think there are more direct causes without which there would be no crisis (risky mortgages and 60 trillion dollar hidden securities "insurance" [CDO] market) . Though, even without a crisis, I think a case could be made for the entire system being a bit funky. Though, it also undeniably has brought great wealth and prosperity to a good portion of the world. I think the whole thing is quite complicated and even the smartest economists do not agree on it all.

The primary cause for this mess was the federal government requiring banks to give mortgages to people who were unlikely to be able to repay them. Having Fannie Mae and Freddie Mac (that is, all of us) back up those bad loans then allowed the bad mess to go forward to make the real-estate bubble. The whole CDO thing then obfuscated the mess and greed ran wild. Pop! goes the bubble.

No this has nothing to do with the economy and it could play a part in this mess and it is all Bush's fault
to begin with

Nope. I think the biggest problem was banks giving loans to people trying to live above their means. If you can't afford it, don't buy it.

somewhat

>When a deposit of central bank money is made at a commercial bank, the central bank money is removed for circulation, and an equal |>amount of new commercial bank money is created. When a loan is made using the central bank money from the commercial bank
>(which keeps only a fraction of the central bank money as reserves), the money supply expands by the size of the loan.

Okay, the above quote is from the Wikipedia article on fractional reserve banking and illustrates what bothers me about the whole concept. The system permits banks to create money through the act of lending it out. Now, an expanding money supply is a good thing so long as there are sufficient goods / services and sufficient demand for those goods and services to absorb the new money.
But if one of those factors is missing, the system is ripe for disaster. If there is too much money out there and not enough stuff to buy you end up with inflation. This is essentially what happened in the late 70s after Carter cut taxes for the middle and working classes and hiked them for businesses and the rich. The average consumer went "Whohoo! I got to keep more of what I make!" and went out to look for stuff to buy. Unfortunately, the rich folks who build the factories to make the stuff and hire the workers to run the factories looked at their new tax bills and thought, "Whoa! I'm gonna have wait a little longer before I get that new widget-maker. Maybe better hold off on new hires and building the new factory too..." So you ended up with very high inflation, if I recall it was durned near 20% annually for a few months. The Federal Reserve Bank, in an effort to curb inflation hiked interest rates up to almost 18% on the one hand, while on the other hand, there was run on a certain bank and the Fed was quietly forking over big bucks to keep it afloat. I can't remember the name of the bank now, and I can't find my copy of the book that told the story.... Oh well, it's around here somewhere, I'll find it eventually.

Anyway, the whole point of this is that I understand what everyone is saying about people living beyond their means and all, but the whole system is predicated on allowing banks to lend beyond their means in the first place. It strikes me as incredibly unstable. I think a famous Jewish carpenter once said something pithy about building a house on sand...

Absolutely.

Well at least I'm not alone. I do realize there is more to it than just this, but I do think that is the main thing that should be addressed if we want really fix things economically.

No one can really say who is really responsible for the economic crisis. Everyone is pointing their fingers at each other. What is done is done. We can't go back and undo anything. Yes there were alot bad decisions made here and there, but there really is nothing we can do about wouldda, couldda, shouldda's, all we can do is move forward with caution, make better desicions, and hope that things will get better in the future.

It's a combination of things. Many people try to blame Bush and much of it isn't his fault. The economy was in much better shape the first six years Bush was President. The economic crisis started in January of 2007 when the liberals took over control of the House and Senate.

> It's a combination of things. Many people try to blame Bush and much
> of it isn't his fault. The economy was in much better shape the first
> six years Bush was President. The economic crisis started in January
> of 2007 when the liberals took over control of the House and Senate.
>

My own feeling is that the series of economic crises we have been subjected to over most of the past century have their roots in legislation ratified in 1913 which became effective in 1914.

> |> It's a combination of things. Many people try to blame Bush
> and much
> |> of it isn't his fault. The economy was in much better shape
> the first
> |> six years Bush was President. The economic crisis started in
> January
> |> of 2007 when the liberals took over control of the House and
> Senate.
> |>
>
> My own feeling is that the series of economic crises we have been
> subjected to over most of the past century have their roots in legislation
> ratified in 1913 which became effective in 1914.
>

I can agree with that