A fractional Reserve

[DougShrapnel]

It seems that more and more respected experts are coming around to the fact that a fiat money system is unsustainable. However I don't really see I a need for a 100% backed money system. What is a good fractional reserve? Or why wouldn't a fractional reserve work?

[Bedreviter]

It seems like this is an issue only in the US, and no other modern industrialized nations with a fiat money system have much opposition to the current system.

[JayTee]

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It seems like this is an issue only in the US, and no other modern industrialized nations with a fiat money system have much opposition to the current system.

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I would definitely like to see an explanation for this. I am assuming that the fiat system only becomes bad when you have large-scale counterfeiting such as our government has done to monetize war debt and other wasteful spending. Do other countries have balanced budget laws or anything preventing their governments from creating whatever money they need to monetize debt?

[Bedreviter]

Im not sure why this is so, but I guess that why it is an issue right now in the US is because og the huge public debt. Less people worried about it when everything was going ok, and few people argue against the fiat money system in a time when that money system is occuring in a time of clear visable growth. The growth in the economies in the western world during the time of fiat currency has been unprecedented to any other time in history, would this growth have been ashuge if the money supply was limited?

Other countries have had big debts as well, Sweden have managed to bounce back from their considerable debt in the mid 90s without chaninging their money system, and I believe France, Germany and Japan are not that much better off than the US is debt-wise.

The need of a federal bank and fiat money is as far as I know a non-issue in Europe, and people look elsewhere to explain why the economy sometimes go downhill.

[lehighguy]

Our previous posistion as worlds reserve currency allowed us, for a temporary time, to engage in wildly more reckless behaivor then any other fiat currency ever could. In 20 years the same could happen to Europe. It all depends on the policies implemented.

[Bedreviter]

But thats more of an argument against how the government have spent their money, not how the money is "made". If you suggest that you need a gold-backed currency (or something similar) to limit the governments spending it seems like the government and not the currency is the problem. Implementing rules related to how government can spend their money could solve much of those problems without having to get rid of fiat money.