Switzerland to vote on banning banks from creating money
Economic historian Niall Ferguson beautifully describes fractional reserves as one of the greatest innovations of humankind in Ascent of Money.The miseries from bank runs and crashes are real, but even so, the total impact on human welfare from fractional reserves has been overwhelmingly positive.How do we know?There were holdouts in Europe originally, some central banks were slow to adopt fractional reserves. They were trounced by the economies of other European nations and their superior access to liquid capital.We've essentially done the laboratory tests here, it's one of the few areas where econ plays like a hard science. We know the answer here, and it's not 100% reserve requirements.It's a tragic topic to put to a referendum though, because I don't expect every random person to be an expert on the technical nuances of financial history. And this is a topic where intuitions are a pretty poor guide, one where I'd expect the wisdom of crowds to fail hard. PhantomGremlin's quote from George Bailey is a good example. Most people aren't bankers, and don't really understand how it works as a system, beyond their own account, so it's weird to ask them to make key decisions here.