Meltdown 2

                                           

Functional reserve means that private banks are forced to keep in their reserves only a part or a fraction of the money they borrow. This means that they can lend more than they received in cash, which technically makes them inherently bankrupt. By its monopoly right and having at disposition taxpayer money, central bank can always intervene and save or bailout these bankrupt banks. Moreover, by in institutionalizing this banking behavior it creates a phenomenon of mural hazard as “the increased likelihood of risky behavior when the acting party believes that any costs of his behavior will be born not by himself alone but by a large pool of people – as when a firm behaves recklessly because it expects to be bailed out with other people’s resources.

Since the fall of 2008, as the stock market plummeted, companies folded, and economic fear and uncertainty began to spread, Americans have been bombarded with a predictable and relentless refrain: the free-market economy has failed. The remedy? According to Barack Obam, the late Bush Administration, Republicans and Democrats in Congress, and the mainstream media, it’s more regulation, more government intervention, more spending, more money creation, and more debt. To add insult to injury, the people who advised the policies that produced the mess are now posing as the wise public servants who will show us the way out. Following the familiar pattern, government failure has been blamed on anyone and everyone but the government itself. And of course, that same government failure is being used to justify further increases in government power.