Those are my thoughts exactly. I simply don't buy the argument that the economy would somehow have collapsed. If you were a business owner relying on credit to meet payroll, for example, what is stopping you from establishing a new line at any one of possibly hundreds of other banks (real banks)?
Also I understand that these aren't traditional banks, though I didn't make that clear. But what strikes me as irrational is that people continue to use the big hybrid institutions like BAC, C , JPM for simple depositing. Why would u want your money in these places where you know they are taking more risk than traditional banks? Its not like as a depositor they get to share in the profits.. I don't see the upside for the avg American to bank at these institutions.
On a related note, in antitrust's post in this thread: http://www.elitetrader.com/vb/showthread.php?s=&threadid=244779&perpage=6&pagenumber=4 there are some quotes that blow my mind. Does this mean that every loan created by a bank essentially diminishes purchasing power of US$? That is retarded, i've heard also, but don't know if this is true.. if a bank receives a 100k deposit and reserve min is 10% they obviously get to loan out the 90k remaining BUT then they get to count that 90k loan as an asset basically and loan out 90% of it and so on.. does anyone know for sure if this is how it works? If any of this is true then our system really is unsustainable, what sense is there in banks being able to lend money they don't have, money that doesn't even exist?
the fractional reserve system is the flaw where all other problems stem from imo. Banks should only be able to loan out what they have, that would diminish credit greatly and also stop the inflation that this lending creates, which would be a much more sustainable (realistic) system.
