[AdamSelene235]

I love Friedman's lucid prose:

A fractional reserve system based on fiat money thus economizes on the cost of producing something that costs nothing to produce; it adds the disadvantages of a fractional reserve system to the disadvantages of a fiat system without adding any corresponding advantages. It makes sense only as a discreet way of transferring some of the income that the government receives from producing money to the banking system, and is worth mentioning at all only because it is the system presently in use in this country.

[Liz]

In the early 1900s, the country suffered from recurrent liquidity crises b/c the banking system was constrained by (1) a rigid amount of currency that could not meet extraordinary demands, and (2) a system of reserves that pyramided up to New York. During these crises, businesses and farmers were unable to obtain credit to finance inventories, and crops production and transportation. The panics spread across the nation and converged on Wall Street, resulting in stock market plunges, numbers of bank and business failures, and even more currency shortages. Thus was the genesis of the Federal Reserve.

That being said, it's common knowledge among fiscal conservatives, that comments (any comments) on the subject can earn one lifelong enemies. Let's just say we'll have to agree to agree or disagree. Nice thread, though.