FT.com | Putting an end to financial crises

A second FT article discussing 100% reserves:

T’was the year the country stood still. Not a car, truck, or bus rode the roads. No one drove to work, no one drove to shop, no one drove to visit. No one drove anywhere.

The reason was simple. No one could buy gas. Gas stations had gone broke.

Their owners had tired of netting pennies on the gallon. They wanted to surge their earnings. The big money, they learned from a Harvard MBA, was in securitising their services. So they started selling GODs – gas options for drivers.

To safeguard the payment system, banks must hold 100 per cent reserves against their deposits either in cash or short-term US treasuries. With 100 per cent reserves, banks runs will be history.

via FT.com | Economists’ Forum | Putting an end to financial crises .

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