MY SUGGESTION TO THE BANK OF ENGLAND GOVERNOR 2011

MY SUGGESTION TO THE BANK OF ENGLAND GOVERNOR

To:               The Honorable Bank of England Governor

From:            Athinarayanan Sanjeevraja

RE:               Fractional Reserve Banking Systems

Suggested Remedies:

Good Morning Mr. Governor. Financial Times, London reported that UK people are advocate eliminating the fractional reserve systems. London school of economics professor also recommended eliminating fractional reserve banking system. It is absolutely erroneous. 

Mr. Governor, if you are referring to full reserve banking, the banks will not be allowed to lend at all. That could throttle the economy unless the government steps in and supplies the money by fiat. I understand that the problem with fractional reserve was that bankers managed to dilute the reserves because they claimed that the reserves were monies that were sitting idle and they were losing profits. But UK banks came through recession nicely with good fractional reserve banking. Us banks were flubbed because their fractional reserves too low at 10% but Canada banks are came out better than both US and UK because Canada had 20% fractional reserves.

Mr. Governor, if you eliminate fractional reserve banking, you need to see a real depression. I would recommend raise the cash ratio for banks to 10% and you will have a far safe banking system.

Thank you very much for your kind attention to this issue Mr. Governor.

Sincerely,

Athinarayanan Sanjeevraja.