Talk:Fractional-reserve banking

Recent changes to the lede

Please compare these two. There are many problems with recent edits. Trying to keep it as respectful as I can:

1. Ungrammatical. "Remainder" is the subject but "are" is the verb in one sentence. Someone (I don't know who) simply does not understand basic grammar.

2. History is put in way too early in the lede. It is totally out of context.

3. Some of the wording doesn't even make sense. Remainder is used to fund other bank liabilities? The sentence is so convoluted it turns in on itself.

Could I implore all editors to realize that the existing page has undergone thousands of edits and shouldn't be messed with lightly. People with little experience in editing should edit lightly at first, as they don't know what they don't know and are editing in ignorance of grammar and clear expression. Please discuss edits on the talk page first, because some recent edits have been train wrecks. If you want to put Menger's stuff in the article there is a history section. It's not very detailed so please feel free to add all the references you want to that section. — Preceding unsigned comment added by 124.176.79.201 (talk • contribs) 13:57, 5 November 2012 (UTC)

New important document from the Bank of England

I believe the document has profound implications for how the main page is written. I am posting it here first to get some feedback on the weight that is should be given. http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

Why do you think this is important, and how do you suggest the article be edited to include what you feel is important? Thanks. SPECIFICO talk 17:54, 12 March 2014 (UTC)

I think it should be given great weight because its from the Bank of England and it not just a teaching-aid. I think its important because it says: "...nor is central bank money ‘multiplied up’ into more loans and deposits." as this wiki page suggests at length. Reissgo (talk) 18:01, 12 March 2014 (UTC)

At this point the main page should really be re-written from scratch. But I am not prepared to do this all in one go. It would be a substantial amount of work and, from experience, would very likely be undone immediately. So I shall make some small changes to test the water and take it from there. Reissgo (talk) 10:28, 13 March 2014 (UTC)

Riessgo, you have other editors here who are reading and responding to your messages. The most fruitful way to contribute here is for you to do likewise. Please re-read and respond to what I asked above. Once you put forth specific proposals, others can respond and collaborate on editing the article. You appear to be repeating that you've found what you believe is an important new source, but you are not telling the community what WP content you believe should be added or amended to reflect your new source. Please don't make changes to the article without mooting them here first. The reason your edits are often reverted is that most of them have been contrary to WP policy or practice. You can avoid this by discussing them here first. Thanks. SPECIFICO talk 12:55, 13 March 2014 (UTC)

My proposal is that the article be modified to de-emphasise (or eliminate) the money multiplier theory. It should also make it clear that banks do not lend out other people's deposits, instead loans create deposits. Reissgo (talk) 13:06, 13 March 2014 (UTC)

Part of the problem with the article -- and on this point Reissgo is correct -- is that the article goes into some detail in the "money multiplier" part of the article without making clear that this form of lending -- when the loan proceeds are actually in the form of currency (in the United States, this would be Federal Reserve notes or current coins, or both) is relatively rare. (See my explanations in this talk page back in August 2013.) As we have said, over and over in these talk pages, the main way that banks make loans is by debiting "loans receivable" (or some such asset account on the books of the bank) and crediting "demand deposits" (in other words, the checking account of the borrower, which is a liability account on the bank's books) or perhaps "cashier's checks outstanding" (again, a liability on the bank's books), etc., etc.

The article probably does not go into enough detail about how the vast majority of loans are actually made in a fractional reserve system. The vast majority of loans are not made by having the borrower walk out of the bank lobby with a bag of currency. The vast majority of loans are made by having the bank issue debt -- in the form of credits to a checking account or in the form of credits to bank checks outstanding (cashier's checks -- checks where the bank itself is both drawer and drawee). Note: Another way a bank could make a loan is not by creating a liability owed by that bank, but by reducing its own assets -- for example, by the bank issuing a check drawn on a checking account that the bank has with some other bank (whether the "other bank" be the central bank or just another commerical bank), etc., etc. That sort of thing. The banks I used to audit had checking accounts with many other commercial banks.

This is why Reissgo is correct when he says that the article should de-emphasize the money multiplier theory -- at least to the extent that the description under the heading of the money multiplier effect gives a misleading impression of how the vast majority of loans are made. I would not say eliminate it completely, but I would say that we need to find reliable, previously published third party sources that explain more specifically how bank lending actually works (which is the way I have just described).

I am a former bank auditor; I audited commercial banks (and savings and loan associations -- remember those?) for over five years; I know how banking works. But as a Wikipedia editor I cannot just insert this description myself, without citations to previously published third party sources. I will go back and look at my college textbook on money and banking (which was written by a former heavyweight at the FDIC) when I get the chance, and see what I can find. This may not happen soon, as I am in the middle of the heavy work load of tax season. Famspear (talk) 18:10, 13 March 2014 (UTC)

Note: I haven't read the Paul Sheard material (cited in the article), but Sheard is technically incorrect when he says that banks cannot lend reserves. The paper currency and current coin held by the bank -- which are part of reserves -- most certainly can be used to fund loans. In other words, it is entirely possible for the borrower to walk out of the bank lobby with a bag of Federal Reserve notes and current coins. It's just that this form of lending is rare. Not impossible; just rare. Perhaps Sheard explains this somewhere in his material. Famspear (talk) 18:18, 13 March 2014 (UTC)

I would think that 40 years into the post-"Nixon Surprise" era it would be easy to find a mainstream money and banking text which presents a view more to Riessgo's liking and without the medieval re-lending tale. On the other hand, as nearly a dozen editors have patiently explained to him, his current approach is not going to end up improving the article. SPECIFICO talk 18:40, 13 March 2014 (UTC)

Wiki policy is BRD. Reissgo (talk) 12:48, 14 March 2014 (UTC)

Materials on how commercial banks usually make loans (not by doling out paper currency, etc.)

OK, I'm creating this new section to hold some materials I have found in my old textbooks.

From the Federal Reserve Bank of Chicago, making it clear that the general rule is that banks usually issue loan proceeds simply by crediting deposit accounts -- not by doling out the paper currency or coin that the bank has already received as "deposits".

Of course, they [commercial banks] do not really make loans out of the money they receive as deposits. If they did this, they would be acting just like financial intermediaries and no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits they make to the borrowers' deposit accounts. Loans (assets) and deposits (liabilities) both rise....

--Federal Reserve Bank of Chicago, Modern Money Mechanics, pp. 3-13 (May 1961), reprinted in Money and Banking: Theory, Analysis, and Policy, p. 59, ed. by S. Mittra (Random House, New York 1970) (bolding added).

From a text published by the American Bankers Association, making it clear that most bank loans are made not by doling out paper currency and coin, but instead by creating or increasing deposit liabilities owed by the bank:

Typically, bank loans are made to existing customers, or the proceeds of a loan are used to open an account; thus, most bank loans increase total deposits. In the typical credit situation, two balance sheet items --loans and deposits -- are simultaneously increased.

--Eric N. Compton, Principles of Banking, p. 150, American Bankers Ass'n (1979) (Eric N. Compton was a Vice President at The Chase Manhattan Bank, N.A.)

From Professor Paul Horvitz:

Since demand deposits are money, this means that commercial banks can create money. The process of deposit creation is deceptively simple -- so much so that even the bankers themselves have frequently been deceived. There are several reasons for this confusion and we shall try to clarify them.

One cause of confusion centers around the meaning of "deposit." Deposits are, of course, a liability of the bank. If we have a $300 deposit in a commercial bank, the bank owes us $300. The deposit itself, however, can arise in various ways. We may have brought $300 in paper money to the bank to deposit in our account. On the balance sheet of the bank this transaction will simply be reflected as a $300 increase in the bank's holdings of cash, and a $300 increase in the bank's deposit liabilities. This transaction is what may be called a primary deposit. It should be noted that this transaction does not result in any change in the money supply. The depositor has $300 less in currency and $300 more in the form of a demand deposit; his total holdings of money are unchanged.

Deposits may arise in a different way, however. Let us suppose a businessman comes into the bank and wants to borrow $1000 to cover the cost of some additional inventory he wants to purchase. The bank may approve the loan, and the businessman will tell the bank to credit the $1000 to his deposit account.

Bank Assets

debit Loans $1000

Bank Liabilities

credit Deposits $1000

The businessman now has an additional $1000 demand deposit. No one else's demand deposits have been reduced. This is clearly an increase in the money supply, and it is apparent that the bank created the $1000.

These derivative deposits are very important both quantitatively and theoretically -- it is in terms of derivative deposits that banks can be thought of as creators of money. If all deposits arose from primary deposits, banks could not be said to create money.

-- Paul M. Horvitz, Monetary Policy and the Financial System, pp. 56-57, Prentice-Hall, 3rd ed. (1974) (bolding added). (Horvitz received his Ph.D. from Massachusetts Institute of Technology, and was Director of Research at the Federal Deposit Insurance Corporation. He was an assistant professor of finance at Boston University. He also served as Associate Director of Research for the Office of Comptroller of the Currency, U.S. Department of the Treasury, and as Financial Economist at the Federal Reserve Bank of Boston.)

Allowing the issuance of loan proceeds in the form of cash (that is, in the form of paper currency and current coins) is considered to be a weakness in internal control in a bank. See, generally, Industry Audit Guide: Audits of Banks, p. 56, Banking Committee, American Institute of Certified Public Accountants (1983).

These are old materials because I was in college, and was then a bank auditor, a long time ago. Famspear (talk) 03:09, 14 March 2014 (UTC)

Suggested new lede

In the light of the seven references in the section "Criticisms of standard textbook descriptions of fractional reserve banking" - especially the new document from the BOE...

How about this?

Fractional reserve banking is a monetary system in which there are two types of money with one type constituting a fraction of the total, hence the name. The first type is known as central bank money or base money which is created by the central bank. The second type, known as broad money or demand deposits, is both created and destroyed by private banks as they make loans, or their loans are repaid. Broad money is essentially an IOU, from the private bank, of central bank money.

Central bank money can be further subdivided into two components, reserves and cash. Reserves are electronic and do not circulate outside of the banking sector, whilst cash takes the form of notes and coins which may be used by the public.

Banks typically loan out IOUs totalling more central bank money than they posses. This makes them vulnerable to a phenomena known as a bank run. Governments often have guarantees and or other policies to protect bank's customers in such circumstances.

There are regulations that require that a bank holds a minimum amount of capital and or reserves for any given amount of IOUs it has loaned out. The exact nature of these regulations may be different between different countries and at different times.

Fractional-reserve banking is the current form of banking in all countries worldwide.

Reissgo (talk) 08:27, 14 March 2014 (UTC)

I see Lawrencekhoo has undone my edit with a request for references. That's fine. I note that the previous lede (of similar length to mine) had references in a total of four places. Lawrence, please could you tell me in which places you think my version needs references. You could perhaps just cut and paste my lede below marking an asterisk where you think references are needed. Reissgo (talk) 15:06, 14 March 2014 (UTC)

Dear Reissgo: I'll have to look at this material in more detail later, as I'm working on U.S. corporate Federal tax matters having deadlines for Monday, March 17th. Just a few comments for now, though:

I realize that the United Kingdom, the United States, and other advanced nations may use certain technical terms, the meanings of which vary from one country to another. In the United States (for example) the term "reserves" (in terms of the reserve requirements imposed on commercial banks) does not have the meaning you are describing in your proposed text. Assuming that a consensus develops to the effect that the introduction should be re-written, I think the change needs to be done in a way so that the revised text does not cause confusion about technical terms that may have one meaning in one banking system and a different meaning in another system. More on this later..... Famspear (talk) 15:18, 14 March 2014 (UTC)

In the United States, under the Federal Reserve System, the reserve requirements are imposed by or under Regulation D, Reserve Requirement of Depository Institutions. Under Regulation D, the term "reserves" essentially means:

1. "vault cash" (a technical term, but basically meaning the actual, physical paper currency and current coin owned by the commercial bank and shown as an asset on its balance sheet), plus

2. the commercial bank's account at the Federal Reserve Bank in the Federal Reserve District in which the bank is located (or, in some cases, the bank's account at a designated "pass-through correspondent" institution).

In other words, if I go to Wells Fargo Bank and open a checking account with one hundred dollars in actual, physical Federal Reserve notes, those actual physical Federal Reserve notes become part of "vault cash" of Wells Fargo Bank. I cease to own those objects, but I receive an asset called a "demand deposit account" (a checking account). Those actual physical bills are now assets of Wells Fargo, and are also part of Wells Fargo's "reserves" (for purposes of the reserve requirements of Regulation D.

Note: "Vault cash" is a technical term in Regulation D, and includes more than just the stuff physically located in the bank's vaults at any given moment.

More later..... Famspear (talk) 15:41, 14 March 2014 (UTC)

You're right. I should have said something more like this:

Central bank money can be further subdivided into two components, electronic and physical. Electronically in the form of an account that private banks have with the central bank. Whilst cash takes the form of notes and coins. Taken together, they comprise the private bank's "reserves". Reissgo (talk) 16:02, 14 March 2014 (UTC)

Better? Reissgo (talk) 16:02, 14 March 2014 (UTC)

It has nothing to do with electicity. Please find a manistream RS textbook which treats the subject in a way you feel is clear and true and use that source to propose alternative text. SPECIFICO talk 16:51, 14 March 2014 (UTC)

I don't know of such a source. With regard "electronic" - well that's a shorthand for saying its just a record, some bytes on a hard disk, some numbers of a piece of paper. I think people will know what it means. I just think the wording could become very cumbersome (and-confusing) for an introductory section if every syllable was required to satisfy the most pedantic of readers. Reissgo (talk) 18:00, 14 March 2014 (UTC)

If you have been unable to locate a source which presents the views you wish to insert in this article, it sounds as if you consider them to be your personal opinions. As WP editors we do not put our own views or our personal "original research" in WP articles. SPECIFICO talk 18:17, 14 March 2014 (UTC)

It is absolutely not my OR. But wiki does paraphrase sources. Its not just cut and paste. Besides, I am happy to provide sources for any individual claim you think is controversial.

BTW, how about this:

Central bank money can be further subdivided into two components. The first is in the form of accounts that private banks have with the central bank. The second being cash i.e. notes and coins. The sum of the two held by any individual bank, comprise that bank's "reserves". Reissgo (talk) 18:22, 14 March 2014 (UTC)

Criticisms of fractional reserve banking

On the disputed para:

Nobel Prize winner Frederick Soddy criticised a number of aspects of the economics systems of his time. With the notable exception of fractional-reserve banking, many of his criticisms have been accepted as valid. Eric Zencey: Mr. Soddy’s Ecological Economy. In: The New York Times. April 12, 2009

Soddy was eventually proven right about everything else economic that he railed against. He may well be proven right about fractional reserve banking. It's a valid criticism from someone in the public sphere. Books discussing Soddy include: Ecological Economics, Second Edition: Principles and Applications, Herman E. Daly, Joshua Farley.

See also, for context, rather than reference, http://monetaryrealism.com/frederick-soddy-on-endogenous-money-debt-deflation/ for some pointers to Soddy's noted economics thinking. http://billtotten.blogspot.com/2009/07/economic-thought-of-frederick-soddy.html - wow, economists really don't like Soddy.

The piece that you cite "Mr. Soddy’s Ecological Economy" in the New York Times, is an OP-ED piece by an outside contributor, which according to WP:IRS guidelines, is not in general a reliable source. LK (talk) 09:32, 28 March 2014 (UTC)

Reference "Where Does Money Come From"

I want to use the book "Where Does Money Come From" as a reference, but I remember that it was once rejected as a RS for not being notable enough. But now I see that it was actually used as a reference by the Bank of England in this document. Surely if its good enough for the BOE, its good enough for Wikipedia? Please confirm. Reissgo (talk) 10:44, 18 March 2014 (UTC)

Y It gets my vote. An academic source can be reliable without being notable in my opinion. Jonpatterns (talk) 11:27, 18 March 2014 (UTC)

It is not, however, an "academic source." Academic writings are peer reviewed, not published by advocacy organizations such as the one which produced this piece. SPECIFICO talk 12:19, 18 March 2014 (UTC)

It would help to know what the book is being used as a reference for?Jonpatterns (talk) 14:42, 18 March 2014 (UTC)

I don't even know exactly which parts I may use - but as I know its correct then it would be generally useful as a reference. But from experience, if SPECIFICO says he doesn't like it, then I will have no chance of using it. Reissgo (talk) 16:49, 18 March 2014 (UTC)

What advocacy organization is being referred to? Jonpatterns (talk) 16:54, 18 March 2014 (UTC)

PositiveMoney.org. Actually, there were four authors. One professor from Southampton university, two researchers from the NEF think tank and one researcher from PositiveMoney. I think there's also a forward from Prof. Charles Goodhart. Reissgo (talk) 17:12, 18 March 2014 (UTC)

FYI, Prof. Goodhart says "This book is an excellent guide and will be suitable for a wide range of audiences, including not only those new to the field, but also to policy-makers and academics.". Reissgo (talk) 17:22, 18 March 2014 (UTC)

I'd like to hear more why SPECIFICO objects to this as a source. This review may be informative. The parts of the book explaining the way the banking system works seem balanced. But where they talk of the nature of money they veer into opinion. review. Maybe it is possible to use sources that the book uses? Jonpatterns (talk) 17:25, 18 March 2014 (UTC)

I'd like to hear more too, but that's not SPECIFICO's style. His normal behaviour is to do just enough to give me the message that my edits won't be allowed and then refuses to engage further. With regards using the documents the the book references, well that my be possible, but the effort involved is too great for me. There are not enough hours in the day. Reissgo (talk) 12:05, 19 March 2014 (UTC)

One option is to use a Request for Comments on an issue. This is then advertised on the relevant Wiki projects - with the intention of get more editors opinions. For example, the issue could be 'Is "Where does money come from?" a suitable reference for the "Fractional reserve banking" article?'. Jonpatterns (talk) 14:00, 19 March 2014 (UTC)

You may be right. But first I think I'll wait a few more days and see if we get any more comments. If enough other editors support this reference then maybe it won't matter that SPECIFICO has objected. Reissgo (talk) 17:24, 19 March 2014 (UTC)

The appropriate venue for feedback on your source is the WP:RSN. If you wish to post there, you should first study the relevant policies concerning WP:RS and WP:V. SPECIFICO talk 19:10, 19 March 2014 (UTC)

My inclination is to give up at this point. WP:RSN requires detail about exact statements that I wish to support with the reference, but I haven't established those yet. I just wanted to get the all clear on the reliability of the book in general. If SPECIFICO is against, then he can easily may it virtually impossible to proceed. So I will now give up on that idea. The reference may be good enough for the Bank of England and Prof. Goodhart, but not good enough for SPECIFICO. A pity. Reissgo (talk) 19:55, 19 March 2014 (UTC)

Ok, plan B: How about "The New Lombard Street: How the Fed Became the Dealer of Last Resort" by Perry Mehrling? Is that a reliable source? BTW I haven't read it yet, but I have watched some of Perry's lectures, so I know he supports the loans-create-deposits view. This book serves as "a kind of overall text" for his coursera course "Economics of Money and Banking", which he explains, relies upon primary sources rather than textbooks. Reissgo (talk) 20:28, 19 March 2014 (UTC)

Discuss and ask for wider opinion before controversial edits and reverting

@SPECIFICO, Lawrencekhoo, and Reissgo: looking at the edit history of page there seems to be a lot of edits followed by a reversion. To improve the article discuss changes before editing and reverting. Also if there is a disagreement call for more editors to get a wider opinion. Jonpatterns (talk) 12:01, 25 March 2014 (UTC)

First of all, I am always keen to discuss issues relating to the main page. But IMHO the edits I am making are not controversial. If the Bank of England publishes a document saying "the monetary system works according to method A and, for the avoidance of doubt, does not work via method B", then saying so on the main page is not controversial. If SPECIFICO or anyone else wishes to discuss specific issues relating to my edits, I am ready to discuss. Also, anyone is free to add the "citation needed" tag wherever they feel necessary.Reissgo (talk) 12:12, 25 March 2014 (UTC)

This story of an IOU to be repaid in central bank money is rather virtual and obsolete don't you think? The Basel agreements do not say a word about that to my knowledge. --Pgreenfinch (talk) 17:07, 25 March 2014 (UTC)

If it were an obsolete idea then the BOE would not be labelling broad money as an IOU of base money in a document published only a few days ago. BTW, I have read it elsewhere too. BASEL not mentioning it is of no consequence because their documents are technical ones and would never use such public-friendly language. Reissgo (talk) 17:49, 25 March 2014 (UTC)

Just shows that good old nostalgic BOE speaks for her own parish in "public-friendly" metaphoric language. Should be more "technical", just for credibility, or at least, as you admit that it is figure of style for the public, you should keep the word "consider" --Pgreenfinch (talk) 22:29, 25 March 2014 (UTC)

Ok, I can live with that. Reissgo (talk) 23:28, 25 March 2014 (UTC)

We've been over this many times. Ressigo, you always claim many Reliable Sources that state that this page is wrong and that something else is so. But when it comes down to it, I have not seen a clear statement of i) what it is you think should be on this page, ii) RS that back that view. My suggestion, if you want something on this page changed, rather than complaining about this this page is wrong, state clearly what you want to remove, what you want to replace it with, and what RS back that change. LK (talk) 06:26, 27 March 2014 (UTC)

It appears you missed the recent document from the Bank of England. Read "New important document from the Bank of England" in this talk page. I may have had too little evidence 18 months ago - but new information is being published all the time which supports my case. You should also look at the seven references on the main page in the section "Criticisms of standard textbook descriptions of fractional reserve banking". Reissgo (talk) 10:37, 27 March 2014 (UTC)

I'd also like your input in the talk page section - Reference "Where Does Money Come From". Reissgo (talk) 10:52, 27 March 2014 (UTC)

I notice in your reversion you said my edits were "1) uncited, 2 removed material was cited and long standing, 3) language is not encyclopedic.". Well 1 is simply false. I did make citations - if there are not enough, feel free to add "citation needed" wherever you think its required. With regard "long standing" - well that's not a defence for keeping text that is blatantly and provably false. With regard 3, well feel free to tweak it - I haven't added that many words in total so it should not be too onerous. Reissgo (talk) 15:35, 27 March 2014 (UTC)

Since most of the material that you added contained no citations, and there are citation to RS in the version that you removed, I don't see how a person can reasonably disagree with the statement that your edit removed cited information for uncited material. (The exception is the Turner 2013 citation added for: "It should be noted that many textbooks contain incorrect descriptions of the money creation/destruction process" - which is not a published paper, and hence not RS.) Second, I don't believe many people will disagree that it is unencyclopedic to state in the lead that textbooks are wrong - when this is not backed up in the article itself. LK (talk) 09:21, 28 March 2014 (UTC)

Lets consider your points one at a time:

most of the material that you added contained no citations: First of all the amount of material added is quite small, so you would not expect that many citations. But I did have some, also the links within the text (of which there were many) are essentially citations. I.e. following the links leads to text that backs up what is being said. I have pleaded multiple times for you to tell me exactly which claims in the small amount of text I have written you feel need citations (wiki allows obvious things to go without citations).

there are citation to RS in the version that you removed: In science, theories come and go. They occasionally get disproved. You may remember long ago there were many books which claimed that there were certain separate regions on the human tongue that contained detectors for sweet, sour salty etc. A corresponding diagram was published in a great many books. Years later this was shown to be junk. If that occurred today, then wiki text with RS citations would have to be removed. This is what's happening right now. The money multiplier / lending & re-lending explanation has been revealed as nonsense. Its time to remove it. By the way, you say I have removed RS material, but you also say that my Turner citation is not reliable because it is not a "published paper". I have to say this made me quite angry because a while back I started up a talk section requesting that the citations should be published papers rather than textbooks - but got shot down. It sounds to me that you want a low quality threshold for what qualifies as a RS for stuff you believe and a much higher threshold for me. This shows your bias. Though I have to say I'm not to worried because the sources I've been using recently are of a higher quality that the average for the main page anyway. Indeed my main reference article is from the Bank of England Quarterly Bulletin - it doesn't get any more authoritative than that.

not backed up in the article itself: The claim that the textbooks are wrong is backed up by seven super-high-quality references in the section "Criticisms of standard textbook descriptions of fractional reserve banking". If you think that section needs to be expanded then I'd be delighted to do it. Reissgo (talk) 10:59, 28 March 2014 (UTC)

My recent revert of the lead

I just reverted the lead to an older version and wish to explain why. I am not - in principle - opposed to the material that was recently inserted in to the lead. However, I am in principle opposed to changing the lead without first changing the body of the article. The difference between the two seems to me to be largely one of presentation. However, the older lead is much more accessible, also, the newer version uses unencyclopedic language ("It should be noted that ..."), and contains a couple of incorrect statements (e.g. "with one type constituting a fraction of the total, hence the name"). Finally, it contains a statement that the textbooks are wrong on money creation, but this is not backed up at all in the body of the article. LK (talk) 06:44, 27 March 2014 (UTC)

I put my answer in "Discuss and ask for wider opinion before controversial edits and reverting". Reissgo (talk) 10:50, 27 March 2014 (UTC)

That's not how it works. You gain consensus first, before changing something back, if the change has been objected to. Also, change the body of the article first, before changing the lead. Doing otherwise makes a mess of the article and is bad practice. LK (talk) 09:08, 28 March 2014 (UTC)

For months now SPECIFICO has been the only one reverting my edits - but he often refuses to take part in discussion or takes part for a short while and then stops prematurely. This breaks the BRD model of how wiki works. If we have 'B' then 'R' then refusal to discuss, then the refuser has the power to block changes forever. Your behaviour in refusing to list the claims I make that you think need citations is a form of refusing to discuss. Personally I like BRD, but if neither you or specifico cooperate then what choice do I have? As another example, note that the talk section Reference "Where Does Money Come From" is in need of further comments from both you and SPECIFICO. Reissgo (talk) 11:17, 28 March 2014 (UTC)

I'm disappointed by the decision to reinsert problematic content, without consensus, whilst using WP:BRD as an excuse. That's not how it works. It's not WP:BRRRRRRRwhateverIwantD. If people don't agree with you, the onus is on you to find a better solution or accept the status quo. bobrayner (talk) 12:03, 28 March 2014 (UTC)

Both SPECIFICO and LK are displaying extreme reluctance to do the 'D' part. How about some discussion of the actual content and sources instead of all this wiki-lawyering. I'll give you a starter: the BOE (and others) have stated that the lending-relending / money multiplier story described at length on the wiki main page is BS. What should we do about it? Reissgo (talk) 12:13, 28 March 2014 (UTC)

What are the specific points to mention in the lead

Wikipedia:BRD_misuse What points should be mentioned in the lead, what is incorrect or should be left out? Jonpatterns (talk) 13:23, 28 March 2014 (UTC)

For reference, here's my suggestion..

Fractional-reserve banking is a monetary system in which there are two types of money with one type constituting a fraction of the total. The first type is known as central bank money or base money which is created by the central bank. The second type, known as broad money or demand deposits or simply credit, is both created and destroyed by private banks as they make loans, or their loans are repaid. Broad money is essentially an IOU, from the private bank, of central bank money.[1]

Central bank money can be further subdivided into two components. The first is in the form of accounts that private banks have with the central bank. The second being cash i.e. notes and coins. The sum of the two held by any individual bank, comprise that bank's "reserves"

Banks typically loan out IOUs totalling more central bank money than they possess. This makes them vulnerable to a phenomena known as a bank run. Governments often have guarantees to protect bank's customers in such circumstances.

There are regulations that require that a bank holds a minimum amount of capital and or reserves for any given amount of IOUs it has loaned out. The exact nature of these regulations may be different between different countries and at different times.

Fractional-reserve banking is the current form of banking in all countries worldwide.[2]

It should be noted that many textbooks contain incorrect descriptions of the money creation/destruction process.[1][3]Reissgo (talk) 14:22, 28 March 2014 (UTC)

Various editors have been over this issue countless times, as the talk page archives demonstrate. For starters, the lede must summarize the content of the article. The article must satisfy WP policies with respect to RS, V, and UNDUE. Riessgo, if you wish to know why the community has rejected your preferred text, please review the archives where many patient editors have explained the issues to you. Thanks. SPECIFICO talk 17:19, 28 March 2014 (UTC)

There has been a steady stream of papers and articles supporting my case, with ZERO counter-papers. Surely the latest BOE paper has to be the straw that breaks the camels back. Surely there is no higher authority... is there?

The weight of the arguments on both sides of the debate is now different to what its was in the "countless times" previously, so what may have been agreed in the past is no longer applicable.

I object to your suggestion that what I have put is O.R. without actually stating which particular claims you think are unsupported. Reissgo (talk) 18:33, 28 March 2014 (UTC)

The trouble with Reissgo

Given that the endogenous money battle seems to be heating up again and there may be some arbitration / third parties getting involved who may feel swamped by the amount of information involved in this multi-year battle, I decided to write a very compact cartoon history of events as I see them, as a reference, here.— Preceding unsigned comment added by Reissgo (talk • contribs)

You can put me on your shit -list too as I have just reverted your change. Above, Specifico asked why there are no economics textbooks that present the endogenous theory on a par with the money multiplier theory. As far as I can see, you failed to answer his question. — goethean 13:15, 29 March 2014 (UTC)

Ok, how about "Where does Money Come From" by NEF and "The New Lombard Street: How the Fed Became the Dealer of Last Resort" by Perry Mehrling. Also it doesn't matter if its not in any textbooks, so long as it is in even better sources, i.e. peer reviewed papers and or journals of central banks to name but a few. Reissgo (talk) 16:18, 29 March 2014 (UTC)

Additionally, I think that you've misrepresented the debate in your presentation of it on your page. Above, users have asked you pertinent questions about your addition which you have refused to answer. You omitted this aspect of the debate from your recounting of the debate. — goethean 13:22, 29 March 2014 (UTC)

I haven't followed the debate closely, but I think I have seen seemingly reasonable edits by Reissgo be reverted with no convincing arguments. At times it made me wonder if there was a hidden agenda at work, perhaps to suppress mention of some branch of libertarian thought. Martijn Meijering (talk) 13:38, 29 March 2014 (UTC)

With regard "pertinent questions about your addition which you have refused to answer" - it is not my intention to avoid answering any pertinent questions. If you think I have left something critical unanswered, feel free to prompt me and I will answer it right here in my next edit. Reissgo (talk) 16:25, 29 March 2014 (UTC)

I just noticed that there are currently SIX sections in this talk page where I am the last one to add a comment... This is evidence that its the other editors that are running away from arguments, leaving questions unanswered, not me. Reissgo (talk) 16:28, 29 March 2014 (UTC)

Those "last comments" in each case were condemnations rather than questions or comments so your inference is not supported. Please undo the last reinsertion of your text. SPECIFICO talk 16:59, 29 March 2014 (UTC)

My last comment in 'Reference "Where Does Money Come From"' is a question for which I have not gotten an answer. Reissgo (talk) 17:08, 29 March 2014 (UTC)

Ditto "Suggested new lede" Reissgo (talk) 17:10, 29 March 2014 (UTC)

So long as there is no prospect of discussing the actual edits themselves on their own merits, rather than wikilawyering, I have no intention of undoing my edits. Reissgo (talk) 17:13, 29 March 2014 (UTC)

The so-called "endogenous money" theory you "support" (ie.e., advocate) is a minority position at best. The very name "fractional reserve banking" makes it clear that the system is designed suv\ch that banks can only lend money based on the amount they have on reserve; that is to say, there is a ceiling on the amount they can lend which is a multiple of the amount on reserve.Ubikwit ^連絡 _{見学/迷惑} 11:08, 30 March 2014 (UTC)

In practice, with compulsory reserves that are limited nowadays to 0% or 1% of deposits, depending on the central bank, this fractional rule is just obsolete or at best theoretical or symbolic. Modern banking regulations (Basel III) use a set of more varied and sophisticated criteria. To freeze a sizable portion of deposits in the central bank would not bring safety, but on the contrary bring a risk of illiquidity --Pgreenfinch (talk) 15:30, 30 March 2014 (UTC)

What's helps improve Wikipedia articles is to find and present WP:RS references and to discuss the article content such references might support. SPECIFICO talk 16:04, 30 March 2014 (UTC)

Hard to find references on something that disappeared. Better admit that this article is about History, not actual practices, which are referenced by the way (Basel III and asset liability management. How come those articles do not even include the good old "fractional" word ? --Pgreenfinch (talk) 16:28, 30 March 2014 (UTC)

Hard to find references on something that disappeared.

There's no logical reason why that would be the case. Unless you are implying some sort of Bermuda Triangle situation. — goethean 18:01, 30 March 2014 (UTC)

What has disappeared? Not fractional reserve banking. There are many many WP articles on various topics which relate to banking practice, regulation and theory -- including a few cited above. Banks don't lock up reserves equal to their deposits. That is how banks operate. That operation is called fractional reserve banking, and this article is about that method and system. With due respect to others who have posted here, I suggest you have a look at standard mainstream texts and other materials on the subject before spending too much time on what appears to be soapboxing and OR by a self-published author with a pet theory and a faulty understanding of both banking and WP policy. SPECIFICO talk 18:16, 30 March 2014 (UTC)

I just took a quick look at the Asset liability management article. Note the tag. It's not clear what the context or subject of that article is intended to be. It's almost entirely without references. SPECIFICO talk 18:30, 30 March 2014 (UTC)

I dont see how you can define "how banks operate" on the basis of that ancient notion of reserves at the central bank, something that has largely disappeared in practice like steam engines did. It is not the only WP article that relies on old platidudes. OK, I will not fight windmills, but don't be surprised if some other contributors will go on raising controversies --Pgreenfinch (talk) 20:23, 30 March 2014 (UTC)

Fractional reserve banking is an ancient phenomenon. It does not entail central banks, regulation, etc. Last I checked, banks still had capital ratios, reserves and other steam engine stuff. SPECIFICO talk 20:53, 30 March 2014 (UTC)

Yes, various balance sheet criteria to ensure solvency and liquidity. Fractional reserves that would freeze a portion of the deposits are not such criteria (well, central banks used them for their own profitability, as usually they were interest-free deposits for them). As it is an ancient theory, why not say it instead of pretending that it is how banks work ? --Pgreenfinch (talk) 12:21, 31 March 2014 (UTC)