reflection on 2 years of learning

I have a better understanding of economics since my article about Ben Bernanke's first 60 Minutes interview, back in the Spring of 2009. I understood the basics of "fractional reserve banking," but now I have a much better understanding of it (I forget if I simply wasn't paying close attention while writing the article, or really didn't know what it was called- as I referred to it as "fractional banking", leaving out the "reserve").

I no longer take the opinion that fractional reserve banking, in itself, is fraud. Fractional reserve banking, combined with government-subsidized insurance for depositors (the FDIC) and a central bank which serves as a lender of last resort to the banks, fractional reserve banking is very dangerous and evil. Fractional reserve banking as a tool used by private banks in a free-banking system, though, has in fact been successful in the past. Professor Lawrence White discusses free banking and its successes. Some Austrian economists, as I understand, talk about how any fractional reserve banking creates distortions in economic production. It's possible that this is the case, but Professor White addresses this question toward the end of the linked video, around 1h 22m. I'm not gonna go into a whole rant on our economic system in this blog post, I just wanted to clarify my current ideas on banking from my former, unclearer ideas.

And for other ideas in and behind the article:

Although the Community Reinvestment Act was bad and unconstitutional legislation, I no longer take the view that it was significant in the housing and financial crises. Of course it didn't help, and it probably hurt on the margins, but there are many other much larger contributors and underlying causes. Chances are there are more people who have been foreclosed upon now in communities which otherwise would have been red-lined (people instead of just not having homes now don't have homes and have poorer credit).

I still agree with my basic premise that helicopter Ben was either completely clueless or lying his way through the entire interview. It's possible that it's a combination of both, that he is merely lying about his confidence in what the Fed can do.