Note that this has exactly nothing to do with whether you are on a Gold Standard nor does it have anything to do with fractional reserve lending. In fact the Depressions of both 1873 and the 1929/1930s occurred while on "hard money". A gold standard (or any other "hard" currency) will do nothing to stop this, because the problem has never been the fiat nature of currency - it is the fact that credit is being extended without collateral beyond the actual cash reserves of the institution in question.
Monday, October 05, 2009
"One Must Never Lend Out More Unsecured Than One Has In Excess Capital"
Excellent Denninger tutorial on the principles of sound banking. He makes a good case against the idea that fractional reserve banking is at the root of our troubles. He summarizes: