Part of the reserve bank is out of date

Bitcoin makes fractional reserve banking an obsolete technology, and Bitcoin wallets are the best 100% reserve banks imaginable.

Text | Pierre Rochard. Fractional Reserve Banking is Obsolete. 2013/2/22.

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In "Money, Bank Credit and the Business Cycle", a theoretical treatise on the Austrian business cycle, Jesús Huerta de Soto establishes the inevitability of economic crises where fractional-reserve banks exist.All that remains for monetary scholars is to analyze past crises and lobby governments for the right reforms.Fortunately, for the first time in history, we are in the enviable position of not having to wait for reforms that may or may not bring sound money.I'll explain why here.

My favorite part about the Bitcoin network is not that it makes society freer, more prosperous, or more just.My favorite part is that it will finally settle one of the longest-running debates in the history of economics: whether money printing and cheap credit are needed to spur growth.

The Austrian School knows that artificial credit expansion inevitably leads to mispricing and misallocation of capital, whether in separate fractional-reserve banking operations or in collaboration with central banks.At issue is the moral legitimacy of fractional-reserve banking, with one party arguing that lending out deposits is inherently fraudulent, while the other arguing that deposits are a particularly liquid loan.

By depositing, you can improve the safekeeping and custody of your funds and gain access to other peripheral services (cashier and bookkeeping services) while maintaining full availability of your funds at all times.You rely on this service to reduce the transaction costs of using your gold, silver or government paper.Bitcoin has great service built into it.

1. Mathematically speaking, there is no better custodian or safe custodian than an encrypted digital wallet.If you use strong passwords, back up your data, and protect your computer, your bitcoins will be more secure than you are personally.

2. Bitcoin is the ideal cashier: it can be used anywhere in the world with an internet connection, it can give unlimited change, and it can transfer funds to any account almost instantly.

3. Distributed, immutable blockchains put banks' bookkeeping and check clearing systems to shame.

With this perfect security and total convenience, you have no reason to deposit money with a third party.In other words, Bitcoin makes fractional reserve banking an obsolete technology, and Bitcoin wallets are the best 100% reserve banks imaginable.

As Bitcoin adoption increases, we will finally be able to "empirically verify" what the Austrian school has been arguing about for decades: 100% reserve banks and a scarce medium of exchange can prevent speculative mania, financial crises, and economicdepression.

“What is needed for the robust expansion of production is additional capital goods, not money or trust media. The credit boom is built on the quicksand of paper money and deposits. It must collapse.”

—— Ludwig von Mises

Public Number: Liu Jiao Lian

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