The Money View: Shadow Banks and Narrow Banks

The video discusses narrow banking in the American context, focusing on the instability caused by fractional reserve banking. It explains how banks expand credit and money and proposes narrow banking as a solution by eliminating loans and holding reserves or treasury bills. This separation of private credit from money aims to stabilize the financial system.

What is the primary concern of those proposing narrow banking?

• The high interest rates charged by banks

• The instability caused by fractional reserve banking

• The lack of digital banking options

• The excessive regulation of banks

How can banks expand their lending according to the transcript?

• By expanding their deposits

• By acquiring more assets

• By increasing their interest rates

• By reducing their reserves

What do proponents of narrow banking believe will stabilize the financial system?

• Increasing the number of loans

• Severing the connection between credit and money

• Reducing the number of banks

• Increasing government intervention

What are banks allowed to hold under the proposed narrow banking model?

• Corporate bonds

• Treasury bills

• Foreign currency

• Real estate

What is the expected outcome of severing private credit from money?

• Increased bank profits

• More bank mergers

• Greater financial system stability

• Higher inflation rates