Bernanke on fractional reserve banking

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Trianglechoke7 Posted: Wed, May 14 2008 8:14 AM

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I was watching the video of Ron on Fox Business channel yesterday, and they had a quote from Bernanke that said this:

"... An excessive preference for  liquid assets reduces societies ability to fund longer term investments that carry a high return but cannot be liquidated quickly."

see it at 2:22 --> http://www.youtube.com/watch?v=txhabgZF_gE&eurl=http://www.lewrockwell.com/blog/lewrw/archives/020977.html

What's the response?

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nhaag replied on Wed, May 14 2008 10:43 AM

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My answer would be :

a) societies do not have any abilities to fund investments whatsoever.

b) I can not understand what an excessive preference is? A preference is a preference.

c) I have the idea this is meant to keep those worthless mortgage assests hold by banks in the books rather than trying to sell them at cheap prices and to write off the rest. So  if someone likes to sell  houses on forclosure to safe at least some of his money, he has an excessive preference for liquid assets.

d) I might be totally wrong