100% reserve banking

In any event, the gold reserves held by central banks has nothing to do with fractional reserve banking properly so-called nor with backing the currency the government or the central bank issues. That was abandoned a long time ago.The term "fractional reserve banking" was originally coined to describe the policy, pursued by governments in the 1950s and 1960s, of trying to control the amount of bank lending by varying the proportion ("fraction") of their assets that they were required to hold as cash and/or some other liquid asset ("reserves"). This was later abandoned in favour of trying to control bank lending by manipulating interest rates instead. Now they are trying to control it by imposing limits on what banks can lend by only allowing them to borrow money to re-lend up to a proportion of their own capital. Which of course is a recognition of the fact that this is what banks do — borrow money to relend, not create it out of nothing as the currency cranks claim

Positive Money are trumpeting a claim that a couple of articles in the latest issue of the Bank of England's Quarterly Bulletin back up their theory, in particular the second, which argues:

They seem to have ignored the word "simply" as well as this passage in the article which explains that banks must have or get the funds to back up their lending, even if these don't all come from deposits that savers place with them:

This is a good enough description of how modern banks work, though it is not clear that "attract" is the right word to describe how the "other liabilities" are acquired since these will be what the bank itself borrows, "liabilities" being what the bank owes others (as opposed to what others owe them, or "assets"). So, from this angle, banks are "intermediaries" between those who lend them money and those they lend money to, even if it is not as "simple" as that.    

Graeber overstates his case that bank loans are essentially IOUs. They can be seen as this from one point of view but this doesn't mean that banks can issue IOUs at will without being able to cover them. A bank which did this would soon go under, as the Bank of England article explicitly explains.He distorts what the article says when he writes:

Most of the article is devoted to describing in detail the various limits to banks' lending (including having to find new outside deposits or loans from other banks and others to remain profitable) which are well below what people want to borrow.

This is pure currency crank nonsense. What a bank or building society lends to someone to buy a house is covered by assets which really exist, whether from "the life savings of some thrifty pensioners" or from what the financial institution has itself borrowed at a lower rate of interest. Graeber needs to explain what banks do do with savings people deposit with them if they don't re-lend them. The Bank of England article says:

Graeber seems to have deleted the word "simply".

Can you not offer us a little taster in the way of an excerpt from it? Knowing Aufheben i expect it is extremely wordy and i don't expect you to transcribe it…just a little extract to highlight it will do. 

This is just common or garden currency crankism, as even Positive Money would recognise. Article 123  of the Lisbon Treaty is the favorite bugbear of French currency cranks after one of them, Etienne Chouard, made a big issue of it in the referendum in France on the Treaty in 2005 where he played a prominent part in the Non campaign.The Article merely confirms the long established practice where governments borrow (to finance their spending over and above what they raise through taxation) via central banks selling bonds to commercial banks and other financial institutions (which of course is not "money creation" as it assumes that the money to buy the bonds already exists) .What it bans is central banks simply creating money and giving it to the government to spend, even if this takes the form of the central bank lending the government the money. But this hasn't happened in developed capitalist countries for ages and is only practised these days in countries like Zimbabwe and certain South American banana republics (and even oil ones like Venezuela). The currency cranks want this to be practised here too. It's not just them of course but all leftwing reformists. They ought to be careful about what they wish for.

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Marx’s Response to Dr PriceIf capitalists seek compound interest, why doesn’t Dr Price’s formula totally overwhelm us all?Marx responds¹  “The process of accumulation of capital may be conceived [if you really want to conceive it this way] as an accumulation of compound interest [only] in the sense that—the portion of profit (surplus-value) which is reconverted into capital, i.e. which serves to absorb more surplus-labour, may be called interest.  But …” [Marx reveals the processes that limit the accumulation of capital.  As a scientist, he must draw upon his underlying theory, as developed in Capital Volume 1.  There he explains interest as one of several forms of surplus-value.  Consequently, the special form interest must also, like general surplus-value itself, ultimately depend upon the division of the social working day into necessary and surplus labour times.  This is Marx’s crucial theoretical insight.  The following explanation is therefore a crucial test of Marx’s theory.²]“Aside from all incidental interference, a large part of available capital is constantly more or less depreciated in the course of the reproduction process, because the value of commodities is not determined by the labour-time originally expended in their production, but by the labour-time expended in their reproduction, and this decreases continually owing to the development of the social productivity of labour.”“On a higher level of social productivity, for this reason, all available capital appears to be the result of a relatively short period of reproduction, instead of [the result of] a long process of accumulation of capital.”“As demonstrated in Part III of this book³, the rate of profit decreases in proportion to the mounting accumulation of capital and the correspondingly increasing productivity of social labour, which is expressed precisely in the relative and progressive decrease of the variable as compared to the constant portion of capital.”“To produce the same rate of profit after the constant capital set in motion by one labourer increases ten-fold, the surplus labour-time would have to increase ten-fold, and soon the total labour-time, and finally the entire 24 hours of a day, would not suffice, even if wholly appropriated by capital.” [Here, by the way, Marx is calling on external determinisms — that of the astronomically-limited working day and that of the biologically-limited working day that intrude crucially upon the capitalist mode of production — in addition to the determinisms inherent in the capitalist mode of production itself.]⁴“The idea that the rate of profit does not shrink is, however, the basis of Price’s progression and in general the basis of ‘all-engrossing capital with compound interest’.”“The identity of surplus-value and surplus-labour imposes a qualitative limit upon the accumulation of capital.  This [qualitative limit upon accumulation of capital] consists of the total working-day, and the prevailing development of the productive forces and of the population, which limits the number of simultaneously exploitable working-days.”“But, if one conceives of surplus-value in the meaningless form of interest, the limit is merely quantitative and defies all fantasy.”Notes¹ Capital, Volume 3 Chapter 24 is stunning.  It begins “The relations of capital assume … their most fetish-like form in interest-bearing capital.  We have here M — M′, money creating more money, self-expanding value, without the process that effectuates these two extremes.” ↩ [Back]² The exponential growth of profit creates an insuperable problem for the Sraffians, whose 1960s conception of Marx demolished Marx in the 1970s, and held sway to the end of the 20th century, until the TSSI school restored Marx’s original conception of his work.  The Sraffian school, following Ricardo, are “physicalists” in the sense of equating profit with physical goods.  On their conception, if profit grows exponentially then physical goods must also grow exponentially, and our Universe must fill up exponentially with Sraffian products, bulkier than Dr Price’s shillings.  [None of this is intended to denigrate the fine scholar Piero Sraffa himself, who remains the skilled editor of the collected works of David Ricardo.] ↩ [Back]³ Capital, Vol. 3, Part III.  The Law of the Tendency of the Rate of Profit to Fall. ↩ [Back]⁴ Autonomous robots, that in imagination work continuously for free — and so escape astronomical and biological determinisms — create a terminal problem for capitalism.  They render surplus labour-time meaningless; they thereby annihilate profit.  The fact that they produce goods of zero value, and so of zero price, is merely incidental to the terminal crisis they pose, if we ever get that far, for the capitalist mode of production. ↩ [Back]