Comment: Fractional reserve ONLY happens at the central bank level ...

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Fractional reserve ONLY happens at the central bank level ...

... it does NOT happen at the local bank down the street.

Think about it: if ALL banks could do it, then no bank would EVER become illiquid. It would be impossible.

The Cypriot banks became insolvent because their managers were boneheads and invested their depositors' money on Greek debt. Once enough people figured out the banks were insolvent, there was a run on the banks, making them illiquid. If they could just print money, that would have been impossible.

Only central banks print money through fractional reserve. I'm not saying that's good or bad, but it MIGHT happen in a free market. It's just that it would be transparent, or people would go elsewhere.