Comment: An armchair analysis of fractional reserve banking

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An armchair analysis of fractional reserve banking

Without it we would probably have much lower growth and less opportunity to do what we want with our lives.

I agree that it is fraudulent in a way that the bank can lend out credit it does not have to many people from their deposits and if the depositors all decide to collect they would end up losing their money.

But if you know the risks of lending/depositing with a bank like this then you should get the returns you deserve. The bank and its executives should also be held accountable for any losses so that it reduces its risk of this kind of event occurring.

The interesting point about fractional reserve banking is that if someone deposits $100,000 in their local bank and the bank then lends out $100,000 to 9 people to build homes in the neighbourhood then this has actually allowed for more wealth in the world (in the form of houses) and then justifies its being lent (assuming none is wasted).

Lord Acton, Lord Chief Justice of England, 1875 - "The issue which has swept down the centuries and which will have to be fought sooner or later is the People v. The Banks."