One objection I hear to 100% reserve banking is that without fractional reserves, there simply wouldn’t be enough loans made to foster economic growth (I would like to avoid the debate about whether fractional reserves are legitimate or not on the free market). While I’m not particularly swayed by this argument, I’m curious to know what percentage of total loans are actually made in the US economy based off fractional reserves. For instance, me loaning some money to a friend or buying a bond would constitute a loan not based on fractional reserves, but a bank loaning out depositors’ money would. If anyone knows the answer to this or can point me in the right direction I would be very appreciative.
Although I don’t know the specific percentage of loans based on fractional reserves, I suspect the percentage is quite high. On the other hand, I’m not sure that statistic would be particularly meaningful in any event because it would not mean that the elimination of fractional reserves would eliminate those loans. Rather, the loan market would simply be fed by other sources, such as venture capital. Those other sources exist even under the current system, and there’s every reason to expect they would continue to exist and in fact become more prevalent upon the elimination of fractional reserve bankinig.
Aaron Spurling
“On the other hand, I’m not sure that statistic would be particularly meaningful in any event because it would not mean that the elimination of fractional reserves would eliminate those loans.”
I agree. I just thought it would be easy to show that fractional reserve banking isn’t as necessary as most people think it is if it can be shown that most loans don’t originate from the fractional reserve process.
97.67%?