> Imagine the fallout if banks suddenly had 100% reserve requirements. No more loans, for business or otherwise. Everyone would be charged hefty fees to keep th

> Imagine the fallout if banks suddenly had 100% reserve requirements. No more loans, for business or otherwise. Everyone would be charged hefty fees to keep their money in the bank, and no interest at all on their deposits (not that there's much to speak of nowadays anyway). Nobody would go for that. Good comment and I'm upvoting you, but you're actually describing classical banking. Under classical banking, there's two different kinds of banks - "deposit banks" that you pay fees to hold your money for you which you can get whenever, and "loan banks" where you can only collect your money at certain times that pay interest (it works similarly to a bond). We're in a system that's mixed - a "savings and loan banking" system. The problem is that your money is both loaned out, and you can collect it at any time. When too many people do this, it's a bank run, and the bank goes bankrupt leading to lots of problems and turmoil. To make this system work, you need a central reserve bank and fiat currency that can be printed. Unfortunately, this inevitably gets abused by some unfrugal government sooner or later, leading to the country's financial system going through hell and back. Historically, every fiat currency has eventually gone down to zero value. I think classical banking could work in the modern era - separating out into savings banks and loan banks. Interest rates would go up, and there'd be less speculative buying. It'd smooth the boom/bust cycle, at the expense of some growth during booms. I think it could work, but yeah, it'd be very different than things are now.