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First of all, Facebook isn't doing fractional reserve. Secondly, banking regulation does nothing to mitigate the risk of fractional reserve banking. Your avera

First of all, Facebook isn't doing fractional reserve. Secondly, banking regulation does nothing to mitigate the risk of fractional reserve banking. Your average bank holds maybe 10% of deposits, the rest is loans way into the future. No such bank can survive a bank run. What does mitigate the risk (for the average bank customers) is the government insurance for bank deposits. A government can always print the money necessary to bail out a failed bank. What such a bailout could do to a currency is another story. Let's just say we got lucky. In any event, the government wants the banks to loan out all this money, because that's economic stimulus. You can't have both tight regulations and easy money.

viraptor 7y ago
> Facebook isn't doing fractional reserve I think a better description would be: Facebook says that right now they're not planning to do fractional reserve. There's nothing holding them to this promise. There's also no control that their partners in Libra will keep it. It may well be the same situation as tether (or worse).
- gridlockd 7y ago
  > There's nothing holding them to this promise. There may be, the exact terms aren't clear yet. Of course the terms might just say "you have no rights whatsoever". The market will price those terms in. > It may well be the same situation as tether (or worse). I don't think that's a good argument against Libra. Tether is still trading around 1.00$, despite its reserves being at best 74%. The market is pricing the risk of ending up as bagholder as next to nothing. Nobody is arguing that holding large amounts of Libra as a "store of value" is a wise thing to do. Neither is storing large amounts of cash under your bed.