4 ms·

I agree. I don't understand why the entire population of the world should be a slave to a clearly broken fractional reserve system. What is stopping someone fro

I agree. I don't understand why the entire population of the world should be a slave to a clearly broken fractional reserve system. What is stopping someone from creating banks that take ZERO risk but just let people park money for a fee?

lotsofpulp 4y ago
Because bank operations cost money, and given that the federal government guarantees deposits of $250k per bank per account holder, it makes no sense to patronize a bank that will charge depositors to use the bank, plus offer less interest compared to a bank that offers free services and more interest.
temptemptemp111 4y ago
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armada651 4y ago
There's nothing stopping anyone from creating such a bank, but in economic times with high interest no one would put their money into a bank that doesn't pay interest as they would have no hope of keeping pace with inflation. Also, if every bank operated in this way then no one would be able to get a loan and debt drives the modern economic systems. Meaning no one would be able to make investments based on debt anymore, at least not with a loan from a bank.
cykros 4y ago
Banks can hardly get people to park their money in them right now because of the fact that they don't pay ENOUGH interest -- everyone's been pulling money out to jump into money market mutual funds with their liquid cash, or short term fixed income products where they can afford to tie it up for a few months. I suspect the short answer is "lack of demand."
tome 4y ago
It's called "narrow banking" and apparently it doesn't make things as safe as you might think. Here's some reading: https://www.cato.org/sites/cato.org/files/serials/files/regulation/1991/4/v14n2-5.pdf https://www.cato.org/sites/cato.org/files/serials/files/regu... https://www.johnkay.com/2011/06/02/should-we-have-narrow-banking/ https://www.johnkay.com/2011/06/02/should-we-have-narrow-ban...
- nine_zeros 4y ago
  But it could be an option? I imagine there is a market for it. No one is asking current banking to be abolished but at least there should be an option for people who want to keep their money away from fractional reserve.
  - tome 4y ago
    Seems reasonable to me. I'd probably use it!
nathanaldensr 4y ago
I had heard somewhere that the Fed doesn't allow for narrow banks to exist. I haven't verified this for myself, however.

lotsofpulp 4y ago

Because bank operations cost money, and given that the federal government guarantees deposits of $250k per bank per account holder, it makes no sense to patronize a bank that will charge depositors to use the bank, plus offer less interest compared to a bank that offers free services and more interest.

temptemptemp111 4y ago

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armada651 4y ago

There's nothing stopping anyone from creating such a bank, but in economic times with high interest no one would put their money into a bank that doesn't pay interest as they would have no hope of keeping pace with inflation. Also, if every bank operated in this way then no one would be able to get a loan and debt drives the modern economic systems. Meaning no one would be able to make investments based on debt anymore, at least not with a loan from a bank.

cykros 4y ago

Banks can hardly get people to park their money in them right now because of the fact that they don't pay ENOUGH interest -- everyone's been pulling money out to jump into money market mutual funds with their liquid cash, or short term fixed income products where they can afford to tie it up for a few months. I suspect the short answer is "lack of demand."

tome 4y ago

It's called "narrow banking" and apparently it doesn't make things as safe as you might think. Here's some reading: https://www.cato.org/sites/cato.org/files/serials/files/regulation/1991/4/v14n2-5.pdf https://www.cato.org/sites/cato.org/files/serials/files/regu... https://www.johnkay.com/2011/06/02/should-we-have-narrow-banking/ https://www.johnkay.com/2011/06/02/should-we-have-narrow-ban...

nine_zeros 4y ago
But it could be an option? I imagine there is a market for it. No one is asking current banking to be abolished but at least there should be an option for people who want to keep their money away from fractional reserve.
- tome 4y ago
  Seems reasonable to me. I'd probably use it!

nathanaldensr 4y ago

I had heard somewhere that the Fed doesn't allow for narrow banks to exist. I haven't verified this for myself, however.