Reply to post: @patrickstar - "the rest is being loaned out"

$67M in bitcoin stolen as hacking typhoon lashes Hong Kong's Bitfinex

DougS Silver badge

@patrickstar - "the rest is being loaned out"

And that's what is responsible for most of our economic growth over the past century. If banks could only loan money they actually had on hand they couldn't loan much at all - basically only the excess that shareholders had put in as capital. They could only loan out deposits that were made in the form of CDs or other vehicles that were time denominated. No way to loan out your savings or checking account funds, and still preserve the ability for you (and any other depositor) to withdraw it whenever you feel like it.

Not that there aren't some issues with fractional reserve banking, but those who advocate eliminating it (not saying you are one of those, just speaking generally) don't understand economics at all. The world economy would collapse and be thrown into a depression that would make the 30s look like the 20s within a year, as loans became almost impossible to get no matter how good your credit or how much collateral you have.

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