# Has Full Reserve banking worked anywhere in the last 200 years? **URL:** \ **Category:** Factual Questions\ **Created:** [April 1, 2012, 2:27am UTC](https://boards.straightdope.com/t/has-full-reserve-banking-worked-anywhere-in-the-last-200-years/617431 "2012-04-01T02:27:59Z")\ **Posts on this page:** 3\ **Page:** 2
**Author:** ![dracoi](https://avatars.discourse-cdn.com/v4/letter/d/90db22/32.png) [@dracoi](https://boards.straightdope.com/u/dracoi)\ **Post date:** [April 14, 2012, 10:14pm UTC](https://boards.straightdope.com/t/has-full-reserve-banking-worked-anywhere-in-the-last-200-years/617431/21 "2012-04-14T22:14:42Z")
> [@septimus](#): > > My question is: Is this confusion about the nature of money a recent phenomenon, or was I just out-of-touch throughout much of the 20th century? I think you were just out of touch. Most people don’t even know what the word “money” means and they know even less about how it is created, managed, etc. Just look at all the questions on this very forum from people asking things like “When my house/stock lost half of its value, where did the money go?” Most people who are in favor of getting rid of the Fed have no clue how the system works. They’re just operating from the assumption that government=bad. Or that the Fed is a front for the Illuminati. To kind of go back to the OP: Fractional reserve banking is really the natural state of banking in an unregulated system. If anything, it’s the governments constantly pushing to keep some kind of reserves in place because it’s expensive for banks to have money on hand when they could be lending it out. Full Reserve banking as a tenet of libertarianism strikes me as making about as much sense as Hitler celebrating Passover. (Yes, I know it would limit the government’s influence/control over the economy in some ways, but it would also require a ruthless death grip over banking practices to enforce full reserve banking.) ---
**Author:** ![Linden\_Arden](https://avatars.discourse-cdn.com/v4/letter/l/53a042/32.png) [@Linden\_Arden](https://boards.straightdope.com/u/Linden_Arden)\ **Post date:** [April 14, 2012, 10:40pm UTC](https://boards.straightdope.com/t/has-full-reserve-banking-worked-anywhere-in-the-last-200-years/617431/22 "2012-04-14T22:40:49Z")
Actually perhaps the most important person in libertarianism wrote this: > [@](#): > > Given this dismal monetary and banking situation, given a 39:1 pyramiding of checkable deposits and currency on top of gold, given a Fed unchecked and out of control, given a world of fiat moneys, how can we possibly return to a sound noninflationary market money? The objectives, after the discussion in this work, should be clear: (a) to return to a gold standard, a commodity standard unhampered by government intervention; (b) to abolish the Federal Reserve System and return to a system of free and competitive banking; (c) to separate the government from money; and (d) **either to enforce 100 percent reserve banking on the commercial banks, or at least to arrive at a system where any bank, at the slightest hint of nonpayment of its demand liabilities, is forced quickly into bankruptcy** and liquidation. While the outlawing of fractional reserve as fraud would be preferable if it could be enforced, the problems of enforcement, especially where banks can continually innovate in forms of credit, make free banking an attractive alternative. Murray Rothbard ---
**Author:** ![Roadfood](https://avatars.discourse-cdn.com/v4/letter/r/9fc348/32.png) [@Roadfood](https://boards.straightdope.com/u/Roadfood)\ **Post date:** [April 15, 2012, 3:47pm UTC](https://boards.straightdope.com/t/has-full-reserve-banking-worked-anywhere-in-the-last-200-years/617431/23 "2012-04-15T15:47:13Z")
> [@Rysto](#): > > I’m sorry, but that’s nonsense. Fractional reserve banking means that banks only keep a fraction of their depositors’ money as reserves, and lend out the rest. The net effect of this is money creation, but that’s because the money that lends out gets re-deposited in a bank, a fraction of which is lent out again, etc, etc. > > However, an individual bank cannot take a $100 deposit and loan out more than $100. It’s impossible; they don’t have the money. The banking system can, assuming that the loaned out money returns to the banking system as deposits. It sounds like you didn’t fully read **Darth Panda** ’s post and his example. While the wording you quote is admittedly ambiguous, the example makes it clear that he meant exactly what you said. [Previous page](https://boards.straightdope.com/t/has-full-reserve-banking-worked-anywhere-in-the-last-200-years/617431.md?page=1)