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I've heard this question posed many times, and it simply is a myth. A 100% reserve requirement would mean that a demand deposit simply becomes a gold store (or whatever the currency is). You leave your gold there for security and convenience, but here's the thing: you'd probably have to pay a fee to keep it there. So the institution makes money there. So that bank would have a little money to loan.
Is that enough capital investment? Not at all. What's forgotten is the concept of time deposits. Demand deposits could not be loaned against, but time deposits can (if the risk is mentioned beforehand). These would probably secure a very nice interest rate (extra nice if you consider the fact that doing nothing with the money means you lose money because of the protection and storage fees).
This then, would be the source of loans. You can save some money for a fee, and use some other money at an institution that you trust to get some interest. This denies the possibility of a bank run and gets you capital investment which directly corresponds to time preference.
Alternatively, you could also have a blending of time and demand deposits whereby you could just give your money to an institutions from which you can withdraw any time and from where you can earn interest, as long as the risk is known beforehand. Of course, not everyone would be able to withdraw from this bank at the same time, so this type of company would probably give themselves a very high reserve requirement to avoid a run.
Is that enough capital investment? Not at all. What's forgotten is the concept of time deposits. Demand deposits could not be loaned against, but time deposits can (if the risk is mentioned beforehand). These would probably secure a very nice interest rate (extra nice if you consider the fact that doing nothing with the money means you lose money because of the protection and storage fees).
This then, would be the source of loans. You can save some money for a fee, and use some other money at an institution that you trust to get some interest. This denies the possibility of a bank run and gets you capital investment which directly corresponds to time preference.
Alternatively, you could also have a blending of time and demand deposits whereby you could just give your money to an institutions from which you can withdraw any time and from where you can earn interest, as long as the risk is known beforehand. Of course, not everyone would be able to withdraw from this bank at the same time, so this type of company would probably give themselves a very high reserve requirement to avoid a run.