Mortgages are illegal?

Gentoo365

zagfles wrote: »

:rotfl:What a surprise! Of course most people are aware of it, maybe not the actual term "fractional reserve" but they'll be aware that banks will lend out a large fraction of the amount which savers deposit.

I hear the whole 'banks make up money' or 'banks lend multiples of what they have' all the time.

Some people genuinely think a bank can just 'make up' money. What they don't reason is the 'fractional reserve' just means that a fraction of savers money is not invested or lent out.

People who promote the idea of 'getting rid of the fractional reserve system' are basically suggesting that banks keep 100% of the savings money either in a safe, or in a deposit account at the Bank of England.

Which they could do. However this would mean that if you wanted to buy a house you would have to save up the full amount. Also interest rates on savings would be less than 0.5%, the exact amount depending on the cost of admin fees and staffing.