How could they issue loans? 10 x 10$ deposits means you can loan 100$? Where as the modern way is more like 100$ in deposits means you can lend out 1000$ because chances are everyone won’t not pay it back? And then can’t you say that since you’ve lent out 1000$ and chances are you’ll get paid back, you’ve basically got 1104.56$ and so can lend out 10k$? And then you bundle those together and sell them to each other depending on what ratio of income to cash you want?

Apologies if no one was meant to answer that.

Doesn't stop a run

10 people put $10 in your bank. You give someone a loan for $50 and leave $50 in the vault. 7 of your customers take $10 out, you are screwed.

Depends. If they take it out electrically, send it to another bank then it just shows up as debt in a database from bank A to bank B. Cash is dirty and boring nowadays.

This doesn't apply to certificates of deposit as depositors agree to not withdraw their money until a specified point in time.

Especially in contemporary times banks make money in an immense amount of ways that don't involve touching customer funds: debit transaction fees, international exchange rate "adjustments", ATM fees, the million 'special processing fee' type fees, and so on. In other countries I've even had to pay a fee when depositing, which was quite odd.

Of course this all is going to pale in comparison to the amount that banks make by d̶u̶m̶p̶i̶n̶g̶ ̶c̶o̶n̶s̶u̶m̶e̶r̶ ̶f̶u̶n̶d̶s̶,̶ ̶h̶e̶a̶v̶i̶l̶y̶ ̶l̶e̶v̶e̶r̶a̶g̶e̶d̶,̶ ̶i̶n̶t̶o̶ ̶h̶i̶g̶h̶ ̶r̶i̶s̶k̶ ̶a̶s̶s̶e̶t̶s̶ responsibly investing deposits. But of course banks under '100% deposits maintained' type systems could then engage in more typical behavior with their own funds above and beyond what's made from deposits. Under such a regime no bank would ever be "too big to fail", customer deposits would be 100% guaranteed at all times, and more. In exchange you'd see substantially slower overall economic growth and monetary multiplication, but I'm increasingly convinced that would not have been a bad thing.

> In other countries I've even had to pay a fee when depositing, which was quite odd.

That's normal for business banking I think. Trucking cash and coins around isn't free, that stuff is heavy.

The Medicis couldn’t loan money at interest— that was usury—so they made money by charging a fee for allowing customers to deposit at one place and have the money available in other locations. That was not considered usury

It’s amazing how long this goes back. ATM transactions fees are stupid high, and now I have someone to blame.

I don't believe the claim that non-fractional reserve banking would actually slow economic growth.

Is real economic growth even determined by anything but technological development?

Of course, the economy can be made to "grow" by some slight of hand, like having a high inflation rate while pretending that we don't. Or by depleting natural resources. But that's not the kind of growth we want.

Some loans go to businesses so they can buy a new widget-making machine, employ more operators, and profitably sell widgets. Economic growth in action!

Other loans go to people who were going to buy a doodad after saving up for 12 months, who instead get the doodad immediately and pay for it for 14 months. That looks like economic growth, because in month 1 doodad sales have risen. But if the sale would have happened anyway, the 'growth' is lot more debatable IMHO.

So if no one got those loans, what would have happened to the resources they bought? What would've happened to the resources that went into building the widget making machine? What would have happened to the operator employees? Would they've disappeared? Most likely they would've become available to another investor who did not get the loan but also wanted to build a widget making machine.

Did the loan actually increase economic growth? I think the only reasonable answer is: Yes, if the bank issuing the loan had a better idea than the market about the future profitability of the investment. However, that doesn't seem very likely to me.

>Is real economic growth even determined by anything but technological development?

That is just the end result, the question is how do you get there? How do you organize an economy to reach that outcome in the most optimal way?

Okay, I agree, that's the question. So how does fractional reserve banking contribute to that organization?

It helps if you take a deep breath.

> Where as the modern way is more like 100$ in deposits means you can lend out 1000$

More like 20,000$, but yes.

Yes, they still issued loans. Louisiana banks weren't true "narrow banks" but were much tighter regulated with much higher reserve requirements than other states at the time (or today). This was a reaction to the financial crisis of 1837.