For example, Person (A) deposits $100 into Bank XYZ. Bank XYZ loans out $90 to Person (B). Person (A) still has $100 in their checking account but now Person (B) has $90 in their checking account. Bank XYZ has $10 in reserves. Ninety percent of our inflation comes from fractional reserve banking..
Commercial/deposit banks will no longer add to the money supply through fractional reserve banking. When Person (A) deposits $100 in Bank XYZ, then Person (B) borrows $90 from Person (A) then Person (A) will have $10 and will be owed $90.
So if I understand you correctly you're suggesting that no-one can borrow money unless that loan is 100% covered by deposits ?
So bank A has 100 customers each depositing $10 into savings (and presumably they would have to keep additional funds for their daily needs which can not be lent out). 5 people come along and each borrow $200 to buy a house.
Where does the sixth person go for their mortgage ? Where does the local storekeeper go to get his trade financing ? Oh look, here comes Intel who wants to borrow $2000 to build a semiconductor plant, which they will pay for out of future cashflows. Guess they will just have to go offshore to a sensible banking system and take those jobs with them.
Seems like a good way to derail an economy.
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