Advantages
There are many advantages to full reserve banking. Here are a few of the main benefits:- The entire reserve banking system encourages banks to increase lending at an unsustainable rate when the economy enters a growth phase, and consumer and corporate confidence rise. A more considerable multiple funds deposited in current accounts is loaned out to support this lending.
- Lowered GDP results from the misallocation of resources caused by artificially low-interest rates and credit expansion.
- The total reserve minimize the possibility of a bank run by ensuring banks can satisfy depositor demands even if every client requests a withdrawal at the same time.
- A massive reduction in the national debt, as a large portion of the interest-bearing assets that banks currently hold are government/treasury bonds or the national debt. Therefore, acquiring these assets with the freshly generated money described above would substantially lower the national debt.
- An economy that controls inflation also avoids the inequitable redistribution of wealth that results from the inflation tax, which results in a more equitable distribution of income and wealth. A fairer distribution of income and wealth can be achieved and maintained by avoiding periods of high inflation because the wealthy are well-equipped to profit from them. At the same time, the general public is far more susceptible to their effects.
