Like it or not, we’re moving towards full reserve banking.

 

 

There are three reasons for thinking we're moving towards full reserve. First, Central Bank Digital Currency looks like it’s now near inevitable. China is to trial CB DC in a few cities in the near future: see article entitled “Major Chinese cities plan large-scale tests of digital currency in 2021” in the Global Times.  

Second, one of the few half decent justifications for deposit insurance and hence for fractional reserve banking is that provides people with a totally safe form of money. But once CBDC is in place, there is then no need for safe money to be provided by private/commercial banks.

Third, and thanks to QE, there has been a vast expansion in the amount of central bank created money (base money) in circulation in Western countries, and under full reserve, base money is the only form of money. In fact according to this Fed chart, Fed issued money now exceeds the amount of privately created money in circulation.

This will all be a big disappointment to the opponents of full reserve, e.g. Ann Pettifor and Charles Goodhart. .