That's not how it works. Fractional reserve of 10% means that $100 of deposits could theoretically turns into over $900 (The central bank loans $100 to you, you can then loan $90 to Pete, Pete can then loan $81 to Sam, Sam loans $73 to Gill, etc.). Here's an example of how it works (for 20%):
That's why people talk about banks being too big too fail now. If one bank fails, where do the loans go? No-one can pay off the loans immediately as they all only have 10% of the assets. So we can't call in all the loans. But another bank can't afford to buy the failed banks assets as they would have to up their reserve, but that money doesn't exist any more as the original bank is bust.
One large bank failing would mean a huge chunk of theoretical money would just, poof, disappear.
That's why some people say it's fraud, etc. Not that I'm agreeing one way or another, but $100 of deposits is worth much more than $90 in the system.
Here's a table showing the total money that could theoretically enter the system for each fractional reserve percentage:
https://en.wikipedia.org/wiki/Money_multiplier#Table
That's why people talk about banks being too big too fail now. If one bank fails, where do the loans go? No-one can pay off the loans immediately as they all only have 10% of the assets. So we can't call in all the loans. But another bank can't afford to buy the failed banks assets as they would have to up their reserve, but that money doesn't exist any more as the original bank is bust.
One large bank failing would mean a huge chunk of theoretical money would just, poof, disappear.
That's why some people say it's fraud, etc. Not that I'm agreeing one way or another, but $100 of deposits is worth much more than $90 in the system.
Here's a table showing the total money that could theoretically enter the system for each fractional reserve percentage:
https://en.wikipedia.org/wiki/Fractional-reserve_banking#/me...