Fractional Reserve Banks vs Full Reserve P2P

I do have concerns with Fractional Reserve Banking (FRB) and would have welcomed further thinking about changes at the time of the last review into banking. However I feel that you are much more likely to lose your money investing in P2P or holding cash in FFrees (never heard of it until tonight) than I am keeping (less than £85k - one benefit of the fall in the £) in RBS, Lloyds et al.

As for P2P:-

i) the founder and flag-bearer has just applied for a banking license;

ii) many platforms are already borrowing long short and lending short long; and

iii) many platforms look more like banks by the day.

I still invest here.



Edit: stupid mistake in point ii.

BG, I agree: P2P lenders hold no reserves per se, but nor do they conjure debt into existence & perpetuate the Ponzi scheme.

I'd imagine all forum members here have worked hard for their money & understand just what it takes to build up a nest egg.  But what about fractional reserve lenders?  They've undergone no such hardship.  They simply conjure money into existence & lend it at interest.  If the loan goes bad, it's no great shakes for them, they'll just create more money & lend that.  We, on the other hand, will have to work x number of extra hours to make up what we've lost.  The people on this forum appreciate money because we know how hard it is to attain.  The banks on the other hand...  Goes some way towards their cavalier attitude, does it not?

I'd also agree that we have benefitted from the fractional reserve model, but some have benefitted more than others & there are millions more who are now enslaved by it.  And just how much have we really benefitted?  In the early 70s, households required a single breadwinner, & that was enough to (on average) pay all of the bills & even set some aside for saving.  Today, we have two or even three income households who still have to borrow to make ends meet.  That is not an increase in the standard of living.  Elizabeth Warren's book "The Two-Income Trap" explores this in detail.  I think it's an excellent read & I'd encourage all forum members to peruse it.

The problem, as I see it, is that almost all money is created as debt.  This works great for those who can create it, but it simply enslaves the rest of us.  You want more money: you have to have more debt.  Fractional reserve banking has served its masters very well for a long time, but it is unsustainable &, above all, immoral.  The government does not need to borrow from private banks.  It has the sovereign power to create debt free money in the interests of the people, rather than the interests of privately owned banks & their shareholders.  The fact that we don't do that (I think) says a lot about who really runs the country.  If you're not already aware of them, check out Positive Money who are doing some sterling (pardon the pun) work raising awareness in this regard.

I seem to have gone off track a little here.  The point I was trying to make is that I see the P2P model as a far more equitable system in that you can only lend what you have already worked hard to attain.  And we can ALL do that.  We can't all just print money for our own benefit & to the detriment of wider society (thankfully).  Let the democratically elected government control the money supply & expand (or contract) it as needed.  Then let's have a full-reserve banking model to oil the wheels of industry.


Anyway, I believe the original question was, do P2P lenders see the P2P model as a selling point (i.e. more equitable system) over established F/R lenders.

But they don't though.  The banks can't simply create money.  They can only lend out money they have (through deposits, or borrowing).  It's not a Ponzi scheme...for every asset there is a liability.  I think what you are trying to say is that banks should not be allowed to make loans and that debt should not exist.  That would mean no-one could get a mortgage - and the majority of people in this country could never buy a house.  No-one could buy a car on credit, get a loan to decorate their house etc etc.  Small companies would have next to no access to finance.  All banks would be able to do would be to take deposits and leave them as central bank reserves earning 0.25% interest - in fact banks would cease to exist, there would be rioting and the end of civilisation as we know it.

I also disagree with many of your other points.  Money is a debt, it's a store of value - if you hold a £5 note then the BOE 'owes' you £5.  Money is not immoral.  Living standards have increased massively since the 1970s...how many people had TV's then (or several for that matter), electrical gadgets, dinner in restaurants, 2 or more family cars, or foreign holidays or even could afford meat with every meal?

If it wasn't for money and debt we will still be stuck in the middle ages.

Uhhhh ? If you are referring to anything other than central banks then I'm not sure its the average man/woman on the street that one should be directing the comment  "... won't know what fractional reserve banking is".


you mean along the lines of e.g. Zimbabwe ?

I think i must be rather misunderstanding your intended meaning.

If you haven't read it, please read the Bank of England report "Money Creation in the Modern Economy" (published 2014).  Or you'll find Positive Money's take on it here:-


positivemoney.org/how-money-works/proof-that-banks-create-money/

So their proposal is to ban debt.

If someone wanted money to buy a house, car, to build a factory, research a new product etc etc then they would have to apply to the government for some 'free' newly created money.

I can see that going well.