Quote from: bitCooper on December 03, 2012, 12:52:42 AM

Why would a professional lender not do fractional reserve lending?

There are a variety of possible reasons. One would be if that's not what the market wants. There's no point in offering a product nobody's buying. Another is that it's risky for the lender. If they make unwise loans, they can lose everything. And even if they do everything right, a run can bankrupt them.

On the other hand, if the market demands a fractional reserve (say because people insist on being paid interest and aren't willing to pay storage fees), then a bank or asset holder will have not choice but to do fractional reserve lending.

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I would never say that a lender is unhealthy just because they have a fractional reserve[.]

I agree that a lender is not unhealthy just because they have a fractional reserve. A lender is unhealthy if their assets (including loans) don't significantly exceed their obligations (including deposits). A lender is also unhealthy if the value of its assets are overstated, for example, if many of the loans are shaky.

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[R]ipple would facilitate it.

That remains to be seen. I think it's very dangerous to assume any particular model will win out. You're trying to do the equivalent of predicting how people will use the Internet 20 years from now, and Ripple makes other models possible.

For one thing, with interest rates as low as they are now, it's not clear a fractional reserve actually makes sense. Of course, interest rates probably won't be this low forever.