Quote from: inashed on Today at 07:08:21 PM

Does fractional reserve banking alone, enough to cause with 100% certainty, price inflation?

Yes, but it is limited, at least according to my understanding.

A reserve ratio of 10% would multiply the money supply by a factor of 9. A reserve ratio of 1% would multiply the money supply by a factor of 99. With a fixed base money like Bitcoin, there will be inflation when the reserve ratio drops and deflation when it rises.

This source of inflation is limited because a lower reserve ratio increases a bank's risks of failure. A bank wants to stay in business, so it is motivated to keep its reserve ratio at a sustainable level, thus limiting it contribution to inflation due to FRB.

On the other hand, there are many factors that reduce these incentives, which is why we continue to see banks fail today. A government wanting to increase the money supply could potentially insure banks so that they could reduce their reserve ratio to dangerous levels.

Also, keep in mind that the level of FRB is not completely determined by the reserve ratio. In the U.S., the minimum required reserve ratio is effectively 0 now, but the level of FRB as measured by M1, M2, M3 ... vs. base money does not reflect that. Furthermore, if you assume that the portion of the bitcoin supply held by banks will much lower than that of fiat, the level of FRB will be even lower simply because there will be fewer bitcoins for banks to loan.