How can a bank lend money if they have to keep 100% reserves?
Banks will be encouraged to continue their loan activities by re- lending money that has been deposited with them, or lending their capital that has been invested with them. In effect they will no longer be allowed to re-lend any credit that has been deposited with them. New bank accounting rules designed by the Monetary Authority will determine how this is accomplished. Perhaps by computer tagging credit so that when it gets deposited into a bank account it is recognized as a deposit of credit, not a deposit of money. Only deposits of money will be loan able. The process could be similar to the way Swiss and other banks computer tag accounts as in $, Francs, Euros or Yen, etc. Other accounting rules for accomplishing the same objective can also be devised. Various types of accounts will have differing requirements: e.g. matching time deposits to loan durations. Money market type accounts can be very flexible. The principle applied will be to encourage good lending, but prohibit money
