by eru | 2026-01-07 03:42:05+00:00
You are mixing up a lot of different ideas and concepts.

Historically, the combination of fractional reserve banking and the classic gold standard was very successful. Just because your bank uses grams of gold as the unit of accounting (or something that's effectively equivalent to grams of gold), doesn't mean they need to have that much of gold in their vaults. Similar to how today a bank will give you dollar bills when you ask for them, but that doesn't mean they need to have their vaults stuffed full of dollar bills. They just need enough solid assets to sell for dollars, so they can give you dollars when you want to withdraw. (Having some gold or dollars on hand is just a convenience, so you don't have to wait for the bank to liquidate assets.)

About narrow banking: there's at least two different definitions of the idea. What your website describes might be called 100% reserve banking. The website is a bit silly: you can already get 100% reserve banking today, if you want it.

The website is also extremely misleading and dishonest about fractional reserve banking. You can eg just follow their own link to the Bank of Amsterdam and read up on it.

The second definition of 'narrow banking' can be seen at eg https://en.wikipedia.org/wiki/Narrow_banking

> Narrow banking is a proposed banking system that would restrict commercial banks to hold only safe and liquid assets, like government bonds, against customer deposits, while prohibiting traditional lending activities. Under this model, banks would function as custodians and payment processors, separate from the lending function performed by other financial intermediaries.

This is like a normal fractional reserve bank, but the only asset they invest in is government bonds. This can still go wrong, if you are not careful: Silicon Valley Bank invested mainly in government bonds, but had a maturity mismatch. Their long term government bonds lost in value (because market interest rates went up), so they went bankrupt. Alas, they still got bailed out.

You can approximate this kind of narrow bank for yourself, by just putting your money either in government bonds directly, or into a money market fund that only invests in government bonds.

> [...] I feel like debating that even America itself would benefit from if less foreign nations held US treasury bonds.

In what sense would America benefit? On an inflation adjusted basis, foreigners often get a negative real interest payment, ie they lose money, for the privilege of lending to the US. That seems like an extremely good deal for America.

> There already are some gold pegged stablecoins and theoretically with things like revolut or some instant way to sell crypto without too much hassle/losses and transfering it easily, its rather possible to do such.

Wise offers to keep your money in a fund and they transparently sell your fund shares, when you are buying a coffee with your card. They transparently buy fund shares, when money comes into your account.

See https://wise.com/help/articles/3luodUQFD9YWzNc8PvIfVK/holdin... and https://wise.com/sg/interest/ and https://wise.com/help/articles/74dYRhMCItIf2IBJLTpFQs/how-do...

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Addendum narrow banking in the sense of only holding government bonds:

I think that should be legal for banks to do, and in fact it's a good argument in favour of eliminating deposit insurance. At least the (explicitly or implicitly) government backed deposit insurance that you have eg in the US. It creates a moral hazard where the incentives for monitoring risks are all but dulled.

People who still want the equivalent of deposit insurance should just put their money into a bank that only invests in short term government bonds: after all, a government backed deposit insurance can't really be safer than these short term government bonds anyway.