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Since all businesses must make a profit to survive, a bank’s ability to make a profit sets its ability to stay in business. Modern, fractional reserve banks make their profits in a multitude of ways: fees, profits from investing people’s deposits, and other collections they receive. Since a fractional reserve bank makes its profits from investments by using other people’s money (even without them knowing it), I don’t believe it is a moral profit.

A full reserve bank, on the other hand, is not allowed to use your deposits to make itself money, without your approval and commitment to also taking a risk. If you deposit US$10,000 in a full reserve bank, the bank has to be able to pay you your US$10,000 on demand, as well as all other depositors if they want their money as well. A fractional reserve bank would have to borrow money from other banks, or the Federal Reserve, if everyone wanted their money — a fractional reserve bank doesn’t have to actually save your money from loss.

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