Somebody has to if you want companies to be able to raise capital and carry on forming new businesses and employing people etc. It's your choice whether you prefer that or the moths and rust.
Hard times aren't as safe as good times, all around.
Hard times aren't as safe as good times, all around.
Investors get paid to take risks. The less risk you want, the less you get paid, and there is a point at which you're taking so little risk that you get paid less than you lose to moths and rust. During hard times, the level of risk required to get a positive return is higher.
Alice, Bob and Carol come into the bank and each take out a $5000 loan. The bank credits each of their accounts with $5000, but there is still only $5000 in their vault, so now they have 25% reserves. As long as the reserve requirement is below 25%, this is fine. If the reserve requirement was 30%, they couldn't make that many loans.
With a 0% reserve requirement, they could loan your $5000 to a million different people and have 0.000001% reserves and still be allowed because 0.000001% is more than 0%. They could send you away and the bank manager could deposit a dollar and they could make unlimited loans from it. They have no use for your money.