The plan that would have made banks hold every deposit

A closer look

Fractional reserve banking is basically a legal magic trick where a bank takes your deposit, loans out 90% of it to someone else, and hopes you don't both want your cash back on the same day. Following the horrific bank runs of the Great Depression, a squad of prominent economists pitched the 1933 Chicago Plan. Their demand was brutally simple: banks must hold 100% of deposits in reserve. If you deposit ten bucks, the bank literally keeps ten bucks in the vault. It would have completely stripped private banks of their superpower to create money out of thin air, which is precisely why the financial lobbying sector made absolutely sure this legislation died a quiet, miserable death.