[notShabu]

It's the only way to keep society working. Most of the money that exists today (over 90%) is actually bank IOUs kept in their database and is what people see when they log on into their accounts.

Without a fractional reserve system, the liquidity that drives all economic activity grinds to a halt as everyone fights over the few remaining real dollars rather than managing their deployed capital.

Banks basically act to multiply the amount of money in the world today by creating promises about the future that act as a bridge that moves money from the future into the present. That money then flows into restaurants, dog walkers, software engineers, etc... Inflation is kept in check b/c the promises force the money to be paid back to the bank via monthly loan repayments.

Banks that only hold short term reserves or cash equivalents like Brex don't act as this multiplier. Going forward it's likely small banks will move towards this model as only the big banks that are too big to fail (b/c they are necessary as multipliers) can afford to take on the risk of longer term investments or creating loans.