Private, voluntary Fractional Reserve System

Let's say I deposit 1000 grams of gold into a 90% reserve bank for safekeeping purposes. This is a special kind of bank that only takes deposits and loans out money. It doesn't have cheques nor inter-account transfers nor bank notes representing the gold in the deposit accounts.

They lend out up to 100 grams of physical gold for 20% interest per year. This will cover the maintenance fees for my deposit and it will also pay me 1% yearly interest on my total deposit (10% on the loanable portion).

If I want to use any of the gold I have deposited to pay for something, I have to go to the bank and withdraw the physical gold. As long as there's reserves in the bank, they will give me any amount of gold that I wish to withdraw from my account. If 90% or more of the gold from deposit accounts is withdrawn at any point, the bank will obviously have run out of gold, and then a number of things could be done depending on a previously agreed upon contract.

I thought of 2 basic things that can happen:


1) The customer will have to wait up to a year until the loans come back and the bank is able to pay them back, possibly with an added premium for the trouble.

In this circumstance the depositor is taking a risk in the sense that they may have to wait up to a whole year without being able to access their gold, in the case that there is a bank run.

And if they were willing to take that risk, then why didn't they just loan the money out for full interest? I know I would.

But some people like the idea of being almost sure that they'll have their money for whatever they wish to spend it on, get a small interest on the side, and take the risk of having the money frozen for up to a year.


2) The bank will take loans from other banks, quite possibly having to pay more than 20% yearly interest rates, to pay back the depositors in real time.

If the bank is making 5% profit a year on all the money that they loan out, and it costs them 25% to borrow it in case there's a bank run, then as long as they can expect a bank run to occur less than once every 5 years, they'll be making a profit. And because every deposit is guaranteed, there is little incentive for a bank run.


You could also have some combination of the two systems. Like for example, the bank could guarantee to pay back 50% of the gold once reserves have been drained and make the depositors wait for the other 50%. You could also have insurance to cover the deposits.


Can you find a reason why this system would be inflationary, fraudulent, or otherwise redistribute wealth in a way that is not intended by the parts involved?