Comment by Ekaros
14 hours ago
You do not even need fractional banking for this. Same thing could happen without it. Someone lends money and is unable to pay it back. Both sides pretend that things will eventually go well. As at least on paper they have not lost anything until prices are realised.
Without fractional banking the bank needs to be way more cautious when appraising an asset and be more conservative with the future gains estimation. Decreasing speculation and inflation of value.