While I applaud the aim to replace conventional banking with a better system, this proposal is based upon misconceptions.

In very few banking systems are reserves a constraint. The fact is that banks create credit instruments/modern money first and THEN spend (often missed) or lend this modern money at interest.

The constraint is the cushion of bank capital - set by the Bank of International Settlements in Basel - which underpins their implicit guarantee of their loans to borrowers.

Note that an enormous amount of credit - which underpins a great deal of retail goods and services - is created by credit card systems such as Mastercard and Visa.

There are no deposits in these systems.

Note also that Switzerland created in 1934 in the WIR a complementary currency/credit system which - if updated - would be an infinitely preferable approach to this regrettably flawed proposal...albeit a proposal with its heart in the rights place.

The fact of the matter is that in a networked economy there is a need for banking-as-a-(risk management) service, but not banks-as-(risk) middlemen.