Comment: Your argument doesn't make sense though...

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In reply to comment: No, I don't know better. (see in situ)

Your argument doesn't make sense though...

You do realize, that without the bank, less houses would be built because people who would never have had enough savings to buy one outright would never own one without the bank giving them the loan. So in reality the actual number of houses built and homeowners are increased by the bank making loans.

The loans are made from money which in your ideal world would just be "warehoused" and doing nothing. When banks make loans in a free banking system, real savings are used to fund things that otherwise would never have happened and as a result the wealth of the nation will increase.

Canada's banking system from 1880 to 1900 didn't have the same issues ours did and they had fractional reserve banking. They had competing banks issuing banknotes.

See page 10 fig 2 of:

The issues we had were due to the ban on branch banking which meant banks could not diversity their loans in other locales/regions and they were much more fragile and prone to failure as a result. Also, the federal requirements that banks hold $1.10 in treasuries for every $1 banknote they issue caused a chronic shortage of banknotes.

On the other hand Canada didn't have these regulations and as a result they didn't have the same panics we had and they didn't have a shrinking monetary supply, but rather one that adjusted for market demand (harvest season etc.).

Also all major depressions were created by government/quasi-government agencies never fractional reserve itself. We had no "Great Depression" until central banks came along, and before that any obscene increase in credit was also fueled by government fiat money, not private competing banks issuing banknotes and making loans with real savings.

You've yet to explain how you claiming that fractional reserve in itself is fraud is not accusing people of committing a crime when none may have necessarily occurred. How are you not implying using force against those who would make a voluntary agreement is how this should be handled if you declare it is "fraud"?

If the depositor knows the bank is loaning out his savings and he's getting paid interest on it, I can't see how any rational person can call this in itself "fraud".