I'm not defending the system. I am merely pointing out what the system is. You can't ignore it, and I've yet to see people actually rebuke the points I've made.
Secondly, fractional reserve banking, as Ron Paul and YOU probably see its what is taught in all economic textbooks. From high school to college. That is what is considered the truth. Yet the empirical evidence doesn't back that up.
Banks don't "loan out" deposits. Banks use deposits to buy US government debt, meet reserve requirements, and fulfill balance-of-transfers. Literally, any perusal of a bank asset and liability sheet should show this. If that isn't enough, look at how the ratio of money supply/credit to reserves is not at all consistent. If you need even more proof about federal debt representing income, look at the yearly statements for private savings, federal government debt, and the external deficit. You will find that they net to zero.
And, it makes a lot of sense. Why didn't QE cause massive expansion of the money supply? Why do huge government deficits not cause huge inflation? Why did private sector savings go down when Clinton balanced the deficit? Why is it there are is no correlation between reserves and money supply? Why has confidence in US debt been so high despite so much of it? Why did the US credit rating going down coincide with a decrease in the yield on treasury bonds? Etc. etc.
Plan for eliminating the national debt in 10-20 years:
Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a