People can't directly submit txns because they are too expensive due to limited space.  So coin used for spending must be held by larger institutions who handle payments internally, and periodically make blockchain transfers among themselves.  These institutions will inevitably go fractional reserve even though they claim they won't.

Congratulations, you've reinvented the gold backed banking system of the 19th century!

The true value that Bitcoin brings to the table is not "everyone gets to write into the holy ledger", it is instead "everyone gets to benefit from sane and non-inflationary financial instutions whose sanity and honesty are ensured by the holy blockchain".