Quote from: JoelKatz on March 18, 2013, 10:26:49 AM

Quote from: rpietila on March 18, 2013, 09:42:56 AM

Well, if their current account contract says that you can withdraw any amount anytime, and they do not possess the capability of making good of such a promise, it IS fraud.

No, it's not fraud. We all understand under what circumstances the bank can and cannot keep that promise. It's not a secret.

The contract is saying that you can request a withdrawal at any time. It is totally obvious that the bank can't process a withdrawal if they don't have the money. They could add that clause to the contract, but there would be no point -- everyone understands that already.

This is the tradeoff we choose to make in exchange for an account that bears interest, rather than paying someone to lock our money in a vault. It's a good deal for the depositors. (Unless the government decides to renege on it, but that could happen without fractional reserves.)

There is no fair tradeoff in a situation along the lines you argue because interest bearing accounts are required for not having your money inflated into oblivion.
When banks that are supposed to be invested in long-term stable investments start falling over because of sub-prime mumbo-jumbo you know that you're being fooled and that the actual risk, or tradeoff as you call it, is misrepresented by said banks.
As it turns out, it is a good deal untill the invisible piramid collapses.