There's no more reason to ban the practice of fractional reserve banking because it can go wrong any more than there is reason to ban ownership of guns because they can be used to murder innocent people. The problem is, like always, a LACK OF COMPETITION. So no, SOCIALISM with it's never ending amount of state borrowing is what got us into this mess. Government intervention in the housing market is what got us into this mess. Government monopolization of the banking industry is what got us into this mess.
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Rather than questioning it, you're just trying to twist history and reality to fit your presupposed idea that there's something inherently wrong with fractional reserve banking, which is why, as iamnotback said, you are simply "conflating orthogonal issues".
Just because a theft is a minuscule spread across millions of victims does not make it any less of a theft. Fractional reserve steals purchasing power aka value.
The banks are allowed to create multiple simultaneous claims which cannot be simultaneously honored to the benefit of themselves and favored insiders. The value of all of the other money in the economy drops when ever this is done. The prime beneficiaries are both the bank who collect interest and the borrower who is the first to access this created money and can spend it before the effects of its creation can percolate through the economy. The ultimate consequences of this is an increasing distortion of the underlying signaling mechanisms in the economy.
Credit creation makes it appear as if the supply of "saved funds" ready for investment has increased, for the effect is the same: the supply of funds for investment purposes increases, and the interest rate is lowered. Borrowers, in short, are misled by the bank inflation into believing that the supply of saved funds (the pool of "deferred" funds ready to be invested) is greater than it really is.
In an environment where the money supply is continually expanding via debt, entrepreneurs mistakenly conclude that investments are really available for long term projects when in fact the pool of available funds has come solely from artificial credit creation consumer demand is artificially and unsustainably elevated.
In a fractional reserve system based on a tangible asset like gold. The banks will quickly cease lending in a downturn fearing that the reality of their
multiple simultaneous claims will be exposed in a "run on the bank". This leads to a critical economy wide liquidity shortage. In a system built on fiat we instead get super bubbles and collectivism.
Fractional reserve increases the supply of money to the benefit of the early receivers, that is, the government, the banks, and their favored debtors or contractors. Monetary inflation is thus a method by which the banking system, and favored political groups, are able to partially expropriate the wealth of other groups in society. Those empowered to control money issue new money to their own economic advantage and at the expense of the remainder of the population.
In
The Foundations of Contentionism the argument is made that top-down oppression and control plays a necessary role in the process of knowledge creation. New knowledge facilitates the gradual relaxation of top-down control in a virtuous cycle. It is not feasible to ban usury as it is critically intertwined throughout all aspects of the modern economy. Instead of outlawed it must be outgrown.