Quote from: jbreher on September 07, 2014, 01:19:21 AM

Quote from: bambino on September 06, 2014, 11:06:07 AM

I cannot believe so many "free market" people are against this idea. If this is what consumers want, someone should provide it, for a fee. More to the point, lending is important, especially when buying a house. Fractional reserves allows others to earn interest on their savings.

I cannot believe so many people accept this idea.

Here's the issue: by making fractional reserve loans, the banks are creating money out of nothing. Then they lend this newly created out at interest. This money that cost them nothing. The increase in the money supply reduces the purchasing power of every bit of money that existed before the loan was made. This reduction in purchasing power is a very real theft of very real wealth from each and every person that held money at t=0-.

And who benefits from this theft of wealth? Temporarily, the loanee. But by the first payment, the bank is receiving net positive income from this stolen wealth.

Theft is theft. Whether by gunpoint or by fractional reserve banking.

Fractional reserves are not free to banks. The bank must pay it's deposit holders and bond holders interest on the money on deposit and lent. When a bank lends money to someone, they need to make sure they are an appropriate risk and price the loan accordingly. When a borrower falls behind on their payments they need to make collection efforts to collect what is owed by the borrower. All of these things cost money.