Technically 90% of the loans ARE created out of thin air. So for every dollar in deposit, they can loan out $9 more. You are woefully uninformed about he banking system.
I know how fractional reserve banking works. You clearly don't. For every dollar in
reserve, they loan out $9 more, from a total of
$10 in deposit.
If I pick up an random hobo off the street and pay him to remodel my house instead of a qualified bonded contractor, is it the hobos fault or my fault for making that investment when it goes wrong?
It is your fault for making the investment, but the hobo's fault for it going wrong, and you can sue him for that. Of course, you likely won't get much, which, more than anything else, is what makes it a bad idea.
It is the primary responsibility of the investing party to due due diligence upon the borrowing party.
That responsibility is to the investor himself. He has a responsibility to make a profit, and that means not making loans that are likely to go bad and lose him money. The fate of the borrower is not his responsibility at all.
If I file for a loan that I shouldn't be approved for, and my bank falsifies my paperwork and gets me the loan anyway, how is that even an enforceable contract let alone something one should be imprisoned for?
Because even if a contract is invalid, it is invalid for
both parties. If the borrower was never supposed to receive the loan, then the lender was never supposed to give it, which means the money loaned is the lender's property and must be returned. Keeping property that doesn't belong to you is theft.
Being poor should never mean a loss of your human rights.
You cannot lose a right you never had in the first place. Nobody, poor or not, has a right to borrow money without paying it back.