It reduces the bitcoin supply for everyone else.

Conventional money is not meant to be a precious commodity whose value changes according to supply and demand.   It has a supply that grows with demand and matches the overall economy.  Creating money to match the demand of the economy is a good thing because it maintains the buying power of money relatively constant (slowly diminishing, on purpose).

I watched half of the movie "Money as Debt" that has been mentioned in this forum a few times.
The movie says that money is created when somebody signs a loan.  The banks create the money for the loan out of thin air.
This seems perfectly reasonable to me.  First of all, a house is not exactly "thin air".  The bankers create money out of houses.  The money supply matches the value of tangible goods that are in the money market.  I admit that I didn't follow all the details, especially the ones that indicate that the interbank loans multiply the money supply many times, but I'm just commenting on this one idea of creating money in exchange for tangible goods.

If I put my house on mortgage for $100k, there is $100k of money created to represent the value of the house that I just put in the money market.  I put goods in the market => there is corresponding amount of money created to represent these goods.  If another person mortgages an identical house, they will get the same amount of $ for it (which will also be created).  If the value of goods that are in the money market doubles, the money supply will also double so that prices will remain constant (excluding a small amount of inflation).

Contrast this with the fixed-money supply of bitcoin:  If I put my house in the market for 1000 bitcoins, I'm reducing the bitcoin supply by 1000 bitcoins.  Bitcoins get scarcer and their value relative to goods (my house) increases.  The next person who mortgages an identical house for bitcoins will receive fewer bitcoins than I did.  We both put in the same amount of goods but we get different amounts of bitcoin, depending on who made the transaction first.  Does this seem a fair exchange system?

The value of 1 bitcoin increases as people use bitcoins more.  The people who hold bitcoins get richer (on paper at least) by holding on to their bitcoins and doing nothing at all.

Which of the two systems seems like a bigger scam?

You talk of bitcoin as if it were an investment commodity (and many others in this forum talk about it and use it that way).  In that case, yes, there's no problem.  Trade whatever you want and see what happens.  It's a trading experiment.

But bitcoin is marketed as a currency and a currency needs to have some universality to be successful.
How would transactions for tangible goods and services happen with mutliple digital currencies?  Would merchants accept a number of them, like they do now with credit cards, or would there be some automatic way to exchange a digital currency for another on the fly?

I also think of the bitcoin community as a social network.  There are a few social networks, but the ones at the top have established themselves and it's difficult to dethrone them because of the network effect.  On the other hand, there are things like telephone operators, which have found a way to interoperate seamlessly by using common protocols.  So I can use the telco of my choice and you can use the telco of your choice, and I can still call you and talk with you on the phone.

Excellent answer!!!  Bitcoin is teaching some internet business skills!

I thought the rightful owners lend their money to the bank and earn interest.  The banks in turn lend this money at higher-risk loans and earn higher interest.

That was my next question, but doesn't it deserve a new topic?

Who makes such centralized decisions?

Then the federal reserve wins.  They are not going to hand out the newly printed trillion to the masses for free.  They will use it to buy something (maybe buy back federal debt).

While reading the interesting tale of the guy who mines bitcoins and then destroys them:
https://bitcointalk.org/index.php?topic=26539
,

I figured out what happens to such destroyed bitcoins and all lost bitcoins:

Well, of course the value of the lost bitcoins is distributed to the remaining bitcoins.
That is one more interesting property of bitcoin.  One may lose a bitcoin, but its value is not lost to the community.

Does conventional cash have this property?
If I burn a number of dollar bills, would the value of the remaining dollars in circulation increase?

My guess is that if I burn a dollar bill, the value of that bill goes back to the U.S. government.
This seems more democratic than what happens to a destroyed bitcoin.
With bitcoins, the people who have more bitcoins benefit more from a lost bitcoin.
With dollars, it's the government who benefits, and the government belongs equally to each citizen (theoretically).

Don't advise me to try this out and see what happens.  I'll try it as a thought experiment.
Ok, I secretly burned a trillion dollar bills.  I lost a fortune.  But who wins?

I want to comment on this topic, which is in the newbie forum, but I don't see the option to quote or to otherwise comment:
https://bitcointalk.org/index.php?topic=26539

Why?

I tried logging-in from another browser, and the same thing happened.

-- Answer:  Apparently that topic is locked.  Too bad, because I had something interesting to comment.  Never mind, I'll start a new topic.  I might as well lock this one too and see what happens.

What about loans?  The point of FRB is that it can be used to lend money to individuals or businesses.  Is bitcoin not suitable for lending?

Ok, you don't need FRB to lend money, but it surely increases the amount that you can lend and therefore decreases the cost of lending.  Otherwise lending will get much more expensive.  Will it not?

As for bank runs, they are a problem with the current banking system too.  That's why Cyprus shut the banks for several days.  If there is a bank run with FRB, people may lose their deposits, no matter if they were in euros or bitcoins.

Is there going to be a cryptoloaning technology invented that does not require banks?  I suppose this would be something like crowdfunding, but safer in terms of tracking where your loan goes and possibly getting part of it back, if necessary.

Could you explain this some more?
Is bitcoin incompatible with any kind of banking at all?

Is there any banking that is not fractional reserve banking?

Is bitcoin incompatible with loans, interest, etc.?

Let's say I deposit 100 bitcoins at the bitcoin bank with 1% interest.  The bank lends 90 bitcoins to someone else for 2% interest.  Between the two of us, we now have 190 bitcoins.  In reality there are only 100 bitcoins that can be used for bitcoin transactions at any time, so this is called fractional reserve banking.  The extra 90 bitcoins are a promise to pay someone at a later date (e.g. when I ask for my deposit back).

A year later the borrower pays back the loan by turning in 91.8 bitcoins to the bank.  I withdraw 101 bitcoins from the bank and the bank ends up with 0.8 bitcoins profit.  Is there something wrong with this scenario?  Is it any different from conventional currency?

Wow!  Mail you the cash?  I thought bitcoin was a way to have secure transactions.