If there is only $100 in the world, and a bank gives it to you and you pay it back with interest, where does the interest come from?
If there's $100 in the world, and a bank "gives $100" to 10 people, who all have to pay back $100 + interest, where does that come from?
You have to borrow it from another bank. Total money in the world increases, the economy grows, but it's a con, a mirage, a convenient consensual fiction. A system based on eternal growth, which relies on pushing around ever increasing debt for its very existence, where repaying the total debt would require giving the banks back all the money they ever loaned plus all the stuff in the world to the value of the conjured extra. How is this not silly?
That's not how fractional reserve banking works. Banks don't lend more than they have in their vaults, they just have less in their vaults than the sum of their depositors' accounts.
That's tangential to your main point, which seems to be an objection to a perpetually increasing amount of money that only exists as numbers in a computer backed by nothing. That only becomes a problem in a severe recession, where the rate of wealth creation slows so much that loans can't be paid back. The system breaks, and governments have to intervene to fix it. This isn't done by just giving banks money, as you suggest. The government typically takes over the banks. The proposed bailout involves buying assets, but it's still not giving banks money.
That is only a problem if you think we'd be better off with the slower economic growth that would result from banning fractional reserve banking. We're not. A system that breaks on a regular basis sounds like a bad idea, but you still have to compare it with the alternative before you condemn it.
Basically: money lent is less or equal to money deposited; no interest (only fees). Interest including fees is ~2.5%, and will "never" change.
The main difference is that that system isn't built on the assumption that the economy will always expand, which the current system is. I'll leave it to someone who actually knows something about the pros and cons of each to tell you if that's good or bad.. But basic reasoning tells me that it's not likely that something that takes place in a fixed environment (Earth) can expand for ever.
As for fractional reserve banking (the regulated version, anyway...), the bank needs only to hold enough capital to write down expected losses on loans. Much of this mess has been caused by the banks voluntarily levering out of this safety margin.
You could skip money and use seashells or chickens or whatever you wanted, the mechanism would still work.
And never mind the fact that even if you support a bailout this one was setup with language to specifically prevent oversight of any kind and would hence almost certainly be extremely corrupt, which rather does characterize that bailout as an attempted net transfer of wealth to me.
They didn't. My comment wasn't an argument, it just stated my position. Someone else replied with a different position, and I explained further. In an ideal world, I would've fully explained my position in the first place, but it wasn't worth the time if no one disagreed.
I do call things "silly" too much.
Seize a bank when it's in trouble, "fix" it, and sell it in a public offering. If the income from the sale nets more than the government spend to fix it, that profit is distributed to the original shareholders.
This happened i Sweden in the early 90's. Some banks were in trouble, and the government said that they'd help them, but by nationalization. One of the major banks were then suddently conveniently able to get some capital, and survived on it's own.