If there’s no fractional reserve, new money is only created by government spending via spending bills passed by congress. People can hold deposit accounts with the government directly (via the treasury) so there’s no possibility of losing deposits. Investments can be left to the market. Interest rates for loans can better reflect real risk, instead of an imaginary number backed by inflation.
When a bank that has made loans fails, the people who took the loan keep the money and collateral. There would be no risk to deposits or housing by bank failure. And the market selects for banks that are actually better at managing risk (imagine that!)
Your points are valid but they've been tried before in other countries and other times in the past, the late 1800s and the issue is then no one wants to use your currency and then wants to use Gold instead because they don't trust it.
- Audited accounts
- Following the required laws
- Ability to have a capital buffer
- Ability to have a risk team to manage risks/entire governance system and controls
- Able to scale to millions of people
- Ability to pay off entire unsecured loan on demand
- Market based Credit rating
- Market value of securities/ability to be sold and absorbed into other institutions
- Ability to raise capital
- Ability to change management entirely
- Can live over 100 years even after its failed (accepting loan payments for example)
- No personality traits/needs in the way of commercial transaction.
- Self sustaining
In its simple form, a group of individuals is a lower risk proposition than an individual.
Banks jobs are to borrow short and lend long. So it also enables the basic structure to play out until the maturity term ends in a very predictable fashion.
Even if the institution is failed it is far more capable and can still run and accept payments for loans around processes.
As an adult, I totally get it. I even believe that, without the Fed, things would be more unstable. However, it seems to me that the cost of the Fed's stability is the creation of a 'super-banked' aristocracy. At the end of the day, normal people have to bear the costs, while the aristocracy is bailed out with an expediency almost unheard of from our government.
If you think reserve banking isn't stable then neither is capitalism or democracy. Human beings are not stable so any system that can flex without breaking is doing as well as anything we've ever come up with.
It's abundantly clear to me at this point:
1) Fractional reserve banking is inherently unstable and no amount of regulation or insurance schemes can prevent bank failures. A major rethink of our monetary system is in order: One that keeps credit allocation and money creation in the private sphere without guaranteeing interest rate arbitrage on all new money to a privileged class of authorized Ponzi schemers.
2) The Federal Reserve Bank is merely a creature of its owners: The international banking cartel. It does not serve the people--rather, treats them adversarially--and the mechanisms of accountability that exist are obviously insufficient. However, increasing the political accountability of the Fed will likely result in a failed political monetary policy. We need to re-evaluate whether the Fed is fit for purpose.
3) At the very least, the Fed must be forced to grant charters for narrow banks, be put in public trust rather than continue under private ownership, ban bank employees from staffing Fed positions, and become radically more transparent in virtually every way. Oversight must be reorganized and democratized. The toxic nexus of fractional reserve banksters and their political and governmental enablers must be destroyed.