>And our system is now so dependent on massive levels of credit -- which could not exist without Fed backstops -- that when a panic hits there are legitimate fears of a total seizure in the economy and widespread social disorder (Hank Paulson's "tanks in the streets"). Maybe my reading of the history is flawed, but it seems to me that the panics of the 19th Century were at least faced with a bit more composure than that.

I would argue that while the dependence on credit is real, it's not due solely to banking. The real dependence on credit is simply because wage levels are so low that most people cannot afford to pay for their lifestyle in cash, and are not even expected to do so.

When you configure the economy such that buying cars, houses, health-care, education, weddings, births, and burials almost always requires credit, then that economy will become intimately dependent on the credit cycle. If you don't like it, then you need to raise wages, reduce inequalities, and oftentimes even nationalize certain vital services, until ordinary citizens can go through life maximizing the amount of goods they pay for in cash and minimize the amount of loans they need to take out.

Otherwise, expect your society to be enslaved to the creditor class.