However there is little doubt that neither of us is going to convince the other in this forum. The next ten years will do a better job of convincing one of us that the other was quite wrong than either of us can do now.
Yes, the fractional reserve banking system has been around a long time. In and of itself it is not an instrument of financial mass destruction. Similarly, bombs have been around for a long time, and do not threaten human civilization. Indeed, much could not have been mined or built without dynamite. The radical increase in interdependency in just the last five or ten years between the big (and many not so big) banks by means of derivatives, are weapons of mass financial destruction, just as the big hydrogen bombs that a few big countries have are weapons of mass physical destruction. We've avoided blowing up our nuclear arsenal on enemy territory ... that is good. If one of the big banks goes, then thanks to derivatives, the other banks go as well. Waking up one morning with ten large, and a hundred medium sized, banks closing their doors, bankrupt, would definitely make a mess of our financial landscape.
The Federal Reserve Act didn't put banks under effective Federal monitoring. Quite the reverse. To print money, our government now has to borrow it from the banks. The Federal Reserve Board is not controlled by our government; it is controlled by the private Federal Reserve Banks, first and foremost of which is the one in New York.
If a clearing firm with assets of X Billion dollars has CDS's of value X Trillion dollars go bad, then it goes poof.
I'm not suggesting we should return to a barter system. But our financial system got sick, and my prediction is that it is going to get a whole bunch sicker, in the coming decade, before we dig ourselves out of this mess.
We should both donate to FreeRepublic.com, and agree to meet back here in a decade, so that one of us can have the pleasure of pointing out the errors of the others ways.
The financial laws and regulations are no longer routinely in the control of the people of this country, nor even of our representatives.
A few banks and financial institutions, such as Bear Stearns, will be destroyed, so as to instill fear in the populace and to send a message to other banks that they must play the game. But when push comes to shove, a wave of panic will be used to justify changes in laws, further consolidating the power of the wealthiest.
The threat of a major collapse of the worlds financial institutions (a very real threat, given the recent buildup of derivatives which entangle the banks with each other) will be used to justify the passing of more laws and regulations favorable to the most powerful.
That a bank is bankrupt if its liabilities exceed its assets is just a rule; if that rule is inconvenient then it can be changed.