Fractional Reserve Banking should be illegal.

To sum up Con"s argument: P1: "During the Great Depression, monetary contraction reduced the GDP." However, the bust was needed because of the boom with mal-investments; this further strengthens my point that the increase in the money supply leads to false booms and busts following. With devalued capital, and the realization that a lot of the money recorded in accounts did not exist, a contraction was sure to follow. P2: "The Federal Reserve or Central Bank alone would be more inflationary" Central Banks in modern states act as a lender of last resort; during booms, when reserves are strained, central banks are essentially fueling the false boom. If false booms are a sufficient utilitative reason to ban fractional-reserve banks, and if the actions of central banks are acts of "legal counterfeiting" to fund member banks, then it follows that a Central Bank"s power to inflate will be reduced if one of its prime arms is amputated. P3: "Start-ups are net borrowers. They need low interest rates." Let us consider first a big rise in interest rates. What is the message to potential savers but to invest; there is a large potential for profit to investors. As the supply for loanable funds increases, the interest rate will decrease. Done in this way, factors can be spent without constantly mal-adjusted signals from inflation; less mal-investments, more sound investments. Considering the largest savers are those who will live on fixed incomes, a non-inflationary future with greater savings holding greater purchasing power is more optimal than less savings with even less purchasing power. Now, to defend my own points. First, in con"s first scenario, he makes a factually incorrect claim. If a bank is holding only the minimum reserve ratio, then the bank is only holding $10 of a $100 deposit, and lending the other 90% out. However, even if the bank held 99.99% of the deposit, the depositor assumes he/she has full access to the account and can withdraw the full 100%. All depositors believe this, and yet the bank can only do this until the reserves run out and people try to withdraw the funds of theirs that supposedly exist, but do not in actuality. The bank profits off the loans it makes, and meanwhile the entirety of the depositors can only withdraw their funds so long as they do so before all the other depositors. That is, the bank does indeed profit from selling the idea that costumers can withdraw their funds at any time. Con then argues that the Great Depression was due to underregulation by the Government and contractionary monetary policy. However, the amount of regulation put into making sure banks don"t mess up is irrelevant to the inherent fraudulent nature of the system, and is merely an additional cost to taxpayers in addition to the inflation created; better to not have a fractional-reserve system at all, regulated or otherwise. As for the assertion that monetary policy was contractionary; the contractions come about as soon as it"s realized that the funds that supposedly exist in all loan accounts and deposit accounts do not actually exist! Had the government stayed out of it and let the prices fall, the economy would have pieced itself together sooner. Also, the stagflation period during the Nixon-Ford-Carter years had far from a contractionary policy, and yet the economy still suffered! Inflation causing mal-investments is true of both scenarios; the contractionary policy of the Federal Reserve is only seen once. In essence, my opponent has not countered the inherit fraud present in the fractional reserve system, nor has con successfully countered that the inflationary boom, when the mal-investments occur, is where the damage sets in, actually strengthening my argument by pointing out the contraction that occurs once it is realized that the funds on records don"t exist and the central bank has to print more money to keep up appearances. I look forward to Con"s rebuttal.