Alright, I'm just going to sidestep all the opinions and talk about theory for a moment.
Let's ignore interest for a bit and say a person makes a loan to another person for $100. So person A gives person B $100, and then later on, person B pays $100 back to person A. However, in the time between when the loan is made and when the loan is repaid, something interesting happens. Person A treats his accounts as though he still has the $100 that he loaned person B, because he knows he will be repaid. So person A counts the $100 towards his wealth at the same time that person B counts the $100 towards his wealth. Suddenly, it seems like we have pulled $100 out of thin air, thanks to the accounting practices of person A.
But wait, we missed something. If person A is claiming the loan for $100, should person B account for the fact that he has to repay the loan, and add negative $100 to his wealth? It sounds like a simple idea, and it stops money from appearing out of thin air when loans are made. However, after applying this idea, person B ends up with a net change of $0 (+100, -100) after taking out the loan. Clearly, we need a more intricate answer to this problem. That is where banking comes in.
Now, here are 3 videos (8 minutes each) on fractional and full reserve banking from Khan academy:
https://www.khanacademy.org/economics-finance-domain/macroeconomics/monetary-system-topic/fractional-reserve-banking-tut/v/overview-of-fractional-reserve-bankingThey are all super easy to follow, completely unbiased, and give a very simple overview of the two types of banking and how each works. I'm not saying you have to watch them, but if you are actually interested in the subject and not just your personal stance, you should find them interesting.
Now for some direct responses.
Quotethe whole idea of inflation is the money is LOSING value thus the price of goods inflate
While your tone suggests that you think that you are correcting my assertion that money should grow in value, I don't think you understand that we are agreeing with each other. Whether we say invested money gains value relative to saved money, or saved money loses value relative to invested money, it is the same statement.
Quotethe documentary is arguing against the existence of a central bank that regulates it self with no oversight and full power to do with the money supply as it sees fit
A central bank is necessary no matter if there is a fractional reserve system or a full reserve system, with the same purpose. The federal reserve is subject to the laws made by Congress, and is overseen by Congressional committee. The board of governors (like board of directors, except they don't have any ownership), are appointed by the government and confirmed by Congress. So while the federal reserve is a separate entity, it is subject to plenty of oversight from our government.
Quoteneither of you actually watched the video or you would know what I'm talking about.
Correct! I have already watched plenty of 90 minute long documentaries about biased views on controversial subjects. I know that they will make persuasive arguments based on incomplete information and flawed logic. While you derived your perspective from the video, that does not make it relevant to the discussion I am having with you.
Quoteit's reasonable to fear the existing system as it IS corrupt, blatantly so, and HAS misused it's power numerous times.
I'm interested to know how you think your solution would be immune to corruption. I agree that the federal reserve has made some bad decisions at great economic cost, but it has also made some good decisions as well, and many more decisions that are sort of in the gray area that are hard to judge. It is easy to judge the entity by cherry picking certain events, but hard to completely replace them with a better performing entity.
QuoteBanking was never intended to be about investment it was originally a way to protect money from theft.
Neither true nor relevant. Early banks offered a variety of services, from loans, to safeguarding valuables, to making transactions with distant merchants. The banks that we use today do have safety deposit boxes that you can rent to store money and other valuables, but that is mostly independent from the bank accounts where people usually store their money.
Quote"The only reason these recessions exist in the first place" is because the banked knowingly create bubbles because they are profitable.
Sure, banks know that they create bubbles, and the reason that they do create bubbles is related to them trying to increase their profits, but when the bubbles collapse, it is the banks that they collapse on, and they suffer huge losses, which ripple out across the rest of the economy. So to frame it as though they cause damage with no consequences is disingenuous.
QuoteThe banking system is set up in such a way to INCENTIVIZE banks to make risky loans and then sell them off
Well to some extent, risky loans are more profitable, but you cannot just walk into a bank and get a loan for any random business plan. Plenty of loan applications are rejected due to risk. When you try to get a loan for a house or a car, banks are more willing to give the loans to people with better credit scores because they are less risky.
QuoteTake the 2008 bailouts for example, as covered in the documentary the Directors of the Federal Reserve Bank which handed out the money for bail outs (note handed not loaned) directed 4 Trillion to their own Companies
Ah yes, the "too big to fail" banks. This was the big issue that became widely publicized, and caused everyone to hate banks for different reasons. Some think they should have let the banks fail, take the economic hit, and then rebuild. Some think the should have punished the banks greed by going after their profits. Some called for increased regulation to prevent the situation from occurring in the first place. The point of the bailout was to stop banks from losing too much money, with the idea that it would mitigate some of the effects of the recession. Did it achieve its purpose? Yes it did. Was there a better decision? We can argue that out, but there is no clear cut answer.
QuotePrinting money only makes it loses it's value.
True. In fact, there are times where the federal reserve stops printing money and starting taking existing money out of circulation. But in general, as an economy grows, it makes sense to print money in proportion to growth. For an oversimplified example, imagine a fruit growing community that has $100 between all the citizens. Let's say they harvest 100 pieces of fruit this year, which sell for $1 each. What happens when they use the seeds to plant more trees? In a few years, the trees mature, and now they are harvesting 120 pieces of fruit. If they still only have $100, now each piece of fruit is going to cost 83.33 cents. Now we can print $20 and keep the prices the same as before. So that is the bare minimum that the central bank should be doing. At present, banks print extra money such that the prices go up year to year, which has the effect of devaluing savings while keeping the value of investments constant. This is meant to discourage wealthy people from sitting on all of their money (which effectively takes it out of circulation), instead encouraging them to invest it (which allows others to borrow it).