The gold standard DIDN’t work. There were LOTS of crashes just like this one, most recently in 1873 AND 1929.

While paying interest to teh Fed does not make sense, the fractional banking system actually does. I once absolutely believed the FEd was the root of all evil, and while I believe they are corrupt, I now undertsand the need for a dynamic productivity backed currency. While the money is worth 5% of what is was in 1900, the wages are 20 times higher.

There has been inflation but that is mostly due to the competition from abroad. It’s hard to preserve our lifestyles with so many out there willing to do the same work for 1/3 as much. That is what is destroying our buying power. Our inability to compete globally. You have to look at the MACRO system, and stop being fixated on this Rand nonsense. If nothing did before, this crash proved Rand was full of shit… There are lots of things that have to change including the fed, but I have come to the awareness that Debt creation system of currency actually works, with some drastic changes. It has been allowed to be rpedatory and purely favoring the rich and that has to change. But the basic system does not and will not. It is the international standard. It’s over, done, it will never go back. We must make it work. But the free market does not work as it stands… In the big casino, the house always wins… read my post on “a bold new plan…”

The fractional reserve system in use today is a very big topic, and the issue is not one sided.

But first a little history is helpful. The origin of the fractional reserve type system came originally from European Goldsmiths who would eventually evolve into the bankers of today. They were private individuals who had nothing to do with government. And as you might imagine money was at one time based on Gold. As they began renting out space for people to store their gold, they began issuing paper receipts or certificates which were much more convenient for folks to carry around, and this was the birth of what would become modern paper money.

The early bankers also realized that they could loan their own gold out at interest to make a profit. Seeing an opportunity for increased profits, they also began loaning out the gold which was not theirs, but the property of those holding the certificates.
They figured as long as they had enough on hand to satisfy the daily exchanges of their customers, they would be okay. This was the birth of the fractional system, meaning that they had on hand a fraction of what they had loaned out.

Their biggest profit came from the collection of interest a practice known as usury. Meaning charging some one a fee for the use of the money.

So one thing which you cleared up is that the issue of the gold standard and the issue of fractional reserve banking is not directly connected, and in all the debates, these separate issues are often mixed together.

Another thing which you pointed out was that the majority of money does not exist as paper, but as leger entries, which are now days entirely electronic. But in practical and actual terms, the inflationary nature of increasing the money supply is valid whether you are talking paper money or electronic money. An increase in the supply, without an increase of goods or services within the economy will reduce the buying power of the currency ie. Debase the currency. The term debase actually come from what happened in the Roman Empire when Rome was trying to finance its empire expansion through military force and found themselves without enough coins to pay the soldiers. So they started to mint coins which were not made of pure gold, but instead added base metals (debasement). This increased the supply, but the value of the coins themselves was increasingly diminished.

It was one of the factors which lead to the collapse of the Roman Empire. Returning to our present day system, and setting politics aside for the moment, economically the debasement of the currency is not a good idea. In Rome, if you had some gold coins stored away, and the government issued new coins containing less gold, you savings were not affected as the amount of gold in your coins was not affected, by the new money. But in our present day system, the buying power of all the currency is diminished by the addition of new money, regardless of whether it is paper or electronic.

Another thing which you pointed out which correct is that the loans or credit issued by the banks today is not making money out of thin air as so many claim. It is trading credit for a promise of payback which is a promise of labor, or entrepreneurial future anticipated profits by the borrower.