The Instigator
cdwlighting
Pro (for)
Tied
0 Points
The Contender
DerekWilliamson
Con (against)
Tied
0 Points

Fraction Reserve Banking is a Fraudulent practice.

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Voting Style: Open Point System: 7 Point
Started: 11/5/2015 Category: Economics
Updated: 1 year ago Status: Post Voting Period
Viewed: 227 times Debate No: 82126
Debate Rounds (3)
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cdwlighting

Pro

Fractional Reserve banking is a Fraudulent practice, and should be banned in the United States.

1. When a bank takes a deposit, it is recorded as a liability (because they owe it to you), it also represents excessive reserves, as the bank is only required to keep a fraction of it on hand as dictated by the federal reserve. They then can then secure loans on those reserves. These loans are counted as Assets to the bank, because they bring in income to the bank in the form of interest. Those loans are provided with money that is created out of nothing. If we as citizens write a check in excess of whats in our bank account knowingly, it's called fraud.

2. By pyramiding additional loans on top of a banks reserves, the money supply grows, which in effect reduces the total purchasing power of the money. Think of it this way (thank you G. Edward Griffith) if the money fairy came tomorrow and doubled the amount of money we ALL have in our checking accounts, what would happen? Prices in effect would double and the purchasing power of your money would diminish. This is called inflation. Inflation is a tax if you take the difference from the inflated price from an un-inflated price, the difference is how much money the government has stolen from your pocket.

3. Fractional reserve banking is unconstitutional based on Article I section 8.

4. Because of fractional reserve banking, The people will be forever in debt, because without debt all the money in the world and US would disappear.
DerekWilliamson

Con

My opponent has demonstrated a lack of fundamental accounting knowledge, and has ignored the role of the central bank and other protections which serve to mitigate the risks of fractional reserve banking (FRB, herein). I contend that FRB, while not inherently ethical or unethical, has been one of the greatest catalysts for human progress in modern history.

When a bank accepts a deposit, both an asset (cash on hand) and a liability (deposit account) are created. In volume, deposit accounts are withdrawn and accepted at relatively stable, predictable rates. For an individual, this is comparable to being issued a mortgage - you receive a one-time lump sum payment (asset) and must repay this loan (liability) on a payment schedule with interest. And, just as an individual is not required to hold the cash to repay his or her entire mortgage balance, a bank is not required to hold enough cash to repay all of its deposits in the event that they were all withdrawn at one time. That is the essence of FRB. Allowing banks to lend out their assets in this way to other entities, as permitted by FRB, is of tremendous importance for economic growth, as it gives individuals and other entities significantly easier access to capital at a significantly reduced cost over individual borrowing.

Numerous protections exist in modern banking to protect deposit holders. Banks must also purchase deposit insurance, to ensure that, in the event of a bank run, deposit holders are able to collect on their debt from the bank. Additionally, the Central Bank exists to act as a lender of last resort for any banks, giving access to capital in the event of any shortfalls.

Central Banking also plays a number of other key roles in monitoring and protecting the FRB system and all stakeholders involved. For one, the Central Bank prescribes requirements for bank reserves to ensure there is enough liquidity to protect individual deposit holders. Second, by lending money itself and collecting interest from banks, the Central Bank is able to control the supply of money and, hence, the rate of inflation. Lastly, through the control of interest rates, the Central Bank plays a key role in ensuring continued economic growth and prosperity.

My opponent has also not outlined his proposed alternative to this system, or why it would better serve the needs of citizens and commerce.
Debate Round No. 1
cdwlighting

Pro

cdwlighting forfeited this round.
DerekWilliamson

Con

DerekWilliamson forfeited this round.
Debate Round No. 2
cdwlighting

Pro

cdwlighting forfeited this round.
DerekWilliamson

Con

DerekWilliamson forfeited this round.
Debate Round No. 3
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