to put what garrion has said into perspective, look into the past of america. from our founding to about 1970 or so, gold was $35 an ounce. yes, that is right, thirty-five dollars an pounce. watch some three stooges some time, you'll see how much value the american dollar has lost. for example, back in the 30's, a week at a hotel was one dollar.
compare to now, where gold is ~$1500 an ounce. a DAY at a bad hotel runs roughly $35.
this stuff isnt restricted to century scale changes. for example, the year i was born, 1981, a loaf of bread was ~ 10 cents. nowadays, 30 years later, you will be lucky to find bread at $1.50 a loaf.
i am of the opinion that bread is a good benchmark of the value of a currency, considering bread has been the basic building block of western civilization for a good thousand years or more.
in the simplest terms: a fractional reserve system does not work. it does not work for the same reason leninist communism does not work. human nature. humans tend toward greed, and their political/economic systems are plagued by corruption. it has been this way throughout all ~6000 years of recorded history, worldwide.
a central bank also does not work because of the same principals. if an entity has the sole power to coin money, that entity is going to be the target of corruption, as american history has shown over the past hundred years. the federal reserve system was founded by men who saw it as the best way to consolidate their own power and wealth. it was not founded with the best interest of the american people at heart. unlike our government, made for the people, by the people - the federal reserve system of fractional reserve + central bank was made for the bankers, by the bankers.
we desperately need a system, like the gold standard, where the value of a currency is backed by a desirable commodity, like gold, rather than a system where the value of a currency is determined by the amount of that currency in circulation. especially when the entity that decides how much currency is in circulation has the sole authority on deciding how much currency is in circulation.
nux: wartime debt. you must remember how things were done back back then. back then, the debt incurred during war was customarily dropped onto the loser of the war (this is what set germany up for the rise of hitler and WW2). back in those days, nations managed to get monopolies on industry. for example, in WW1, germany had a total monopoly on the production of light bulbs.no one else in the world manufactured light bulbs. because this was allowed, when trade ended with germany, we americans had to start a lightbulb industry, then expand it enough to support wartime production. in the space of a few months. to support this, the government offered massive subsidies. the government then had to take loans to back these, as it could not afford to pay them (it pushed war bonds pretty heavy back then... i wonder what pushed us to stop relying on our citizenry with bonds, and start taking loans from foreign governments)
had the government not been already corrupted by big business and big banking, we more than likely would not been in such big debt. a truly free market has historically been shown to regulate itself, it is when people start meddling.... making the market progressively less and less free... that "capitalism" starts to fail.
we humans have a habit of viewing the past as if they had the perspective on the world that we have today. think of the renaissance painting of biblical scenes as if they were in medieval europe. people even 100 years ago had different values and ethics than we do now. nowadays, invading a country without helping to rebuild it after the war is almost unthinkably barbaric. heaping war debt onto the loser of a war is also unthinkable. total war is a barbaric concept also, not having existed for westerners since hiroshima and nagasaki. unrestricted travel over most of the world is equally unthinkable these days. can you imagine crossing the boarders of many countries without so much as a passport check?
TL;DR: fractional reserve, central bank, "hybrid capitalism" = bad. gold standard, sound currency, true capitalism = good. also: ethics change a lot in 100 years.
