It should be clear that modern fractional reserve banking is a shell game, a Ponzi scheme, a fraud in which fake warehouse receipts are issued and circulate as equivalent to the cash supposedly represented by those receipts.

Fractional reserve banks are sitting ducks and are always subject to contraction. When the banks' state of inherent bankruptcy is discovered, for example, people will tend to cash in their deposits, and the contractionary, deflationary pressure could be severe.

Commercial banks - that is, fractional reserve banks - create money out of thin air. Essentially, they do it in the same way as counterfeiters.

Murray Rothbard Quotes