I would like to see what he is talking about, but I believe fractional reserve banking must be outlawed. Drawing interest for the money supply defies mathematical solution. This doesn't matter whether it is gold or paper. Only that the expansion of paper literally becomes impossible, the reverse of infinite. Only the paper maker can create more paper, which generally must have titles to something behind it or it is worthless. You can at least mine more gold.

There should be 2 markets if we went to public banking. One would be where the government held the deposits, cleared the checks and loaned more money at interest to very slim limit. Thus maybe the government could lend out an extra 3% annually at 3% interest. The interest would cover the bad debts and could be spent as a tax.

The other market would be where the private people would lend money to each other. This would be the capital markets. They would be without insurance and everything at risk. There would be plenty of losses, but then again, there would be successful enterprises. Resources would be used in a more conservative manner than now and a fool and his money would soon be parted.

I welcome the push for state banks as an educational tool for the 99% of the public that have yet to understand that commercial banks and credit unions create money out of thin air and then charge interest on it and said money disappears when a loan is paid back or defaulted on.

The better solution would be reform at the Federal level to create a permanent money supply that is created in tune with production and population growth. This would do away with most of the boom-bust cycles we currently suffer. The Federal Reserve Banks could be easily replaced with some well-programmed computers. Until that happens we may as well take advantage of the existing system.

For more on state banks, see the numerous articles written by Ellen Brown available under Articles by the Author at her website: www.webofdebt.com

In the interest of open debate Jamie Walton had an insightful response to proposals for state banks at http://www.monetary.org/moneyscenefive.html

Get rid of the parasitic debt money usurers. Congress shall coin(print) money, not private parasites.

Does fractional reserve banking bound to fail?

No. You can have low, reasonable, or high reserve - each requires appropriate control measures to sustain. But when you practice mismatch - low reserve (high leverage) and little control - failure is guaranteed.

Is fiat money system bound to fail?

Yes. The question is how long one can be operated. With wisdom and prudence, fiat money can be useful and operated sustainably for a long time, 1-2 centuries. But with abuse (as happened in the US) it can blow up in a very short time.

Why did the US abuse its fiat money system?

To grow its empire. While the US can be called a 'reluctant' empire, it is nevertheless a full-blown empire complete with a massive global military (all empires love to kick foreigner butts) and an imperial finance practice. Non-imperial nations use its currency to trade and issue only enough to sustain that trade. USA, however, issues its currency to flood the world whether the world wants it or not. From this flooding, US exercise its imperial control on all manner of finance. Of course, flooding the world with trillions of dollar means the US must abuse its fiat money system to achieve geo-political dominance. Note that such dominance does not mean its citizens gain the benefit. Only the elites who control the empire benefits.

To learn more about public banking see www.WebOfDebt.com and read Ellen Brown's articles and her book "Web of Debt."

.... A more serious downside of using gold as a medium of exchange is that productivity becomes tied to the availability of the metal. When gold flooded the market after a major gold discovery in the nineteenth century, there was plenty of money to hire workers, so production and employment went up. When gold was scarce, as when the bankers raised interest rates and called in loans, there was insufficient money to hire workers, so production and employment went down. But what did the availability of gold have to do with the ability of farmers to farm, of miners to mine, of builders to build? Not much.

http://www.webofdebt.com/excerpts/chapter-37.php

Learn more about public banking . . .
Web of Debt dot com
Read the excellent posts by researcher Ellen Brown JD and also her book, "Web of Debt." I couldn't put it down.

The purpose of "money" is to tally the value of goods and services traded, facilitating commerce between buyers and sellers.

A more serious downside of using gold as a medium of exchange is that productivity becomes tied to the availability of the metal. When gold flooded the market after a major gold discovery in the nineteenth century, there was plenty of money to hire workers, so production and employment went up. When gold was scarce, as when the bankers raised interest rates and called in loans, there was insufficient money to hire workers, so production and employment went down. But what did the availability of gold have to do with the ability of farmers to farm, of miners to mine, of builders to build? Not much.

Michael Moore: "4. Each of the 50 states must create a state-owned public bank like they have in North Dakota... If a company's primary motive to exist is to make a profit, then it needs a set of stringent rules to live by -- and the first rule is "Do no harm." The second rule: The question must always be asked -- "Is ...this for the common good?" (Click here for some info about the state-owned Bank of North Dakota.)"
Jct: Finally, a good first step. My two videos "Michael Moore short on what to do" http://www.youtube.com/watch?v=6bBIK4tAnQc and "Michael Moore's Banking Systems Engineering Thesis" http://www.youtube.com/watch?v=EWEdeeHisgU expressed my disappointment and Michael Moore not dealing with who gets to benefit from creating our money, private banks... See More or the people. I'm glad to see he's taken the first step in right direction. Once each state has its own bank, it can then get rid of the interest it doesn't need to pay itself.