Why is fractional reserve banking moral and a net economic positive for society?

Fractional reserve banking has been wrongly labeled as fraud because it has been thought as if commercial banks create multiple titles to a small pool of money. However, our checking accounts are not property titles but credit, a promise to make our payments. We lend the commercial banks our money today and we get goods & services as we use our checking account balance. In fact, fractional reserve banking (FRB) is beneficial for society because it coordinates over time our purchases with the investment companies make to have inventories ready for us.

Commercial banks coordinate our purchases

The main way the commercial banks cover their promises is by the goods & services depositors get every week. Please follow the time-structure example:

1. Monday we deposit 100 coins, we get 100 debit balance.

2. Tuesday the bank lends those 100 coins to the grocery store.

3. Wednesday the grocery store uses the 100 coins to buy more inventory.

4. Saturday we transfer our 100 balance to the grocery store. We are made good on our loan to the commercial bank with goods, not with money.

5. The grocery store uses the transferred balance to pay the loan.

6. Both debts are erased. The loan you made to the bank is paid with goods & services, and the loan the bank made to the grocery store is canceled by the balance transferred.

This is an exogenous example. On another occasion we can develop endogenous examples. But it must be clear now. The commercial banking process gets resources to companies before we buy goods & services, so they have our preferred economic goods in their inventory. Commercial banks coordinate our commercial time-preferences with the time-structure of investment in the commercial sector.  We lend, then the commercial bank lends, and later we get paid by the goods & services we get weekly; many times daily.

The commercial bank owes you the amount deposited, the contract clearly says that.

Furthermore, we have to keep in mind that the checking account contract is very clear. The contract states: "Unless otherwise expressly agreed in writing, our relationship with you will be that of debtor and creditor. That is, we owe you the amount of your deposit."* There is no deceit that our money is stored waiting to be picked up.Checking accounts are not property titles, checking accounts are credit we give to the bank and we are paid by the goods & services we get from companies that do business with our banks. Then again, we lend, then the commercial bank lends, and later we get paid by the goods & services we get weekly; many times daily.

Conclusion 

In closing, fractional reserve banking has been wrongly labeled as fraud, but it cannot be fraud. Our checking accounts are not property titles, they are credit we give to the commercial bank. Also, fractional reserve banking coordinates our commercial time-preferences with the time-structure of investment in the commercial sector. One last time, we lend, then the commercial bank lends, and later we get paid by the goods & services we get weekly; many times daily. We cannot avoid its effectiveness in coordinating our actions over time with the companies we do business with.

*Consumer Deposit Account Agreements, Banking Relationship Fact Sheets, and Notices

https://online.citi.com/JRS/popups/ao/Consumer_Client_Manual.pdf?JFP_TOKEN=POJGUX3S