I deposit $1000 into the Bank
Bank Clerk types "+$10,000" on the keyboard and then the clerk lends out $9000 in mortgages and loans to other customers, which then goes towards other recipients who then spend this made up money on consumer goods, services and luxuries. Withdrawal limits and other measures are brought in to prevent customers from withdrawing more money than the bank actually has. Meanwhile, since there is all this extra money in society, people realize it's becoming worthless and therefore prices go up (inflation).
The only people who benefit from this are those who have the license to print money, the bankers. Bankers are the same ones, for years, who have requested we move away from a cash society because it would make their evil work easier. After all if there's no paper money then the bankers have complete control over everything.
Fractional reserve banking has to go. Why do we need bankers? How can they necessarily be any better at banking than the average university math graduate? If you're telling me you need to be born into a generational banking family to do risk assessments ("should I loan $300K to a guy who hasn't worked in 15 years?") then you must be "bright".
If you were to "turn off" fractional reserve banking then how would anyone be able to borrow money? For the most part they could not as there would not be any to lend by banks. You would still have sites like prosper and BTCJam, but these sites charge much higher interest rates then what you would expect for loans that are secured by something other then your signature. These sites also rely partly on the banking system in that they base your risk level off of your prior payment history of debts that was possible by a fractional reserve system.
Deflation is usually the result of major banking collapses as people no longer have access to money that they once had so they are forced to spend less not more money.
