If the transactions will not be on the block chain, then you have unregulated fractional reserves
Did you say something about a "brain stem" ?
Yes I did.
"Unregulated fractional reserves" will happen with any money system, any culture, any technology, any market.
The distinction is that when I choose to only transact on the block chain, I am assured that I am not receiving someone's else liability.
If someone else wants to go trade counter-party risk funny money offchain, that is their prerogative but it has no relevance to my point upthread.
There's nothing to stop me advertising my car and sending 5 people a "promise" to deliver it in exchange for something of value to me. Thats an "unregulated fractional reserve".
Yep. And those offers or transactions aren't on the block chain. That is why I don't trust any "statement of value" that is not on the block chain. (don't conflate "statement" with real assets offchain, which are fine ... I will accept gold for example)
The criticisms you cite are straw men. They are not the real problems with the blockchain. In fact, blockchain transactions are about 300 times faster than present day bank transfers. 10 minutes vs 1-3 days. Furthermore, bank transfers are no more reversible than blockchain transfers and you DO NOT want reversibility in the blockchain.
The point of sale issues (speed, refunds, discounts, store cards, insurance, payment protection, monetary media) are not the domain of a money system. They are the domain of particular payment processors. (If they want to operate a fractional reserve system like MT Gox, so be it - that's one of the hazards of payment processors but again - it has nothing to do with Bitcoin the same way as Gox didn't have anything to do with Bitcoin).
Bitcoin is not a fractional reserve money system - it is a full reserve, unlevered form of base money. It's exactly the opposite of what all the anti-NWO'rs (of which I suppose I am one) are paranoid about when they talk about "electronic money". It's just that most of them are clueless about the mechanics of money anyway and so just stick with "anything electronic" as their definition.
You go with your fractional reserve money system.
We smart folks will go build a decentralized block chain money system without counter-party risk.
And let's compare who ends up where. I already told you that yours will end up owned by the government, i.e. back to fiat. Because counter-party risk is failure (and especially for the next 10 - 20 years given the $223 trillion debt bomb)
![Wink](https://bitcointalk.org/Smileys/default/wink.gif)
If the users are not using the base money, then the base money system will be controlled by those using it (and their government regulators!) which will be all your printed-from-thin-air money institutions you want offchain.
You didn't learn from the horrific failure of our current fractional reserve system nor even Mt.Gox, so you want to go back for sloppy seconds, thirds, fourths.
You really can't see that for example New York is preparing to regulate these offchain institutions so they have to have certain capital ratios, etc.. The government will take over and your 21 million coins base money will become irrelevant, because everyone will need to use the offchain money to do anything.
We can indeed put all those functions on the block chain, decentralized, and no cheating.
Edit: cripes the entire point of Satoshi's invention to solve the Byzantine General's problem was to eliminate the requirement to trust anyone. The breakthrough was eliminating the need to trust what can't be proven to be trustable.