I often hear the time-interest theory of credit. Real credit is based on savings rather than fraction reserve banking and the interest rate depends on the amount of savings in an economy. It is simple economics and I don't see why it takes so much time for society to understand this.
But there is another problem. Not the interest rate one, but rather the credit one. Murray Rothbard, in The Case for a 100 Percent Gold Dollar which I just read, states that in a libertarian world, banks would not be allowed to lend the gold (money) in their vaults as this money would be the property of the depositor and lending it away would equal to theft or fraud.
Rothbard thus caracterizes the banking credit system as fraud, which I might not totally disagree with. But then, if banks cannot lend money out as investments, who would? Who would produce credit for the economy? And also, what would be, then, the whole purpose of the time-interest theory of credit?
And the fact that there's nothing preventing someone from investing in some other way like mutual funds and the like. There's a difference between telling a bank to keep your money, and telling someone to invest your money.