Honestly, I’m not that well read on the topic and I haven’t much time currently to dedicate to it. However, I am well read enough to know not to throw out the idea of it just because I’m not well read enough to understand Free Banking fully.
George Selgin speaks a lot about Free Banking and defends Fractional Reserve banking pretty well. As you’ll see in his biography, he’s quite an accomplished economist and author.
Furthermore, you ”believe that if banking was deregulated, banks WOULD practice fractional reserve banking,” and then move to a “hypothetical truism”: ”They would then of course fail over times and we’d hit some big recessions until they learn they can’t do that.” Are you certain of that? At what rate would fractional reserve banking cause the bank to fail? What’s the likelihood of it? Would it not be in the banks’ greatest interests to preserve themselves as long as they could, reducing the likelihood of going out of business? What about their contractual obligations to their account holders?
There are many questions to consider in this. Jumping to conclusions such as “to hell with Fractional Reserve banking” is intellectually lazy, especially when it’s based on a belief you hold.