system
Given the following post, respond as if you're commenting on Reddit:
human
I believe that the current banking system (fractional reserve banking) is a ponzi scheme. CMV

Definition -
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation.

Banks make money from the loans they give out with other investors' money. 

Also, a core tenant of a ponzi scheme is that if all investors demanded their money back, the operation would collapse. This is absolutely the case with our banks.
gpt
This isn't actually the case, for a number of reasons.  See, a ponzi scheme pays out based on the person's own money or money paid by subsequent *investors*.  Fractional reserve banking pays out based on *interest* collected from people who are loaned money.

A core tenet of a ponzi scheme is that if all investors demanded their money back, it would collapse.  It's true from a purely literal perspective that our banks fit the definition: a run on a bank can kill it.  However, if the bank were given time to call in its many, many loans it *would* be capable of paying its patrons back in full.  It might *take* a while, but that's not the real issue.  The issue is the difference between "assets" and "liquid assets."  A ponzi scheme is short on both, but a bank is only short on the latter: it's got lots of assets like long-term mortgages, loans and investments (plus all sorts of property assets and so on) but it has relatively little in the way of cash or cash-equivalents because those don't make it any money.

The key is that a bank is a value-creating business in a way that a ponzi scheme is not.  *All* a ponzi scheme does is take in money and redistribute it, but a bank not only provides useful individual banking services (ATMs, various locations, investments, insurance, etc.) it also provides a separate line of profit-driven loan services.  Basically, customers who deposit money with the bank are giving the bank a loan, which it then uses as capital.  In return, the bank offers the useful banking services for far less than they would cost if the money just sat in a vault.