Fractional reserve banking is counterfeiting in all cases. In the case of deposit insurance when a bank issues extra credit this means that the bank is issuing more government liabilities. This is printing (government) money. But someone (in a free market without deposit insurance) who issues unfunded IOUs is still printing money even if it is worthless. Someone who runs a ponzi scheme is printing money even if that money has no value. It is possible to print worthless money.
Fractional reserve banking in a free market is counterfeiting because the use of the word bank suggests the organisation will not use deposits for loans. Bank suggests full reserve banking.
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