Your understanding is wrong.  A bank cannot lend out more than its deposits.  In fact, the reserve ratio is what specifies how much they can lend out.  They are allowed to lend (in the UK) 97% of deposits.

The concept of "retaining a claim on ownership but relinquishing the actual ownership" makes no sense. It's just an obfuscation. Furthermore, again based upon TTTC and Kinsella's work, there is no ownership of Bitcoins. There is only ownership of the media and computers involved in the functioning of Bitcoin. Bitcoins are already an abstract concept, so derivative instruments issued by Bitcoin "banks" are even more abstract and there is even less reason why their issuance should be in any way legally related to each other.

Non-sequitur. Merely because money is special economically does not imply that different property rights rules apply to it.

You argue that because the market price of BTC has decreased through FRB, this is a violation of property rights. However, this is what you have to prove, not assert. You are assuming your conclusion.

As I said already, almost any act whatsoever can decrease the market price of BTC. A creation of a new currency, say Bitcoin2, which has superior features than Bitcoin, for example, could cause this. Is that illegal too?

The fundamental economics is the same. Some goods S act as substitutes of another good M. If the production costs of S are lower than M, this leads to an increase of supply and a decrease in price. This happens everywhere and is not particular to money. Should it be illegal in those other cases too? Or should it be different with money?

Fractional-reserve banking is a form of banking where banks maintain reserves (of cash and coin or deposits at the central bank) that are only a fraction of the customer's deposits.

This has nothing to do with 'counterfeiting".

As I said above; money is under FRB is not created out of thin air.  It is created by pulling apart a zero into an asset and a matching liability.

The money created by FRB is indeed an increase in money supply;

A deposit contract means that the depositor retains ownership. So your argument makes no sense. What you are describing is a loan contract, where the ownership is transferred.

An operator cannot invest more than 100% of his reserves, that's logically impossible. However, he can issue instruments whose price exceeds that of the reserves. If these instruments are usable in some way (for example, they can be used for payment, or at least speculation like on Bitcoinica), he can make additional profit on that, and he is operating at fractional reserves.

For some reason, the concepts of money creation and FRB are being blurred together in this thread. I sure as Hell don't keep 100% FV of deposits or bonds in my wallet.

We don't? Hmm.. Ok, I missed something.

In other words, you assert that money is a special type of good, and normal property rights do not apply to it. It's a sort of collective ownership, where a change of price thereof constitutes an illegal act. The problem is, almost any act whatsoever changes the prices, so almost any act whatsoever therefore should be illegal.

Ad hominem, non-sequitur and an appeal to emotion.

Appeal to emotion and circular reasoning.

IMO, FRB is a normal process. Most people don't want their money just sitting there otherwise they would get safety deposit boxes and not  bank accounts.

What we are really arguing about is the amount of Leverage that is applied to FRB. I think 30-40 is a good amount, apparently banks thought 400 was good. I guess they know better NOW.

The payment of interest is a proof that the reserves are not 100%. Unless of course the operator is running at a loss.

Let's put it differently then. Technically, the money is not created out of nothing, there is always some non-zero cost associated with it. If not for any other reason, at least for opportunity cost of the resources (e.g. bank's computer) involved for the duration of the creation. Let's say I would find out a way to produce oranges more cheaply (for example, by using Star Trek replicators). Or by inventing a car I would put the horse-pulled carriage operators out of business.

A more deep reason why this is happening is that the newly printed money acts a substitute for the old money, similarly as a car acts as a substitute for a carriage. But absent legal restrictions, it is not the producer who determines whether the new money acts as a substitute or not. So the producer's act of creating new money, per se, cannot violate anyone's rights. Similarly, B and C trading this new money as if it was old does not violate the rights of D. The only way the new money can be used to violated D's rights is if someone trading with D misrepresents their characterstics, or forces D to accept it.

Edit: furthermore, since substitutes which have reserves are associated with costs (e.g. storage), the issuer of them needs to compensate for this somehow. He can charge the users (e.g. demurrage, transaction fees), or he can use the reserves for some other purpose (e.g. loans or financial markets). All other things being equal, a user would choose the one where he does not have to pay. If there is a demand for substitutes, the market forces will lead to fractional reserves.

This makes a full-reserve unlikely on a free market.

Trading "counterfeits" may be fraudulent, but there is no necessity. If I put a sticker on a piece of rock saying "orange", and sell it, it also may or may not be fraud, depending on the context.

Similarly as if I figure out how to create oranges out of nothing, the other producers would take a huge loss even though their property rights were not violated.

Maybe you can start by rereading my post. For further information, maybe you can start with Against Intellectual Property by Stephan Kinsella.

In the Austrian School, there are no property rights in values (see Block, Hoppe, Kinsella) or purchasing power, even though some of the Austrians use the redistributive element of FRB to argue it's illegitimate.

I'm with evoorhees.  As long as it's disclosed, it's fine.

For those calling depositors "savers"?  I assume you mean that they savers in the hope of earning a return.  Please explain to me then how, other than by some degree of FRB, you expect banks to pay interest on savers' deposits?

When the bank goes "poof, here's $200,000" you are ignoring the other side of the accounting equation.  For every asset there is a liability.  When they create $200,000 of asset (e.g. a loan to let you buy your house) they also create $200,000 of liability (which is what an account in credit is).  It's nonsense to argue that the bank gets all of that asset.  It's also nonsense to suggest that it is magic that creates it, it is the willingness of someone to sign away their future earning power to servicing that loan that makes the asset an asset -- banks can only create up to what people are willing to borrow.  What the bank gets to keep is the spread between the interest they charge and the interest they pay.

FRB isn't evil; it's what banks are for.  You might disagree with the level at which it is done, but pretty much no one thinks they should pay the bank a fee to hold their money for them.  Therefore they do want FRB.

The failure was not FRB.  The failure was the government creating or allowing to be created an environment were the risk of failure were transferred to the taxpayer.  The banks should be careful about who they lend to (but were ordered not to be by the governments of the world), to minimise defaults.  The cost of defaulting individually should be uncomfortably high so that people aren't "willing to borrow" infinite amounts.  The spread that the banks earn is intended to be in exchange for vetting lenders, chasing defaulters, insuring against defaulters, and buying the big vaults to keep some liquidity on hand for when the savers want to buy groceries.  When there are more defaulters than the spread can absorb, then we get a financial crash (oh look, that's exactly what happened).

I really don't want a world were people can't buy a house because there is no FRB system to let the previous generation lend to the next generation at a profit.

About the only way I could see it NOT being so would be if (1) every bank issued their own notes (for gold, bitcoins, dollars, etc.) and (2) the FR banks clearly indicated on the notes (and on the checks, etc.) that they used fractional reserve banking.

Food for thought....