I'd like to know as well. And for that matter, is there any interesting material out there that talks about Bitcoin?
What are you looking for? https://en.bitcoin.it/wiki/Main_Page has a lot of good info on a lot of stuff. reddit.com/r/bitcoin is a pretty helpful place to ask casual questions.
So many questions. Bitcoin is really making re-evaluate a lot of things. I think I've given you a sense of what I'm looking for.
I'm no expert, but I don't think that most banks would actually hold paper notes for every dollar they are storing for their account holders. In reality banks are already pretty much digital for most transactions.
What I am wondering is when* various governments are going to start enforcing existing regulations^, that apply to banks, on the various bitcoin exchanges.
* perhaps the exchanges already comply with these regulations, but I would be surprised.
^ don't ask me what the regulations are, I am guessing that banking is/should be a heavily regulated industry in most countries.
edit: formatting.
During the subprime mortgage, American banks (and some foreign banks but I can't recall them) were deregulated in a way that allowed them to have a higher ratio between their liabilities and what they actually held. This meant they could increase their financial investments without really having the money. I can't remember the exact ratio but it was something like 40-1.
[1] http://en.wikipedia.org/wiki/Bank_regulation#Reserve_require...
Here's an analysis of that report by economic analyst Tuur Demeester: http://www.zerohedge.com/news/2012-11-04/bitcoin-seen-throug...
Here's an interview of Tuur Demeester by Max Keiser about his report: http://www.youtube.com/watch?v=d5vowdygIPU#t=12m42s
Long story short: The ECB is worried about Bitcoin because unlike e-gold and other centrally clearing solutions, the peer-to-peer bitcoin doesn't have a central guy doing all the transaction clearing so there is no-one to bully and arrest.
Still a good read if only for a perspective change.
Intentional inflation and deflation of bitcoin is impossible, but one could imagine the creation of a digital currency where it would be possible.
You don't need to put bitcoins in a bank for "safe keeping," but in a mature bitcoin economy, you'd probably want to invest them in some form, so there would be banks that give out loans. They can't use fractional reserve banking unless they issue their own "notes" (digital or otherwise) that are redeemable for bitcoin. In such a case, there would be no required fractional reserve, unless one were to be instituted by law. Basically, in all these aspects, you can really think of bitcoin as a digital fom of gold. Banks used to hold gold in their vaults and give out redeemable bank notes, so this has happened before historically.