(1) We set up our fractional reserve bank;Where is the fraud here?
(2) our clients hand over money to us and explicitly agree that the ownership of their money passes to the bank;
(3) the bank gives the client a bank account, which is a credit/debt instrument or an IOU redeemable on demand to return to them money up to the amount in his or her account from (a) the bank’s reserves, (b) from sale of financial assets, or (3) loans.
(4) it is understood by all parties that most of the original money has been loaned out (except for that portion held as reserves), and only a tantundem from the bank’s reserves, money from sale of financial assets, or loans is provided;
(5) the bank’s private notes are negotiable, so that they can be used by anyone who accepts them as a means of payment/medium of exchange. It is in our contact that our clients must explain to anyone who accepts our private notes the terms as stipulated to them. The private notes are widely accepted in the community. People are happy to accept them as a means of payment, and redeem them when they wish to.
(6) if the bank becomes insolvent, the clients holding accounts or unredeemed bank notes can sue to regain their debt from the liquidation of the bank’s assets. Everyone understands this and accepts the risk.
In the freedom-hating anarcho-capitalist world, private protection agency thugs invade the property of the owners/partners of the fractional reserve bank, committing violence against them, breaking up their profitable business (which is a shining example of private enterprise), and tearing up the bank’s free contracts.
The fractional reserve bankers are dragged into a private court, and the vicious anarcho-capitalist judge breathes fire and brimstone as he holds up Rothbard’s Man, Economy, and State (as if it were the Bible), banging it on the bench, screaming at the bankers that their fractional reserve bank contracts were really just bailments and they have committed fraud.
The bankers reply that this is nonsense: all their clients freely agreed to a loan contract, and they produce the contracts to prove this. The prosecution can find no clients who are willing to say that they were defrauded or did not understand the contract.
Nevertheless, the cultist Rothbardians are adamant fraud has occurred (even though they cannot prove anything). The bankers are found guilty on trumped up charges – conspiracy to commit fraud, fraud, and theft of their clients’ bailments.
As they are led off to the horrors of an anarcho-capitalist prison, the bankers realise the nature of the Rothbardian anarcho-capitalist world: a world of suppression of private enterprise, violence against businessmen, and violation of the sanctity of free contract.
Michael Rozeff disagrees with Rothbard on FRB [pdf]:
ReplyDeletehttp://www.independent.org/pdf/tir/tir_14_04_02_rozeff.pdf
If the depositors aren’t misled and the payees aren’t misled, who cares?
Zzzzzzzzzzzzzzzzzzzzzzzzz
This topic only helps us Austrians to further refine our arguments like in the multiple natural interest rates debate. It does nothing to substantiate the Keynesian Hoax or impair the basic Austrian view.
Four points emerge then:
ReplyDelete(1) with FRB legal in an anarcho-capitalist society, then inflation of the money supply via fiduciary media will occur;
(2) under the logic of ABCT, the anarcho-capitalist society will be hit by perpetual trade cycles;
(3) the anarcho-capitalist belief that the trade cycle will be eliminated in their system is nonsensical rubbish;
(4) the anarcho-capitalist system just reduces to a free banking system: it faces all the instability and unemployment that a free banking system would face, including asset bubbles, banking sector collapse, and debt deflationary depression.
I have my doubts as to how useful FRB would be. Since payees would have to be made to understand that an FRB note IS NOT the same as a 100% specie reserve note, why would anyone ever accept them? I would think a home seller would demand a pile of specie instead of racing to the FRB bank hoping that the cash is still there. If payees they did accept them, they would be discounted. Further, to the extent these notes bid up the price of things, they would only be bid up in terms of those specific notes and probably not in terms of 100% specie reserve notes. The key to the ABCT is people being misled, and my proposal mandates that no one be misled.
ReplyDeleteYou still always avoid my definitive critique of your schemes. How is it that free people in a voluntary association will not be able to figure out how to avoid your imaginary business cycle but, a priori, a ruling elite with SWAT teams can figure this out.
Also, you fail to realize that a free association of people could agree to whatever legal system they wanted and could voluntarily agree to a system of business cycle overseers if need be. They also would be under no requirement to agree with Rothbard on torture. Heck, they could all agree to live under Sharia law.
"Since payees would have to be made to understand that an FRB note IS NOT the same as a 100% specie reserve note, why would anyone ever accept them?"
ReplyDeleteFor precisely the reason that millions of business people have accepted FRB in the real world over many centuries: a mutuum contract giving you interest without a fixed time period is much more convenient and flexible than a time deposit.
That is why the free market invented fractional reserve banking.
It overcomes the difficulty of needing liquidity at short notice for businesses and individuals that have their money locked up in time deposits.
"I would think a home seller would demand a pile of specie instead of racing to the FRB bank hoping that the cash is still there. "
ReplyDeleteFunny how you can telepathically predict how people would behave.
If people acted in the way you think, nobody would ever accept a bill of exchange, sight draft or time draft as a means of payment.
For the record, I don’t claim to be able to predict specifically what agreements people will make in the future nor do I intend to force them to do anything other than obey the non-aggression principle and that would only be in a defensive mode.
ReplyDeleteRegarding the future success of FRB in a free society, just throw the baby in the pool and see if it swims. As I said before,
ZZZZZZZZZZZZZZZZZ
1/2
ReplyDeleteWe've already gone over this nonsense. This newest attempt is just a restatement of your original fallacious diversionary pretension that the victims created by the FRB business cycle are "all in agreement" with an added fallacious claim about what "backs" the demand deposits.
I'll start with the newest fallacy, then I'll just reconsider the first fallacy.
LK claims in (6) that clients whose money is not made available to them at all times, can just sue the bank, which in turn will sell assets for the needed cash. The claim then is that fiduciary money (frb created money) is somehow "backed" by the value of something real, like "assets." However, what LK ignores is the crucial fact that the value of those assets DEPENDS on the continued existence of FRB propping up the nominal values of those assets, and would themselves collapse in value as defaults, bankruptcies and bank failures generates a decline in the money supply and thus a decline in aggregate demand and thus a decline in asset prices. Furthermore, there would be no basis upon which a voluntary lender to a bank (not a demand depositor) could sue the bank in the event that the bank failed to pay back the loan. Unless there are contractual stipulations such as the bank being obliged to keep the tantundem available at all times, a lender to a bank incurs the risk of total loss.
Next up is LK's "crying wolf" over the alleged violation of property rights that would allegedly occur under enforcing 100% reserve on demand deposits. This position of LK is thoroughly dishonest, for LK advocates his own brand of private property violations at banks, for example various government regulations that usurp and thus violate the banks and their client's voluntary contracts.
For example, LK wants the government goons to point their guns at bankers and clients, drag them into court, and breathe fire on them, should they decide to engage in voluntary contracts that go against LK's desire that the solution to the instability of FRB systems be violently separate commercial from investment banking, violently steal people’s purchasing power through deposit insurance for commercial banks, and violently stopping “reckless lending” voluntary contracts, and also to violently enforce a lender of last resort in a central bank who will violently stop market interest rates and market rates of inflation from taking place.
2/2
ReplyDeleteNow, if LK’s point is that those who are against FRB and consider it fraud, cannot claim that they are against violations of property, or contract, or individual economic freedom, since they are allegedly in favor of violating individual economic freedom in banning FRB, thus allegedly manifesting a hypocritical position of claiming to be both for and against violations of property, then LK, contrary to his belief, would actually only be undermining his own position of wanting exponentially more violations of property than he believes those against FRB allegedly desire.
The truth is that what LK has done in this latest post is to completely ignore the nature of demand deposits, and defend a bank’s right to lend out money that was first lent to them, which is a defense of loans, not demand deposits. Again and again, LK conflates demand deposits with loans, and believes the myth that being against FRB means one is against voluntary loans. We are not. If a client gives money to a bank, and willingly accepts that the bank will lend that money out to others to become their property, then that is a loan to the bank. It is not a demand deposit. Those of us against FRB are against lending out demand deposits. A system where 100% of the bank client population willingly accepted a bank to loan out ALL the money the clients deposit with their bank would not even be an FRB system. It would be a “100% reserve on demand deposits (demand deposits would actually be zero) plus a free market driven collateralization of loans circulating as mediums of exchange system.”
In this system, no anarcho-capitalist can be against it, because nobody would be contracting for a demand deposit. Everyone who earned money would then turn around and loan it out to others via their banks, by taking advantage of their bank’s ability to seek out profitable investment opportunities that the lenders could not or would not do themselves. It would be a monetary system built almost entirely on debt, and not only that, but if voluntary contracts are not to be violated or stopped, then LK’s new morality of claiming to be against violations of contract, must accept that ANY quantity of such voluntary contracts ought to be permitted, and thus LK would be compelled to admit that his alleged “horror” he feels at anarcho-capitalists against FRB who allegedly want to coerce voluntary contract participants, is nothing but a hypocritical smear.
LK would have to be in favor of the business cycle generating on the basis of “too much” FRB. LK would have to be in favor of widespread unemployment and idle resources as the FRB system collapses after being inflated during a prior FRB boom. LK could not claim that it would be justified during the collapse for the government to then steal other people’s money and then spend it on various special interest group projects, with the intention of replacing the lost debt money with new money, so as to avoid aggregate monetary deflation. LK could not claim that this is justified if his voluntary contract-based protestations against anti-FRB advocates are honest protestations.
Your entire post says NOTHING about any contradiction in those who advocate both non-aggression against voluntary contracts and abolition of FRB through enforcement. What you have described in your 6-part defense of FRB is actually a defense of voluntary loans, not FRB. FRB is a system where there is less money on reserve than there are demand deposits, not a system where there is less money on reserve than there are loans.
"Since payees would have to be made to understand that an FRB note IS NOT the same as a 100% specie reserve note, why would anyone ever accept them?"
ReplyDeleteFor precisely the reason that millions of business people have accepted FRB in the real world over many centuries: a mutuum contract giving you interest without a fixed time period is much more convenient and flexible than a time deposit.
False. You are ignoring all the government interventions that distort the market and make FRB attractive. The reason why FRB persists is because governments have interfered with the affects of FRB, not because "millions of business people have recognized the benefits" of it on their own.
From governments historically allowing banks to withhold contractual obligations and deny withdrawal requests, which prevents bank failures, to FDIC insurance, to the three central bank attempts to prop up the FRB credit system, the actual market effects of FRB are not readily observable, and so it enables it to persist where otherwise people would learn to distinguish between 100% reserve banks and FRB banks and make absolute sure of their risks by being able to read balance sheet statements.
Thus, when you say this nonsense:
That is why the free market invented fractional reserve banking.
It overcomes the difficulty of needing liquidity at short notice for businesses and individuals that have their money locked up in time deposits.
That is nothing but a "just world" fallacy. You're trying to find a non-fraudulent explanation for fraudulent actions.
"I would think a home seller would demand a pile of specie instead of racing to the FRB bank hoping that the cash is still there."
ReplyDeleteFunny how you can telepathically predict how people would behave.
If people acted in the way you think, nobody would ever accept a bill of exchange, sight draft or time draft as a means of payment.
You are committing a fallacy of failing to take into account that Roddis is not talking about what we have now when he makes that argument. He is abstracting and talking about principles. By responding with "if that were true, nobody would now be accepting a bill of exchange today", you are ignoring all the government interventions that lead to people accepting them as mediums of exchange. FDIC, central banks creating new money ex nihilo, bank holidays thus preventing bank collapses and thus preventing eradication of client's accounts, all of these interventions and violations of private property prevent the full effects of FRB from being felt by the populace, which of course prevents the populace from learning the true nature and direct effects of FRB.
Funny how LK's entire raison d'être is his market failure theory that is based upon telepathically predicting how foolishly people would ALWAYS behave in a voluntary association.
ReplyDelete"LK claims in (6) that clients whose money is not made available to them at all times, can just sue the bank, which in turn will sell assets for the needed cash. "
ReplyDeleteWhat I said is that if the bank is insolvent, then its assets (meaning its property, real assets and financial ones) will be sold off to pay creditors, but if that doesn't cover all the debts, then you have ALREADY accepted that risk in signing the contract. all that is required is:
(6) if the bank becomes insolvent, the clients holding accounts or unredeemed bank notes can sue to regain their debt from the liquidation of the bank’s assets (real or financial. Everyone understands this and accepts the risk that all the debts might not be repaid.
If all contracts now require no risk of loss, then the basis of all captalism is destroyed.
"This position of LK is thoroughly dishonest, for LK advocates his own brand of private property violations at banks," etc etc.
ReplyDeleteMy position is irrelevant to the example considered above. That example could, for example, by used by any free banker against a Rothbardian anti-FRB position.
There is no "hypocrisy" because I do not advocate natural rights.
"The truth is that what LK has done in this latest post is to completely ignore the nature of demand deposits, and defend a bank’s right to lend out money that was first lent to them, which is a defense of loans, not demand deposits."
ReplyDeleteDemand deposits are loans (although a fraction of them are held as reserves).
If 2 parties contract to have a callable loan in precisely the way I have described above, where is the fraud?
"LK conflates demand deposits with loans, and believes the myth that being against FRB means one is against voluntary loans. We are not"
ReplyDeleteThen you have no argument against FRB callable loans. Period.
You have also misunderstood point (4) above.
ReplyDeleteI have clarified it:
(4) it is understood by all parties that most of the original money has been loaned out (except for that portion held as reserves), and only a tantundem from the bank’s reserves, money from sale of financial assets, or loans is provided;
You still always avoid my definitive critique of your schemes. How is it that free people in a voluntary association will not be able to figure out how to avoid your imaginary business cycle but, a priori, a ruling elite with SWAT teams can figure this out.
ReplyDeleteThat's easy - the premise is that avoiding business cycles is something individuals would not do voluntarily or cooperatively, not that they couldn't. It's likely that if everyone knew how to keep the economy stable, most would not see it as in their immediate interests, and would not follow along.
So, the assertion that this is about "figuring out" anything is a straw man. The state is there to enforce the rules, not to be an oracle.
1/2
ReplyDelete"LK claims in (6) that clients whose money is not made available to them at all times, can just sue the bank, which in turn will sell assets for the needed cash."
What I said is that if the bank is insolvent, then its assets (meaning its property, real assets and financial ones) will be sold off to pay creditors, but if that doesn't cover all the debts, then you have ALREADY accepted that risk in signing the contract.
Risk of a loan, yes. Not risk of a demand deposit.
(6) if the bank becomes insolvent, the clients holding accounts or unredeemed bank notes can sue to regain their debt from the liquidation of the bank’s assets (real or financial. Everyone understands this and accepts the risk that all the debts might not be repaid.
If everyone understands that their money is loaned out, then their accounts are not demand deposit accounts, but loans to the bank.
"This position of LK is thoroughly dishonest, for LK advocates his own brand of private property violations at banks," etc etc.
My position is irrelevant to the example considered above.
No, it is certainly quite relevant, because if you're going to use property rights as a foundation to argue that anti-FRB advocates are wrong, then you must accept that your own brand of property rights violation advocacy is wrong.
That example could, for example, by used by any free banker against a Rothbardian anti-FRB position.
Sure, but you're not a free banker. You can't say that anti-FRB advocates (by the way, to be against FRB does necessarily make one a "Rothbardian.") are wrong. You could only say that free bankers would consider anti-FRB advocates to be wrong, in which case the debate would be over two strands of free market advocacies, not the free market and your statism.
There is no "hypocrisy" because I do not advocate natural rights.
It's not necessary that you are a hypocrite that you be an advocate of natural rights. It's that you are claiming anti-FRB advocates are wrong on the basis of alleged property rights violations, and yet you yourself advocate for violations of property rights, in various state violence forms such as violently separating voluntary uniting of commercial banking and investment banking, as well as using violence to stop further "voluntary FRB contracts" that go beyond a certain undefined and thus ad hoc limit of fiduciary media. You said that it is a valid response to the problems of FRB to get the state to "regulate", which of course means the state is justified in using brute violence to stop voluntary contracts that go against what the regulators want.
2/2
ReplyDelete"The truth is that what LK has done in this latest post is to completely ignore the nature of demand deposits, and defend a bank’s right to lend out money that was first lent to them, which is a defense of loans, not demand deposits."
Demand deposits are loans (although a fraction of them are held as reserves).
False. Demand deposits are not loans. Loans are loans. Demand deposits are demand deposits. Demand deposits do not result in property rights transfer. Loans do. Any sum of money that changes ownership is not a demand deposit.
If 2 parties contract to have a callable loan in precisely the way I have described above, where is the fraud?
The fraud is put on those who contracted for or believe they have, a demand deposit, but the bank reneges because they paid off the "FRB demand deposit lenders" and thus have no money left to pay the demand depositors.
You keep pretending to read the minds of millions of people, when you have no justification in claiming that "everyone knows and understands." A recent poll showed that around 70% of the UK population thinks that their banks have their money available at all times, when in reality they don't. You can't claim that everyone would know, especially when we live in a society where everyone "should" know, but only a minority actually do!
"LK conflates demand deposits with loans, and believes the myth that being against FRB means one is against voluntary loans. We are not"
Then you have no argument against FRB callable loans. Period.
Bank loans backed by client loans to the bank, are not FRB generating. Only demand deposits that are lent are FRB generating. "FRB loans" is an oxymoron.
You have also misunderstood point (4) above.
In (4), you have again implicitly argued that ABCT is valid.
I have clarified it:
(4) it is understood by all parties that most of the original money has been loaned out (except for that portion held as reserves), and only a tantundem from the bank’s reserves, money from sale of financial assets, or loans is provided;
If everyone knows that their money is loaned out, then they are not demand deposits. They are loans.
"The fraud is put on those who contracted for or believe they have, a demand deposit, but the bank reneges because they paid off the "FRB demand deposit lenders" and thus have no money left to pay the demand depositors."
ReplyDeleteThere is no fraud.
They have already signed a contract freely and voluntarily accepting the risk that they might lose their money.
"You can't claim that everyone would know, especially when we live in a society where everyone "should" know, but only a minority actually do!"
ReplyDeleteThis isn't relevant to the situation I have sketched above: this is a mere evasion of the issue.
If the clients of the bank and the bank - all parties - contract to have a callable loan in precisely the way I have described above, where is the fraud?
So, does pete still require a nonstandard definition of 'demand deposit', and 'fraud' to claim that frb demand deposits are fraud?
ReplyDeleteArgosy Jones,
ReplyDeleteHis current position now requires that all callable loans where there is risk that your loan contract might not be honoured are immoral/fraudulent.
In fact, all loans of any time (demand or time deposit) would be immoral by that criterion, because there is risk that any loan contract might not be honoured.
He in fact shows ignorance of modern Austrian anti-FRB argument anyway: the more sophisticated operators like Huerta de Soto argue that mutuum loans cannot exist without a time deposit element.
But that is palpable nonsense. Sight drafts and virtually every callable loan in existence would now be immoral if that were true, as Selgin has noted:
"If De Soto’s position is in fact that callable loans are ipso-facto illegitimate, then that position is even less tenable than I once supposed. For now it isn’t just a question of wishing to suppress fractionally-backed bank deposits, but of wishing to suppress all call loans, starting with brokers loans (which have long played a very important role in financing securities trades) but also including callable bonds and many other non-bank intermediated securities."
http://blog.mises.org/9973/white-and-horwitz-on-hoppe/#comment-548811
"The fraud is put on those who contracted for or believe they have, a demand deposit, but the bank reneges because they paid off the "FRB demand deposit lenders" and thus have no money left to pay the demand depositors."
ReplyDeleteThere is no fraud.
There were no demand deposits in your hypothetical example. You dropped the context of demand deposits and diverted the discussion to loans instead.
They have already signed a contract freely and voluntarily accepting the risk that they might lose their money.
Those are loans, not demand deposits.
"You can't claim that everyone would know, especially when we live in a society where everyone "should" know, but only a minority actually do!"
ReplyDeleteThis isn't relevant to the situation I have sketched above: this is a mere evasion of the issue.
The real world is relevant to your hypothetical scenario because we have aspects of your hypothetical example in the real world. And in the real world, the results are widespread unemployment and idle resources.
The situation you have described above where "everyone knows and agrees that the banks would lend their money out" would be a system of loans, not demand deposits.
If the clients of the bank and the bank - all parties - contract to have a callable loan in precisely the way I have described above, where is the fraud?
The fraud is with demand deposits being loaned out, not loans being loaned out.
"There were no demand deposits in your hypothetical example. You dropped the context of demand deposits and diverted the discussion to loans instead.
ReplyDeleteLOL.. so now you're saying that if "demand deposits" were just renamed "callable loans" and if all parties freely agreed to the terms, there would be NO moral argument against fractional reserve callable loans?
Argosy:
ReplyDeleteSo, does pete still require a nonstandard definition of 'demand deposit', and 'fraud' to claim that frb demand deposits are fraud?
If your only defense is to claim that your definition is "standard" whereas my definition is "nonstandard" then congrats on admitting that you don't understand the arguments taking place, and congrats on admitting that your entire position is based on semantics only, and not on meanings of terms, or actions of people, or on economic principles.
"The real world is relevant to your hypothetical scenario because we have aspects of your hypothetical example in the real world. And in the real world, the results are widespread unemployment and idle resources. "
ReplyDeleteTo object to the effects of FRB on these grounds - its effects on real world people experiencing unmeployment etc - requires a utilitarian/consequentilaist argument.
A natural rights ethics cannot do it.
There are no natural rights arguments against sale of alcohol or even hard drugs, yet these can have very bad effects on large numbers of people. Under a natural rights ethics, to ban alcohol would just be a violence against freedom of private enterprise and consumers' preferences, for example - whatever bad effects alcohol has.
It is the same with FRB.
His current position now requires
ReplyDeleteThat is dishonestly insinuating that my position has changed. My position has not changed. I have said since the beginning that demand deposits are not loans.
that all callable loans where there is risk that your loan contract might not be honoured are immoral/fraudulent.
Straw man. A callable loan does have a risk of loss due to the investments not paying back what is expected. But we're talking about demand deposits, not loans.
You can claim over and over and over and over again that demand deposits are loans, but you'd only be denying the very foundation of the entire debate, and begging the question of your own position.
You have not shown that demand deposits are loans. Citing positive law is not a valid foundation, because positive law is just status quo. If the government defined slavery is voluntary labor, then that doesn't mean slavery would in fact be voluntary labor. The state does not determine reality.
In fact, all loans of any time (demand or time deposit)
Demand deposits are not loans.
He in fact shows ignorance of modern Austrian anti-FRB argument anyway: the more sophisticated operators like Huerta de Soto argue that mutuum loans cannot exist without a time deposit element.
But that is palpable nonsense.
How so?
Sight drafts and virtually every callable loan in existence would now be immoral if that were true
Callable loans have a time deposit element, namely, the maturity of the loan. The introduction of call options does not turn the loan into a demand deposit.
as Selgin has noted:
"If De Soto’s position is in fact that callable loans are ipso-facto illegitimate
De Soto does not consider callable loans as ipso-facto illegitimate. That's a straw man.
The fraud is with demand deposits being loaned out, not loans being loaned out.
ReplyDeleteLOL.. So if the clients of the bank and the bank - all parties - contract to have a "callable loan" system in precisely the way I have described above, there is no fraud???
You are saying there is none?
So now a world with a fractional reserve "callable loan" banking system in precisely the way I have described above would be moral?
"There were no demand deposits in your hypothetical example. You dropped the context of demand deposits and diverted the discussion to loans instead.
ReplyDeleteLOL.. so now you're saying that if "demand deposits" were just renamed "callable loans" and if all parties freely agreed to the terms, there would be NO moral argument against fractional reserve callable loans?
No, you're still missing the elephant in the room. "Fractional reserve loans" is an oxymoron. Fractional reserve banking is not fractional reserve lending. Fractional reserve banking is fractional reserve on demand deposits, not loans.
If you tell me that people are opening up accounts where the bank takes ownership of the money, and/or that money gets lent out, then that is not a fractional reserve bank. That is an investment institution which has debt investors.
In your worldview, demand deposits, and traditional money for safe keeping accounts, would be impossible. You're just refusing to consider the possibility of the existence of demand deposits and traditional sake keeping banks, and claiming that anytime anyone gives physical possession of any money to any bank, for whatever reason, that money becomes the property of the bank.
How are 100% reserve banks even possible in your treatment of banking if your worldview won't even allow people to open up demand deposit accounts in 100% reserve banks?
> "If De Soto’s position is in fact that
ReplyDelete> callable loans are ipso-facto illegitimate
De Soto does not consider callable loans as ipso-facto illegitimate. That's a straw man.
De Soto does not say he "considers callable loans as ipso-facto illegitimate" - correct, but that is not Selgin's point.
His point is that De Soto's position - for logical conisistency - requires/entails that all callable loans as ipso-facto illegitimate.
Different thing.
You're just refusing to consider the possibility of the existence of demand deposits and traditional sake keeping banks, and claiming that anytime anyone gives physical possession of any money to any bank, for whatever reason, that money becomes the property of the bank.
ReplyDeleteThat is rubbish. Safety box bailment is a service that many banks (even hotels) offer. I do not argue that "anytime anyone gives physical possession of any money to any bank, for whatever reason, that money becomes the property of the bank". Pathetic.
I have already shown how English and American law distinguishes between bailment and mutuum.
How are 100% reserve banks even possible in your treatment of banking if your worldview won't even allow people to open up demand deposit accounts in 100% reserve banks?
LOL... Pure, utter garbage. There is no law against a bailment warehouse for money, even today, nor has there at any time in the past.
"The real world is relevant to your hypothetical scenario because we have aspects of your hypothetical example in the real world. And in the real world, the results are widespread unemployment and idle resources."
ReplyDeleteTo object to the effects of FRB on these grounds - its effects on real world people experiencing unmeployment etc - requires a utilitarian/consequentilaist argument.
I was not objecting to FRB on those grounds. That one realizes that there are destructive effects of FRB fraud is just an expectation that is proven correct, it is a realization of what happens when FRB fraud goes unchecked.
A natural rights ethics cannot do it.
Natural law based arguments can show that demand deposits are not loans. That is sufficient to refuting your entire false equivocation of the two.
There are no natural rights arguments against sale of alcohol or even hard drugs, yet these can have very bad effects on large numbers of people.
The sale of alcohol and drugs has exactly zero negative effects on anyone, since "sale" presumes voluntary and thus mutually beneficial trade. That people can become inebriated and then harm others is no argument against alcohol any more than McDonald's sales cannot be blamed for obese people falling over on top of children and killing them.
FRB is fraud and the fraud is itself necessarily destructive, and it necessarily has destructive effects.
Under a natural rights ethics, to ban alcohol would just be a violence against freedom of private enterprise and consumers' preferences, for example - whatever bad effects alcohol has.
Alcohol cannot be banned under natural rights ethics.
It is the same with FRB.
No, it is not the same at all. If you instead said that a store that sells alcohol were to grant ownership rights to the same bottle of alcohol to more than one party, then it would be similar to FRB fraud.
"The sale of alcohol and drugs has exactly zero negative effects on anyone, since "sale" presumes voluntary and thus mutually beneficial trade. That people can become inebriated and then harm others is no argument against alcohol any more than McDonald's sales cannot be blamed for obese people falling over on top of children and killing them."
ReplyDeleteThe existence of mutuum loans that are callable has exactly zero negative effects on anyone, since the "contract" signed by the clients presumes voluntary and thus mutually beneficial trade. That people can lose money by an insolvent FR bank or that FR banks can caue a business cycle is no argument against FRB any more than McDonald's sales cannot be blamed for obese people falling over on top of children and killing them.
You're just refusing to consider the possibility of the existence of demand deposits and traditional sake keeping banks, and claiming that anytime anyone gives physical possession of any money to any bank, for whatever reason, that money becomes the property of the bank.
ReplyDeleteThat is rubbish. Safety box bailment is a service that many banks (even hotels) offer.
You ignore demand deposits based on tantundem, and fallaciously presume that any deposits other than those in safe deposit boxes are deposits that entail transfer of ownership rights. You are ignoring the ownership of a tantundem sum available at the bank.
I have already shown how English and American law distinguishes between bailment and mutuum.
I have already shown that positive law cannot serve as a foundation for the morality of FRB.
How are 100% reserve banks even possible in your treatment of banking if your worldview won't even allow people to open up demand deposit accounts in 100% reserve banks?
There is no law against a bailment warehouse for money, even today, nor has there at any time in the past.
There are FDIC laws, and central bank laws, and laws that allow banks and a minority of bank clients to treat tantundem demand deposits as loans, at the expense of others.
The existence of mutuum loans that are callable has exactly zero negative effects on anyone, since the "contract" signed by the clients presumes voluntary and thus mutually beneficial trade.
ReplyDeleteFalse. It negatively effects others through the business cycle, which is UNAVOIDABLE given FRB, unlike the sale of alcohol, in which case it IS avoidable to harm others.
That people can lose money by an insolvent FR bank or that FR banks can caue a business cycle is no argument against FRB any more than McDonald's sales cannot be blamed for obese people falling over on top of children and killing them.
False. People eating McDonalds and becoming obese does not necessarily cause obese people to kill children, whereas FRB and inflating a credit boom DOES necessarily cause the business cycle and thus necessarily causes harm to innocent people.
"It negatively effects others through the business cycle, which is UNAVOIDABLE given FRB, ..."
ReplyDeleteThat still gives no moral argument for banning it.
"whereas FRB and inflating a credit boom DOES necessarily cause the business cycle and thus necessarily causes harm to innocent people. "
By the same type of reasoning you could ban guns: "guns and sale of guns DOES necessarily allow criminals to engage inviolent crime and thus necessarily causes harm to innocent people.
Thus guns should be banned.
Of course, natural rights ethics can provide no basis for consequentialist arguments of this type, either for FRB or for guns.
Lord Keynes,
ReplyDeleteIt's clear that the Rothbardians are pulling a Westboro Baptist on your blog. Even if they did have something of value to say, we'll never know, because they're more interested in provoking you to waste your time.
They're not entitled to their opinions, and certainly not to a forum for the expression of those opinions.
(There's an entertaining opinion piece on that topic by Jamie Whyte, who, despite being a libertarian, has some interesting ideas.)
"It negatively effects others through the business cycle, which is UNAVOIDABLE given FRB, ..."
ReplyDeleteThat still gives no moral argument for banning it.
Actually it does, because if an effect of an action necessarily harms innocent people, then there is a moral case to ban that action.
"whereas FRB and inflating a credit boom DOES necessarily cause the business cycle and thus necessarily causes harm to innocent people. "
By the same type of reasoning you could ban guns: "guns and sale of guns DOES necessarily allow criminals to engage inviolent crime and thus necessarily causes harm to innocent people.
No, that is not the same type of reasoning. Producing and selling guns does not necessarily allow criminals to engage in violent crime, because producing and selling guns can also be used as a defense against criminals, in using guns for protection, not aggression. It is not necessary to gun production and selling that innocent people be harmed.
Good people can own guns as well you know, and not harm any innocent people.
So your example falls flat. It is not of the same type of reasoning as in FRB and the unavoidable harm it causes. FRB cannot be "used only for good" so to speak.
Thus guns should be banned.
Non sequitur. Gun sales does not necessarily cause crime to be committed or innocent people to be harmed.
Of course, natural rights ethics can provide no basis for consequentialist arguments of this type, either for FRB or for guns.
Natural rights can refute the alleged morality of FRB, and all other acts of fraud. Demand deposits are not loans. Those who willingly and knowingly deposit money as "callable loans", are actually investors in risky debt.
"Actually it does, because if an effect of an action necessarily harms innocent people, then there is a moral case to ban that action."
ReplyDeleteAn end (preventing bad effects) can justify the means (banning that action)?
You mean you have converted to utilitarianism? :)
"Actually it does, because if an effect of an action necessarily harms innocent people, then there is a moral case to ban that action."
ReplyDeleteAn end (bad effects) can justify the means (banning that action)?
You mean you have converted to utilitarianism? :)
I said a moral case can be made, not that I adhere to it.
I said:
"It negatively effects others through the business cycle, which is UNAVOIDABLE given FRB,"
You said:
"That still gives no moral argument for banning it."
That statement is false. It does give "a" moral argument for banning it. I never said I would necessarily adhere to it.
Nice try though. It's almost as good as me converting you to adhering to the ABCT, but without any stated premises on my part that would justify such a thing.
My view is that ANY consequentialist moral framework that can show a cause having a necessarily harmful effect, is able to be accommodated by natural rights, by discerning what natural rights are violated in the cause. This is because natural rights are built on irrefutable axioms that are a priori true to all experience. This is not to say that "is" leads to "ought", it is to say that all moral claims that violate it cannot be claimed to be internally consistent with what is, and it is up to people to choose to live according to what is, as opposed to what is not.
Pete,
ReplyDeleteAre you seriously arguing that Lord Keynes's arguments are only "semantic" because he won't use your absurd revisionist definitions? Did no one ever teach you that if you want to participate in an argument, you must use the widely agreed-upon meanings of words?
This is because natural rights are built on irrefutable axioms that are a priori true to all experience.
ReplyDeleteI get it now, Pete is trolling. Or else he is the most perfect Rothbardroid out there.
This is because natural rights are built on irrefutable axioms that are a priori true to all experience.
ReplyDeleteI agree with the other Anonymous. The idea that anything can be a priori true to all experience is literally demented. I hope that Pete will receive the mental health services he requires, whether voluntarily or not.
I think people posting Anonymously need to give themselves handles/pen names, please.
ReplyDeleteIt's getting confusing to keep track of arguments and who said what!
The idea that anything can be a priori true to all experience is literally demented.
Regarding that point, certainly if you subscribe to Quine's naturalised epistemology, which has had a significant influence on, or at least place within, modern analytic philosophy.
If your only defense is to claim that your definition is "standard" whereas my definition is "nonstandard" then congrats on admitting that you don't understand the arguments taking place, and congrats on admitting that your entire position is based on semantics only, and not on meanings of terms, or actions of people, or on economic principles.
ReplyDeleteIf your claim that fractional reserve demand deposits are fraud requires you to redefine both demand deposits and fraud, then you're effectively talking about an alternate universe. If you think such contortions are the makings of a good argument, think again.
The 'multiple titles to same property' definition of fraud, necessary to your argument was contrived deliberately to apply to fractional reserve demand deposits (under an also contrived definition, maddeningly). Name one instance of fraud that meets this definition, but not the dictionary definition. And it better not be time deposits or insurance!
That or link to the newspeak dictionary where you got your definitions, so we can all learn to speak Rothbardese. And I'd like to add, anyone who has to redefine both A and B to make A=B true, is highly inefficient.
Anonymous:
ReplyDeletePete, are you seriously arguing that Lord Keynes's arguments are only "semantic" because he won't use your absurd revisionist definitions?
Rhetorical question. No, I am not revisioning any definitions. And the person I said was arguing over semantics was Argosy.
Did no one ever teach you that if you want to participate in an argument, you must use the widely agreed-upon meanings of words?
Agreed, which is why LK and Argosy are committing a foul by redefining demand deposits to be loans.
"This is because natural rights are built on irrefutable axioms that are a priori true to all experience."
I get it now, Pete is trolling. Or else he is the most perfect Rothbardroid out there.
It was actually Kant that made this discovery, which Mises then adopted and improved upon immeasurably, which Rothbard actually rejected. But congrats on immaturely trying to shoehorn all those who disagree with you into "Rothbardaroids".
To the other Anonymous:
"This is because natural rights are built on irrefutable axioms that are a priori true to all experience."
I agree with the other Anonymous. The idea that anything can be a priori true to all experience is literally demented. I hope that Pete will receive the mental health services he requires, whether voluntarily or not.
How is it literally demented?
If you claim that there is nothing that can be known as true a priori to observation, then that claim itself cannot be true a priori to observation either. But if that's true, then because it is an argument that is being used to prove itself, because it is a vacuous claim, it means the only way we can take your claim seriously, is if it is not an a posteriori to observation claim, but rather an a priori claim.
Obviously the concept "observation" must be grounded a priori to observation, because you can't observe other entities making observations unless you first understand what an observation is.
LK:
I think people posting Anonymously need to give themselves handles/pen names, please.
It's getting confusing to keep track of arguments and who said what!
Seconded.
"The idea that anything can be a priori true to all experience is literally demented."
Regarding that point, certainly if you subscribe to Quine's naturalised epistemology, which has had a significant influence on, or at least place within, modern analytic philosophy.
Grice and Strawson, as well as Putnam, exposed serious errors in Quine's original challenge against a priori synthetic knowledge, which compelled Quine to write a new book completely denying the determinacy of translation, which is easily exposed as contradictory with even the most basic of logical arguments, as Hoppe has shown in his essay "In Defense of Extreme Rationalism" where he debunks the notion that language makes rationalism based on meanings impossible.
In addition, this doesn't even include the embarrassing fact that Quine's book was translated into many different languages, and yet neither he nor his contemporaries said anything regarding any distortions or changed meanings in the translations.
Anonymous:
ReplyDeleteI hope that Pete will receive the mental health services he requires, whether voluntarily or not.
This attitude of initiating force against people that are peaceful and yet disagree with you is a textbook example of the disgusting morality of statists in action. Stalin also ordered violent incarcerations and forced institutionalizations of peaceful intellectual dissenters. The only difference between you and Stalin is that nobody obeys what you tell them to do. And that probably makes you mad.
Argosy:
ReplyDeleteIf your claim that fractional reserve demand deposits are fraud requires you to redefine both demand deposits and fraud, then you're effectively talking about an alternate universe.
I am not "redefining" demand deposits nor fraud.
The 'multiple titles to same property' definition of fraud, necessary to your argument was contrived deliberately to apply to fractional reserve demand deposits (under an also contrived definition, maddeningly).
No, it was introduced as a necessary principle of non-fraudulent, enforceable contracting.
It is also not a "contrived" definition.
Name one instance of fraud that meets this definition, but not the dictionary definition.
Name one instance of slavery being unjust, and that ought to be eradicated, in a 4th century dictionary or political philosophy treatise.
And it better not be time deposits or insurance!
Here's an instance: FRB banking.
That or link to the newspeak dictionary where you got your definitions, so we can all learn to speak Rothbardese.
You sound like you have a fetish for Rothbard.
And I'd like to add, anyone who has to redefine both A and B to make A=B true, is highly inefficient.
Nobody is redefining anything except LK and the likes of your ilk, in redefining a demand deposit to be a loan.
...in redefining a demand deposit to be a loan.
ReplyDeleteA loan with no specific time set for repayment but callable on demand has been called a mutuum/creditum (loan) since Roman times, and is described as such in the Institutes of Gaius (161 AD):
The agreement enforceable as mutuum could only be for the restoration of an equal sum of money or of goods equal in quantity and similar in quality to those lent, at a date named or, if no date was named, on demand.
Francis De Zulueta, The Institutes of Gaius, Part 2, p. 149.
Yes, clearly I have *redefined* it, fool. Tell us another fable.
More clear evidence that I *redefined* it:
ReplyDeleteA deposit of money with a bank or private person is what is known in the civil law as a mutuum or irregular deposit—the distinction between the two kinds of deposit not being recognized by the common law.
When money is borrowed, and no time of payment is fixed by the contract of loan, the debt, as already stated, is instantly due, and an action may be brought without demand — the bringing of the action being a sufficient demand to entitle the lender to recover. (Chitty on Contracts, 734; Norton v. JEUam, 2 M. & W. 461.)
J. Tiffany, 1865. Reports of Cases Argued and Determined in the Court of Appeals of the State of New York (vol. II), Weare C. Little, law Bookseller, Albany. p. 168.
Pete/Major_Freedom,
ReplyDeleteAnswer one question:
(1) if two parties freely and voluntarily consent to a contract where one party hands over money to another as a loan, ownership of the money is transferred to the second party, there is no strict maturity date for the loan, but the debt can called back in whole or part at the discretion of party one in money of the same value/quantity up to teh amount lent. Is this moral or not?
If you cannot give a clear answer without evasion, you have no further contribution to make on this thread.
I think it's easier. If Rothbard really did think that fractional reserve banking is fraudulent, no matter if it's voluntary or not, he should have accepted that killing, no matter if voluntary or not (i.e., the victim wanted to be killed, like an assisted suicide), is a violation of the victim's property over his life.
ReplyDeleteTotally nonsense.
Answer one question:
ReplyDelete(1) if two parties freely and voluntarily consent to a contract where one party hands over money to another as a loan, ownership of the money is transferred to the second party, there is no strict maturity date for the loan, but the debt can called back in whole or part at the discretion of party one in money of the same value/quantity up to teh amount lent. Is this moral or not?
If there is no implied time period, and is callable, then it is a callable non-controlling equity instrument with fixed dividend payments, like a preferred stock. It is not a demand deposit, nor is it a loan. It is not a demand deposit because ownership rights of the tantundem have been transferred to the bank, and it is not a loan because there is no implied maturity.
A perpetual bond is also a non-controlling equity instrument that pays fixed dividends. It is not a loan.
It is moral if the two parties agree, because the bank is not lending out money from a demand deposit of tantundem account, but rather from a loan account, or non-controlling equity account.
This is not FRB. FRB is lending out demand deposits, not loans, nor non-controllable equity with calls.
Yes, the law as it is written today allows the banks to treat demand deposits of tantundem as loans, which means demand deposits of tantundem have all but been erased from the law and thus legal enforcement, and in my experience, every bank in the country contains on their contracts the clause that demand deposit relationships will be treated as debtor and creditor relationships, or more accurately as non-controlling equity with a call option relationships.
To the extent that banks and clients do this, it is not FRB banking, but investment banking.
To the extent that banks lend out of demand deposit tantundem accounts, against the client's knowledge or consent, then it is fraud. This fraud was present in the historical banking systems beginning with the onset of the modern state era, but has been "covered up" so to speak, by governments allowing all banks to treat demand deposits as loans or equity, and thus skirt around culpability in losses to demand depositors, which has since been responded with silly regulations such as Glass Steagall, and FDIC, and even central banking, which has only exacerbated the instabilities.
If you cannot give a clear answer without evasion, you have no further contribution to make on this thread.
Answer three questions:
One, show that a demand deposit is a loan, appealing to neither the status quo fallacy, nor positive law, which is just another form of status quo fallacy, and do so by using economic logic from first principles.
Two, show how it is even possible in your worldview for there to be a demand deposit of tandundem, that is not a loan and not a non-controlling equity investment, where ownership is retained by the depositor.
Three, show how a willing FRB demand depositor would have grounds for suing a bank in the event of the bank refusing or being unable to pay out their demand deposit obligations, and then reconcile that with having to tell 70% of the UK population (and probably same percentage of the US population) that they were idiots for believing that their banks had their client's demand deposit money on hand, without referring to contracts (since the presence of a clause in the contract that the bank intends to lend out demand deposit money is clearly not being communicated effectively to the clients, and why banks who do not make it clear, while not committing a contractual violation, are nevertheless acting with dubious morality by not making such a vital aspect of the contract clear to the clients).
Keep in mind, Rothbard gave credit to the Suffolk bank (a Fractional reserve bank) in his book 'History of Money and Banking" I actually have a short blog post about this: http://www.anarchico.net/2011/09/mr-rothbard-on-suffolk-bank.html
ReplyDelete"If there is no implied time period, and is callable, then it is a callable non-controlling equity instrument with fixed dividend payments, like a preferred stock"
ReplyDeleteWhat utter, idiotic rubbish.
Lending money to a bank in the way I have specified above does not mean
(1) you suddenly have an ownership stake in the bank; the loan above is a debt instrument ("legally enforceable evidence of a debt and the promise of its timely repayment").
(2) does not come with fixed dividend payments.
Your response is a blatantly dishonest attempt to define what was said, showing your inablity to engage in any honest debate.
"Yes, the law as it is written today allows the banks to treat demand deposits of tantundem as loans"....
"Two, show how it is even possible in your worldview for there to be a demand deposit of tandundem"
"Demand deposit(s) of tantundem" is a confused phrase showing your ignorance or just plain dishonesty.
A tantundem just means something paid given back of the same amount/quantity/value as lent. You attempt to conflate the word with a bailment. Tantundem does not mean a bailment and never has. There is no obligation to keep some tantundem at hand at all times during a mutuum loan.
"then reconcile that with having to tell 70% of the UK population (and probably same percentage of the US population) that they were idiots for believing that their banks had their client's demand deposit money on hand"
That is a feeble evasion of the issue: whether 2 parties freely and voluntarily agree to the terms I have described above.
You have nothing further to contribute to this thread.
You have also re-enforced my conclusion above that the Rothbardian would have no choice but to use violence and coercion to suppress the freely negotiated and agreed to contract I described above, or force the 2 parties against their will to change their contract to your newly invented one.
ReplyDeleteDespite your "liberty"/"no force against innocent parties ever!" rhetoric, by your own standard, you are an enemy of freedom, a violent and coercive thug who whould suppress free contract.
Correction:
ReplyDelete"Your response is a blatantly dishonest attempt to re-define what was said,
Tangentially relevant Bank of America drama in St. Louis:
ReplyDeletehttp://www.youtube.com/watch?v=Db_P0wHsSz0
Also, regardless of what you think of Lord Keynes, he does have a point about the Rothbardian view on fractional reserves. (I am not a big fan of most of lord Keynes' ideas but its only fair to give credit where its due.) There is no fraud committed through fractional reserve systems in theory, and Rothbard tries to justify his fraud claims based on his horrid understanding on how fractional reserves are ran.
ReplyDeleteModern rothbardians take a different approach to dealing with fractional reserve banks than Rothbard. While Rothbard advocated violence to get fractional reserves out of the market, (most)modern rothbardians do not and think that the market would throw out fractional reserve banks over time, even though they still consider it as fraud. But then this begs the question, 'If X is fraud, and therefore a crime, why not advocate violence or courts to get rid of X? (assuming a hypothetical free market society).'
Strikes me the entire argument over whether fractional reserve is fraudulent is a waste of time. If an activity breaks the law or legal principles, but is on balance beneficial or at least doesn’t do any harm, it is the law that should be changed, not the activity that should be banned.
ReplyDeleteIt’s like “stealing” something from someone’s trash bin. Strictly speaking that is illegal. But it would arguably make sense to make it legal to take what you want from other peoples’ trash bins.
Lord Keynes
ReplyDeleteI think you are a little confused about demand deposit.
first, there is no risk of me losing my money because the whole reason for having a bank account is for me to use my money on the go. If the bank had not made it clear that I could lose my money then I lost my money it is fraud. That is why when FRB was getting invented, when a bank run happened, the bankers lost thier lives from not too happy depositers. that is where banking requalations came in as goverment tried to reduce bank runs. no where does it say that I could lose my demand deposits that is why they are demand deposits to began with deposit quarantee or not.
second, imagine the beginning of banking. the bank notes represented gold in the vault and the public treated the bank notes like the actual gold. say I put put 1 ounce of gold in the bank and got 1 bank note. the banker printed another 9 notes and gave it to his friend. In the market place my purchasing power has been reduced to 1/10 of what it should be. even if the banker lent the 9 bank notes to 9 customers he is frauding them because they put up collateral on the basis that they were being lent 1 ounce of gold in terms of bank notes. that is why it is a scam and immoral. FRB is only moral if the depositer and borrower is told of the counterfitting and they are foolish enough to accept.
I hope you reply back and we can the same discusiion as you and pete.
first, there is no risk of losing deamand deposit because the whole purpose of demand deposit is that it is there when you needed it. in bank runs at the beginning of banking bankers lost their lives for not having their depositers money. that is why banking regulations came in to reduce bank runs.
ReplyDeletesecond, FRB is robbery. lets imaganine that beginning of banking. i put 1 ounce of gold in the bank and get 1 bank note. the banker prints 9 banks notes and lends it to 9 customers. the depositer lost 9/10 of purchasing power and the borrowers put up collateral on the belief that that bank note given to them represented 1 ounce of gold of purchasing power instead of 1/10. leaving aside the robbery, the fact that bank runs can happen just shows how greedy bankers can be.
"second, FRB is robbery. lets imaganine that beginning of banking. i put 1 ounce of gold in the bank and get 1 bank note. the banker prints 9 banks notes and lends it to 9 customers."
ReplyDeleteThis is a wholly false view of the history of FRB.
See:
Selgin, G. “Those Dishonest Goldsmiths,” revised January 20, 2011
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1589709
"the bank notes represented gold in the vault and the public treated the bank notes like the actual gold. "
Bank notes of the type you are talking about are mere IOUs - debt/credit instruments that are a promise to pay gold on demand.
Just as your FR account at the bank is a debt/credit instrument: it is shown as liability to the bank on the liability side of the bank's balance sheet and is a credit to you. When you give your money over to the bank you lose ownership of it, in a mutuum contract, not as bailment contract. The FR account is a mere debt to you owed by the bank. The bank promises to pay back that debt on demand from its reserves, money from sale of financial assets or other borrowing.
history is not important. You still have not explained how the printing of bank notes is not robbing depsoiters and borrowers of purchasing power without their knowledge. if they know then it is okay.
ReplyDeleteI will tell you what will happen to demand deposits in a free market. If a particualr bank is having a bank run like northern rock its customers will be told that their deposits are not availbale and then they lose their money legally as it says on the small print. then all bank customers will check thier contracts and probably think they we misled. and FRB will came to an end by customer power. If at this point when customers realise that demand deposits are loans and are happy with the pittance of interest they get as against the inflation rate than it is the will of the market but I doubt it.
the main problem with FRB is that the inflation its causes by legal counterfeiting is simply robbery and enlightened bank customers will see it that way.
"then all bank customers will check thier contracts and probably think they we misled. and FRB will came to an end by customer power."
ReplyDeleteNumerous bank runs have occurred throughout history, many people have lost their money and life savings, yet FRB continued. So even this idea is contradicted by history.
Your statement that "history is not important" is perfectly ridiculous.
"the main problem with FRB is that the inflation its causes by legal counterfeiting is simply robbery and enlightened bank customers will see it that way."
(1) It isn't "counterfeiting." You're just begging the question.
(2) With the failure of the "counterfeiting" argument, the creation of inflation cannot be a serious argument against FRB, as money inflows via a capital account could also cause high inflation inside a nation. Is that an argument for banning capital account international money flows? Of course not.
"Numerous bank runs have occurred throughout history, many people have lost their money and life savings, yet FRB continued. So even this idea is contradicted by history."
ReplyDeleteThat was because the government prevented depositers getting the justice owed to them. In 2001 argentina when depositers couldn't get their money out there was police to make sure angry custumers didn't do vigilante justice. as for legal justice, the bankers paid of politians and police to do thier bidding when ever bank runs and bank holidays have happended in history. that doesn't make it moral or just because the victims were helpless. that like saying slavery is right in 1800 because its victims could do nothing about it.
"(1) It isn't "counterfeiting." You're just begging the question."
you saying it doesn't make it so. If i were to do what a banker does I would end up in jail for counterfeiting. If not I have been very misinformed and will do what a banker does tomorrow. If however, i will go to jail for what a banker does and a banker won't how can that be justified. prove to me that it isn't counterfeiting and why only bankers can legally print money whithout working for that money.
I believe morals are universal and there should be no exceptions. the video below will highlight my point about counterfeiting making all money worthless.
http://www.youtube.com/watch?v=ddq8FwIfw7w
To prove to you that FRB is counterfeiting imagine that all money was in the form of gold and silver and then tell me if FRB is possible if all the coins were tested for purity and if possible, how? because it is hard to print gold and silver you know!
ReplyDeleteYou know what you are actually right. If Fractional Reserve Banking is Voluntary, Where is the Fraud? But is it voluntary? of course in my opinion FRB is like a con scheme and like some peaple get conned out of their money it doesn't matter. the main problem is ofcourse the legal tendar issue. because if was given the ability to print the legal tendar my countrymen have no chioce but to get poorer by loss of purchasing power. there has always been local and regional currencies and i support these but ofcourse I know I am trusting the community leader not to counterfeiting it and should I have any suspicions I can stop using it. But I have no chocie if bankers and the Bank of England my central bank decide to counterfeiting my money and no way to opt out.the problem with keynesians is that they do want a free market in currencies. I have nothing against paper currencies as long as I am not forced into using it against my will. That is why I fully support Ron Paul's competing currency bill. If you don't competing currencies then you are just represent special interests. I am against Monopoly Capitalism in all its forms.
watch this video to see what I am talking about.
http://www.youtube.com/watch?v=cVdI4Kx8TdY
"It is actually illegal in many countries, including Britain, to use gold and silver coins to buy and sell. They are not 'legal tender'. We have to use paper money and the coins that everyone uses. To do that we are supposed to have jobs and earn money, or start businesses. If people want more paper money than they can earn in those ways, they have to go to the bank and ask them very politely if they can have some. People then have to agree to pay extra for the use of the bank's dollars or pounds."
I quoted this paragraph from this article.
http://www.bogvaerker.dk/Bookwright/Money.html
This article I have read has refuted keynes ideas on paradox of thrift.
ReplyDeletehttp://www.marketoracle.co.uk/Article31137.html
what your take on it?
First, your post actually says that Keynes was right about the paradox of thrift in debt deflationary sitations!:
ReplyDelete"Keynes was correct in his observation that high level of savings caused a shortfall in national income, but we need to remember that he was writing in the 1930s — in the middle of the Great Depression. His General Theory was published in 1936. What Keynes observed was an anomaly caused by the financial crisis. Falling asset prices threatened the solvency of both individuals and corporations, forcing them to increase their level of savings and — most importantly — use their savings to repay debt."
Its claim that in normal times the paradox of thrift is irrelvant is nonsense. It ignores the role of secondary financial/real asset markets, subjective expectations, and liquidity preference.
In short, that article refutes nothing and concedes that the paradox of thrift has real macro-economic effects in debt deflationary environments.
that was a conventional economist speaking so i just your thought on his ideas and as usual you stuck to your guns, fair enough. i will talk about paradox of thrift another time. lets get back to FRB. I would like you to refute my two previous posts so that I am enlightned by your arguments.
ReplyDelete(1) the "counterfeiting" argument is nonsense.
ReplyDeleteIf two or more people freely consent to FRB and the use of fiduciary media as a means of payment, there is no "counterfeiting". All parties give consent and are aware that FR bank notes are debt instruments, payable on demand. Their FR accounts are all debt instruments.
(2) Without the "counterfeiting" argument, the inflation argument will not work.
If the creation of inflation by private agents were a serious argument, then all money inflows via a capital account woudl be immoral.
"are aware that FR bank notes are debt instruments, payable on demand."
ReplyDeletethat is where you are badly mistaken. most peaple don't know and in their ignorance they pay the price. but my point is that I know it is counterfieitng and youc can't prove it to me that it isn't counterfieting.FRB may be immoral but it should be illegal just like prostitution.
" To prove to you that FRB is counterfeiting imagine that all money was in the form of gold and silver and then tell me if FRB is possible if all the coins were tested for purity and if possible, how? because it is hard to print gold and silver you know!"
"You know what you are actually right. If Fractional Reserve Banking is Voluntary, Where is the Fraud? But is it voluntary? of course in my opinion FRB is like a con scheme and like some peaple get conned out of their money it doesn't matter. the main problem is ofcourse the legal tendar issue. because if was given the ability to print the legal tendar my countrymen have no chioce but to get poorer by loss of purchasing power. there has always been local and regional currencies and i support these but ofcourse I know I am trusting the community leader not to counterfeiting it and should I have any suspicions I can stop using it. But I have no chocie if bankers and the Bank of England my central bank decide to counterfeiting my money and no way to opt out.the problem with keynesians is that they do want a free market in currencies. I have nothing against paper currencies as long as I am not forced into using it against my will. That is why I fully support Ron Paul's competing currency bill. If you don't competing currencies then you are just represent special interests. I am against Monopoly Capitalism in all its forms.
watch this video to see what I am talking about.
http://www.youtube.com/watch?v=cVdI4Kx8TdY "
You havent answered this point and only because of legal tendar do I have a problem with bankers.
"If i were to do what a banker does I would end up in jail for counterfeiting. If not I have been very misinformed and will do what a banker does tomorrow. If however, i will go to jail for what a banker does and a banker won't how can that be justified. prove to me that it isn't counterfeiting and why only bankers can legally print money whithout working for that money."
you also haven't answered this point and I take this point back the moment legal tendar laws are revoked.
I will make this very easy for you. Can post keynesians economics work without legal tendar laws? I will seriously consider it if it does. And why am I agianst legal tendar laws? because it is giving a monopoly to certian actors and centralisation of power is always bad and I believe in decentralisation politicaly, economically and socailly.
going back to bank runs, if deposits are loans then when bank runs happen why isn't the bank considered a debtor to depositors and made to sell assets to repay depositers. if that happens in bank runs then I have against banking but does it happen? how can depositers lose their life savings wihtout banks first being liquidated. because if the relationship between depositers and the bank is not one of creditor and debtor, then it is robbery by any defintion of the word.
"most peaple don't know and in their ignorance they pay the price. "
ReplyDeleteSo if people were aware that their FR accounts are mere debt instruments, debts on the liability side of the bank's balance sheet, then it would be moral?
Problem solved: legislate to make banks explicitly explain this to customers.
"because if the relationship between depositers and the bank is not one of creditor and debtor, then it is robbery by any defintion of the word. "
ReplyDeleteThat is absolute rubbish. If you lend someone money, like any investment activity you face uncertainty and the possibility of investment failure, and losing your money. That is capitalism.
"You havent answered this point and only because of legal tendar do I have a problem with bankers."
ReplyDeleteSo now you're saying that if there were no legal tender laws, FRB would be OK with you?
"Problem solved: legislate to make banks explicitly explain this to customers."
ReplyDeleteagreed but the bank also has to explain the inflation
'The best way to destroy the capitalist system is to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.' Lord Keynes said this.
"There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." Lord Keynes said this.
the inflation is mostly caused by the banks and a bit by government.
"That is absolute rubbish. If you lend someone money, like any investment activity you face uncertainty and the possibility of investment failure, and losing your money. That is capitalism."
I agree so why doesn't the bank take the same attitude with debtors. If the bank lend me money they expect collateral in case the loan goes bad. I have to give up assets I had before the loan so it should be the same with the banks. no double standards or else you are a hypocrite. the depositers should be paid first ahead of shareholders because the shareholders took on the investment risk.
"So now you're saying that if there were no legal tender laws, FRB would be OK with you?"
absolutely because it is consentual. I don't believe in consumer protection. if peaple are willing to be robbed by their ignorance then why is it my problem. let the banker take his sin to the next world and be punished by god. by point is that in a free market the currency with the least inflation would win eventaully and bankers will feel the pressure to increase reserves as close to 100% as possible while still being profitable. the custumers is king and bankers have to compete with local currencies and the most trusted currency will have the largest market share.
"FRB may be immoral but it should be not illegal just like prostitution."
ReplyDeletesorry i meant
"FRB may be immoral but it should be not be illegal just like prostitution."
"If the bank lend me money they expect collateral in case the loan goes bad. I have to give up assets I had before the loan so it should be the same with the banks. no double standards or else you are a hypocrite."
ReplyDeleteThere is no double standard: this is free contract. It two parties freely agree to the debtor-creditor relationship without collateral, then that is their free choice. How dare you tell them what to do, you evil, collectivist, do-gooder.
It's none of your business.
"There is no double standard: this is free contract. It two parties freely agree to the debtor-creditor relationship without collateral, then that is their free choice. How dare you tell them what to do, you evil, collectivist, do-gooder.
ReplyDeleteIt's none of your business."
agreed as long as is it made clear to the customers that deposits are an investment in the bank. now answer the question on the legal tender issue and tell me because I am not that knowlegable which schools of economic thought are against legal tendar money apart from the Austrians?
As for legal tender laws, I doubt whether the abilition of it would make much difference. You must pay your taxes in your domestic currency that the government is the sovereign issuer of.
ReplyDeleteThat will mean it is still the major currency in the nation state involved.
"You must pay your taxes in your domestic currency that the government is the sovereign issuer of."
ReplyDelete"It is actually illegal in many countries, including Britain, to use gold and silver coins to buy and sell. They are not 'legal tender'. We have to use paper money and the coins that everyone uses. To do that we are supposed to have jobs and earn money, or start businesses. If people want more paper money than they can earn in those ways, they have to go to the bank and ask them very politely if they can have some. People then have to agree to pay extra for the use of the bank's dollars or pounds."
I quoted this paragraph from this article.
http://www.bogvaerker.dk/Bookwright/Money.html
This is the number one issue in economics I believe and you don't think it makes much difference, fair enough. Then you should have no problem with the repeal of the legal tendar laws.
why can't i pay taxes in gold as gold has market exchange rate. I am against government monoploy of the money supply because if only politians or politians and bankers control the money supply because eventaully all paper money will became worthless in the end as they have in history.
money and wealth is what the markets says it is and the governemnt should have no control of it, it should just tax what money peaple use because the public have trust in the money they use and the governemnt can exchange goods in the market in the money they collected.
ReplyDeleteTo make this really easy why should the government have anything to do with the money supply?
"How dare you tell them what to do, you evil, collectivist, do-gooder.
It's none of your business."
You accuse me of being a collectivist while it appears the real collectivist is you.
Just for the record, I am not agaist government, banks or anybody prinitng their currency. you pay taxes in dollars if you trust the GOV and I will in gold as these will be competing currencies. I am agaisnt the coercion of me being robbed in broad daylight supposedly in the benefit of the majority (legal tnedar) while in reality it is always the rich as has been true throughout history. if it was the majority I may have let it go.
ReplyDeletewatch this video.
ReplyDeletehttp://www.youtube.com/watch?feature=player_embedded&v=hxdsfa8OFVc
my question is why is the money supply based on debt? I hate debt and wish everybody will live within their means. so if everyone was like me the whole economy would crash to zero. why can't the money supply be free of debt?
this articel shows my support for alternative currencies.
ReplyDeletehttp://www.activistpost.com/2011/10/for-self-determination-we-need-free.html
why not pay taxes in any of these?
So do you agree with me on legal tendar laws?
ReplyDeleteand if not I would like to see your reasons for defending the indefensible.
I do not regard legal tender laws as immoral or as a problem.
ReplyDelete"World War I caused ruinous inflation as participants broke from the gold standard and issued currency freely. Inflation also accompanied the U.S. Civil War, World War II, and the Vietnam War, among others. War-induced inflation, although strongest in war zones, extends to distant belligerents, such as the United States in the World Wars, and, in major wars, even to neutral countries, owing to trade disruption and scarcities.
ReplyDeletePresent-day wars continue to fuel inflation and drive currencies towards worthlessness. In Angola's civil war (1975-2002), for example, the government currency became so useless that an alternative "hard" currency - bottles of beer - came to replace it in many daily transactions."
that is why it is immoral to have the governemnt control the money supply because without inflation wars wouldn't last very long and the public would pay for the war directly instead of indirectly.
Imagaine if the governemnt controlled the laptop industry and only it can sell laptops, is that the free market? no
ReplyDeleteso how is legal tendar laws any different?
I laugh when the mainstream news says the west has a free market economy. if the money supply is controlled how is it a free market economy?
I can give countless examples of why government or special interest control of the money supply is problematic and immoral.
the problem with the current system and post keynesian is that they are both support statism.
what is the many benefits of the money supply being controlled by anybody?
Do these benefits outweight the many negatives and if so how?
"that is why it is immoral to have the governemnt control the money supply because without inflation wars wouldn't last very long and the public would pay for the war directly instead of indirectly. "
ReplyDeleteWhat rubbish. Wars were common in the 19th century, or even in earlier periods where there were no central banks to monetise a government war deficit. The gold standard and a long period of deflation (1873-1896) did not stop wars.
(1) for god's sake, it is spelled "legal tender".
ReplyDelete(2) "Imagaine if the governemnt controlled the laptop industry and only it can sell laptops, is that the free market? no
so how is legal tendar laws any different?"
There is a convincing consequentialist argument for legal tender laws, just as there is for a state monopoly on law enforcement or defence.
There is no convincing consequentialist argument for a government-controlled laptop industry.
"What rubbish. Wars were common in the 19th century, or even in earlier periods where there were no central banks to monetise a government war deficit. The gold standard and a long period of deflation (1873-1896) did not stop wars."
ReplyDeleteyou don't need a central bank to print money. there was GOV controlled money in both U.S. Civil War and USA revolutionary war. there was no major war in (1873-1896) so your argument is meaningless.I hate to admit it but central bankers have better displine than politians. this is why I am against anybody controlling the money supply.
"(1) for god's sake, it is spelled "legal tender"."
use of WORD has killed my spelling.
"There is a convincing consequentialist argument for legal tender laws, just as there is for a state monopoly on law enforcement or defence."
I would love to hear that argument so that I can refute it. saying something deosn't make it so, for "god's sake" give your reasons.
"Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men." Lord Acton
As for state monopoly on law enforcement or defence you must remember it isn't absolute. the public can have firearms and can protect themselves even against the state so public protection isn't a state monopoly. USA and Switzerland are excellent examples. But legal tender laws gives the state absolute control of the money. So if the public can have their own guns why can't they print their own money?
consumer protection is reason enough because who are you to stop a transcation based on mutual consent?
"How dare you tell them what to do, you evil, collectivist, do-gooder.
It's none of your business."
I have no problem with banking when bankers and shareholders are unlimitedly liable. the video below will explain how the government screwed depositers.
ReplyDeletehttp://www.youtube.com/watch?feature=player_embedded&v=jvH4YlpCGSo
this is the funniest article on government and capitalism ever. read it and tell me what you think. I will support real capitalism until i die.
ReplyDeletehttp://www.marketoracle.co.uk/Article31343.html
the majority are ignorant
ReplyDeleteWho is misled?
ReplyDeleteEveryone who holds the respective currency or drawing rights to it (bank deposits of some sort or other).
That's who is misled.
And it's not only an issue of misleading people.
It's an issue of no one at all having any possibility of opting out of the fraud, no say in whether their purchasing power is stripped from even if they are aware of the fraudulent means by which this is done.
Also, if one is not aware of all the counterfeiters counterfeiting currency as we speak, does that mean we acquiesce to their counterfeiting?
Are you bankers spawn, by any means?
Fractional reserve banking becomes a fraud when the number of borrowers decline compared to a previous set in a long serious downturn, causing a shortage of available money to pay the interest in the money supply, the system then later becomes a ponzi scheme banks close thier doors due to having no reserves to back the amounts created by the fractional reserve methods used the base of money used for FRB is from nothing to ten percent reserves.
ReplyDeleteThus depositors will not get thier money back.
Banks do not supply/issue any money to pay interest other than an increase in loans that inflate the money supply this is why they need growth in deposits/loans.
A ponzi scheme is a fraud proven in the courts in many cases this scheme is smaller and takes only a short time to reveal itself compared to the bank scheme the end result of the bank ponzi scheme is called a depression.
So it would be a sign of the times that the bank ponzi collapse is due when a serious downturn occurs, credit shrinks due to low deposits read loans, this triggers unemployment, low tax take, low government bond issue, that is also another deposit form for fractional
reserve banking.
These signs are already here bailouts/stimulus are needed to bolster the bank liquidity,overseas funding is drying up deposits are in short supply banks are falsifying documents to get loans they can expand ten times or nine if they have to pay back the low doc no doc loans all this trickery is not stopping the slide toward the ponzi event.
As the tax payer backs most credit expansion the money used belongs to them by means of mortgage or lien the bank has only used a law to monitise it & make a fat profit out of the interest it charges on money out of thin air plus your assetts if you don't pay.
This fraud then is provided by government in a law for the banks FRB,For the elites who can borrow and deduct the costs from the taxpayer, this is a great scheme while it lasts for them, however they all get greedy and speculate bringing the day of reconing closer with each spike & fall at the exchange.
"Fractional reserve banking becomes a fraud when the number of borrowers decline compared to a previous set in a long serious downturn," ... etc.
DeleteNone of the things you describe are fraud.
You're thinking partly of the inherent risk involved in having fractional
reserves. Risk is not the same thing a fraud.
E.g., the insurance industry faces potential risk (too many claims in a short period of time that cannot be honoured), but this does not mean insurance is fraudulent.