tag:blogger.com,1999:blog-6245381193993153721.post197996908801347802..comments2024-03-17T00:23:24.896-07:00Comments on Social Democracy for the 21st Century: A Realist Alternative to the Modern Left: Fractional Reserve Banking: An Evil?Lord Keyneshttp://www.blogger.com/profile/06556863604205200159noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-6245381193993153721.post-24462652222755898652011-03-17T19:55:09.577-07:002011-03-17T19:55:09.577-07:00Thanks for this article, and especially for the ci...Thanks for this article, and especially for the citations. What's always bothered me about this debate is the fact that no capitalists actually want to abandon FRB (or, for that matter, the Fed.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-83892404730586660282010-12-28T05:17:40.019-08:002010-12-28T05:17:40.019-08:00Couldn't it be that in nowadays world, with lo...Couldn't it be that in nowadays world, with lots of central banks pumping fiduciary media and creating bubbles anytime, any country that implements free banking FRB would be subject by those "external attacks" and make it very unstable?<br /><br />Maybe the case is now stronger for the implementation of a 100% commodity backed money.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-78935234112676190122010-12-27T15:52:02.171-08:002010-12-27T15:52:02.171-08:00What is very difficult to say is to what extent FR...<i>What is very difficult to say is to what extent FRB is inherently stable</i><br /><br />I think the evidence suggests that, in the absence of a lender of last resort and deposit insurance, FRB can be prone to bank runs and devastating financial crises.<br /><br />Some cases in point: Australia's banking crisis in the 1890s and the US banking collapses 1929-1933.<br /><br />On Australia's crisis (which occurred under the gold standard and with no central bank), see Charles R. Hickson and John D. Turner, 2002, “Free Banking Gone Awry: The Australian Banking Crisis of 1893,” Financial History Review 9: 147–167.<br /><br />Government intervention through a central bank, deposit insurance and effective financial regulation to minimize reckless lending reduce uncertainty and make a FRB system more stable and more effective in creating productive investment.<br /><br />The reason we have these interventions is precisely because people (even bankers, business people and investors) found the laissez faire FRB system too unstable.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-82709053080779440812010-12-27T11:41:34.297-08:002010-12-27T11:41:34.297-08:00First of all, there's no official "Austri...First of all, there's no official "Austrian position" on FRB or 100% reserve banking.<br /><br />And I think Rothbard (as Walter Block explains) tries to make a difference between a demand deposit (which, according to Rothbard, should not yield any interest and should not be subject to FRB) and a time deposit. Anyway, I think that the Rothbardian idea of FRB as fraud is just silly. It can be established out of a voluntary order, and even the praxeological attack on FRB by Hoppe, Hulsmann and Block is somewhat silly (Against Fiduciary Media, check it on https://mises.org/journals/qjae/pdf/Qjae1_1_2.PDF).<br /><br />Also, Mises position on the subject is rather dubious, so I wouldn't put any word on his mouth about this issue. He championed the wertfrei economics, all we know is he favoured a return to the gold standard and a return to free banking (we may say we don't know nothing about reserve requirements).<br /><br />What is very difficult to say is to what extent FRB is inherently stable, there are lots of papers about it, but this is a part of empirical economics, a much more difficult way to get the "truth".Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-78821435486740325542010-11-06T02:55:00.938-07:002010-11-06T02:55:00.938-07:00"They fail to understand that, when a deposit..."They fail to understand that, when a depositor places money in a factional reserve bank, the depositor has exchanged one set of property rights for another."<br /><br />It's not a failure of understanding this concept, but a rejection of it. Rothbard noted the historical evolution of bailment law, whereby bank deposits came to be seen as debts, rather than a bailment. He cites the decisions of Carr v. Carr [1811], Devaynes v. Noble [1816] and Foley v. Hill and Others [1848] to explain this development.<br /><br />They [Austrians] argue that banks should perform the role of a secure warehouse, or a 'bailor'. They argue, as you noted, that deposits should remain property of the depositor.<br /><br />"The Austrians have a false and indefensible view that bank deposits remain the property of the depositor."<br /><br />The Austrians argue this position should be the case, but they are not arguing that it is currently the case. You seem to confuse the words 'should' and 'is'.<br /><br />Nonetheless, I'm interested to know, how & why is the traditional view of bailment "false and indefensible"?Just a laymennoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-60190615140437879692010-06-27T16:00:54.871-07:002010-06-27T16:00:54.871-07:00Hello Professor Selgin,
Your points are excellent...Hello Professor Selgin,<br /><br />Your points are excellent and I have clearly made an error in characterizing the<br />Rothbardians' view on FRB as the "Austrian" view. I will certainly read your paper on the goldsmiths. <br />If you read this response, can I ask if you regard yourself as an Austrian or as a neoclassical libertarian?<br />I have found what must be your website here:<br /><br />http://www.terry.uga.edu/~selgin/<br /><br />RegardsLord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-25849615700300526762010-06-27T09:46:35.567-07:002010-06-27T09:46:35.567-07:00A much needed post. However, I think you give the...A much needed post. However, I think you give the Rothbardians too much credit by characterizing their anti-fractional reserve position as the "Austrian" view. Even among self-styled Austrian economists (I say "economists" to make clear that I'm not counting mere "fans" of Austrian economics, many of whom know no more about it than what they read on Mises.com), it is a minority view. <br /><br />For more on the wrongheaded history behind the Rothbardian position have a look at my working paper, "Those Dishonest Goldsmiths," available online as an SSRN working paper.George Selginhttps://www.blogger.com/profile/03106618641653835537noreply@blogger.com