The Free Talk Live BBS
Free Talk Live => General => Topic started by: freeAgent on May 12, 2011, 09:39:38 AM
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http://econlog.econlib.org/archives/2011/05/the_morality_of_1.html
I thought this was a pretty good article about the morality of fractional reserve banking. This is an issue that gets discussed on the show a lot, and I don't think that this perspective comes through. Essentially, Caplan is saying that there is no deceit involved in our current fractional reserve banking system, and if you really want 100% reserve banking, it's easy to find in the form of safety deposit boxes.
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Yep.
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I call typical Chicago school bullshit.
I doubt Rothbard ever said fractional reserve banking should be "illegal." He's saying it amounts to fraud, and I agree. Talk to any statists about it, and their responses will range from denial to justification. Legal tender laws and the corporate/state establishment make it nearly impossible to avoid the current corrupt banking system.
A "safe deposit box" is no substitute for an honest banker, who you and I know would never stand a chance to do business in this economy, and would be treated as harshly, if not more, than people like the Liberty Dollar folks.
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WTFK, what most supporters of fractional reserve banking think is that it has two key functions: to regulate inflation (since private banks can and historically had inflated the currency in terms of their issuance of bank notes) and to maintain price levels (to avoid monetary deflation). Both are valid in terms of desirability, but to assume the method works seems invalid to me. Morality or no morality, the system is fundamentally broken much like some memory allocation schemes are for computer programs.
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I'm up in the air for this one, but FR banking also helps accelerate capital creation. If I give a new business $100 of fiat money and they create $1000 worth of goods out of it, paying back $110, that's helping make everyone wealthier, the original depositer included (if not interest, then free use of a bank.) This is only good to a degree because every fiat dollar given out is a liability and risk. I think FR banking could exist in an open market. I also definitely think the whole banking industry in the US is intensely corrupte, skewed, and cartellized (sp?).
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Fractional reserve banking is not necessarily fraudulent if people are aware how it works. Fraud requires deception and deceit.
There have also been some pretty stable free banking systems that engaged in fractional reserve banking.
http://www.econtalk.org/archives/2008/11/selgin_on_free.html
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I'm up in the air for this one, but FR banking also helps accelerate capital creation. If I give a new business $100 of fiat money and they create $1000 worth of goods out of it, paying back $110, that's helping make everyone wealthier, the original depositer included (if not interest, then free use of a bank.) This is only good to a degree because every fiat dollar given out is a liability and risk. I think FR banking could exist in an open market. I also definitely think the whole banking industry in the US is intensely corrupte, skewed, and cartellized (sp?).
I agree that if the banks say "we only keep ten percent of your money" and they do that, then it could be allowed in a free market and would not be fraud. I also think people wouldn't deposit their money there.
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I call typical Chicago school bullshit.
I doubt Rothbard ever said fractional reserve banking should be "illegal." He's saying it amounts to fraud, and I agree. Talk to any statists about it, and their responses will range from denial to justification. Legal tender laws and the corporate/state establishment make it nearly impossible to avoid the current corrupt banking system.
A "safe deposit box" is no substitute for an honest banker, who you and I know would never stand a chance to do business in this economy, and would be treated as harshly, if not more, than people like the Liberty Dollar folks.
WTFTK, Bryan Caplan is not in the Chicago School. He teaches at economics at George Mason, of all places. Of course, he's not an Austrian either...but he's not a monetarist.
Are you saying Rothbard would say fraud should be "legal" (yeah, I know...hard to frame it as such in terms of legality when you advocate for anarchy, but whatever)? I think banks are generally pretty honest, and when it comes to safe deposit boxes, I've never heard of banks stealing from them or letting other people or the government gain entrance (without a warrant). Unless you have evidence to the contrary, I'm going to assume that's baseless speculation.
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I just wanted to ad nothing important to the discussion......
Although I have some Milton Freeman books on my shelf, I am told that he was largely responsible for the creation of income tax withholding.
And elephants can smell water from up to three miles away.
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I call typical Chicago school bullshit.
I doubt Rothbard ever said fractional reserve banking should be "illegal." He's saying it amounts to fraud, and I agree. Talk to any statists about it, and their responses will range from denial to justification. Legal tender laws and the corporate/state establishment make it nearly impossible to avoid the current corrupt banking system.
A "safe deposit box" is no substitute for an honest banker, who you and I know would never stand a chance to do business in this economy, and would be treated as harshly, if not more, than people like the Liberty Dollar folks.
WTFTK, Bryan Caplan is not in the Chicago School. He teaches at economics at George Mason, of all places. Of course, he's not an Austrian either...but he's not a monetarist.
Are you saying Rothbard would say fraud should be "legal" (yeah, I know...hard to frame it as such in terms of legality when you advocate for anarchy, but whatever)? I think banks are generally pretty honest, and when it comes to safe deposit boxes, I've never heard of banks stealing from them or letting other people or the government gain entrance (without a warrant). Unless you have evidence to the contrary, I'm going to assume that's baseless speculation.
People confuse positive economics w/ normative economics, dude. There's no point talking to WTFTK on this even though the Reserve publishes all its data and how it make its decisions. I'm no fan of fractional reserve banking, but I'm not sure why people call it fraudulent when everything is public.
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I call typical Chicago school bullshit.
I doubt Rothbard ever said fractional reserve banking should be "illegal." He's saying it amounts to fraud, and I agree. Talk to any statists about it, and their responses will range from denial to justification. Legal tender laws and the corporate/state establishment make it nearly impossible to avoid the current corrupt banking system.
A "safe deposit box" is no substitute for an honest banker, who you and I know would never stand a chance to do business in this economy, and would be treated as harshly, if not more, than people like the Liberty Dollar folks.
WTFTK, Bryan Caplan is not in the Chicago School. He teaches at economics at George Mason, of all places. Of course, he's not an Austrian either...but he's not a monetarist.
Are you saying Rothbard would say fraud should be "legal" (yeah, I know...hard to frame it as such in terms of legality when you advocate for anarchy, but whatever)? I think banks are generally pretty honest, and when it comes to safe deposit boxes, I've never heard of banks stealing from them or letting other people or the government gain entrance (without a warrant). Unless you have evidence to the contrary, I'm going to assume that's baseless speculation.
Rothbard would certainly NOT say fraud should be legal. It's quite the opposite. No free society would tolerate the fraud. As I've pointed out, bankers try to deny or frame around the plain truth that the "money" they lend is created out of of thin air. Without the state helping to obscure what they're really doing, they would be forced to operate in a way that is well-audited, and the common person would know what they're up to.
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I call typical Chicago school bullshit.
I doubt Rothbard ever said fractional reserve banking should be "illegal." He's saying it amounts to fraud, and I agree. Talk to any statists about it, and their responses will range from denial to justification. Legal tender laws and the corporate/state establishment make it nearly impossible to avoid the current corrupt banking system.
A "safe deposit box" is no substitute for an honest banker, who you and I know would never stand a chance to do business in this economy, and would be treated as harshly, if not more, than people like the Liberty Dollar folks.
WTFTK, Bryan Caplan is not in the Chicago School. He teaches at economics at George Mason, of all places. Of course, he's not an Austrian either...but he's not a monetarist.
Are you saying Rothbard would say fraud should be "legal" (yeah, I know...hard to frame it as such in terms of legality when you advocate for anarchy, but whatever)? I think banks are generally pretty honest, and when it comes to safe deposit boxes, I've never heard of banks stealing from them or letting other people or the government gain entrance (without a warrant). Unless you have evidence to the contrary, I'm going to assume that's baseless speculation.
People confuse positive economics w/ normative economics, dude. There's no point talking to WTFTK on this even though the Reserve publishes all its data and how it make its decisions. I'm no fan of fractional reserve banking, but I'm not sure why people call it fraudulent when everything is public.
You're still pissed that you got owned when you tried to say science didn't depend on the scientific method to be science.
WTF is WTFTK anyway?
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"money". That's a good one. Fiat money is still real money. It has an exchange value. Instead of being based on physical commodities, it's based on trust in the competence of your banker.
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"money". That's a good one. Fiat money is still real money. It has an exchange value. Instead of being based on physical commodities, it's based on trust in the competence of your banker.
Money such as bitcoin, which is not subject to legal tender laws, banking restrictions, etc., but simply relies on the market for its value is perfectly reasonable. FRNs are not.
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"money". That's a good one. Fiat money is still real money. It has an exchange value. Instead of being based on physical commodities, it's based on trust in the competence of your banker.
Money such as bitcoin, which is not subject to legal tender laws, banking restrictions, etc., but simply relies on the market for its value is perfectly reasonable. FRNs are not.
How do FRNs not rely on the market for value (outside of the current, government enforced system) ? If a bank is known to have a poor track record, its notes will be less valuable.
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"money". That's a good one. Fiat money is still real money. It has an exchange value. Instead of being based on physical commodities, it's based on trust in the competence of your banker.
Money such as bitcoin, which is not subject to legal tender laws, banking restrictions, etc., but simply relies on the market for its value is perfectly reasonable. FRNs are not.
How do FRNs not rely on the market for value (outside of the current, government enforced system) ? If a bank is known to have a poor track record, its notes will be less valuable.
L E G A L . T E N D E R . L A W S
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I'd point out the bitcoin is also generated out of thin air. It will be interesting to see what happens if/when that system collapses.
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I'd point out the bitcoin is also generated out of thin air. It will be interesting to see what happens if/when that system collapses.
Government hyperinflation will kill the dollar, and won't kill the bitcoin.
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George Selgin just posted a nice little piece on the crazy anti-fractional reserve banking crowd as well:
They oppose it for a variety of reasons, one of which is their belief that, in a truly free-market setting, fractional reserve banking wouldn’t survive. Instead, they insist, 100-percent reserve banks would prevail. That they haven't is due, in their opinion, to a banking industry playing field slanted in favor of favor fractional-reserve banks, especially by either implicit or implicit deposit guarantees financed through forced levies upon all banks, and sometimes by taxation or inflation. In short, fractional-reserve banking has been nurtured by government subsidies.
Free bankers have tried responding to this argument by noting how fractional reserve banking has prevailed under every sort of bank regulatory regime, from the earliest beginnings of banking, not excepting regimes that involved very little regulation, like those of Scotland, Canada, and Sweden, and that lacked even a trace of government guarantees or other sorts of artificial support. But since some 100-percenters seem unmoved by this approach, I here take a different tack, which consists of pointing out that every significant 100-percent bank known to history was a government-sponsored enterprise, which depended for its existence on some combination of direct government subsidies, compulsory patronage, or laws suppressing rival (fractional reserve) institutions. Yet despite the special support they enjoyed, and their solemn commitments to refrain from lending coin deposited with them, they all eventually came a cropper. What’s more, it was these government-sponsored full-reserve banks, rather than their private-market fractional reserve counterparts, that were the progenitors of later central banks, starting with the Bank of England.
Read the whole thing: http://www.freebanking.org/2011/05/31/the-state-and-100-percent-reserve-banking/