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freeAgent

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Bryan Caplan Smacks Rothbard
« on: May 12, 2011, 09:39:38 AM »

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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Andy

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Re: Bryan Caplan Smacks Rothbard
« Reply #1 on: May 12, 2011, 10:44:18 AM »

Yep.

Cognitive Dissident

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Re: Bryan Caplan Smacks Rothbard
« Reply #2 on: May 12, 2011, 01:08:28 PM »

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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Re: Bryan Caplan Smacks Rothbard
« Reply #3 on: May 12, 2011, 11:05:35 PM »

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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LTKoblinsky

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Re: Bryan Caplan Smacks Rothbard
« Reply #4 on: May 13, 2011, 12:04:57 AM »

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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Evil Muppet

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Re: Bryan Caplan Smacks Rothbard
« Reply #5 on: May 13, 2011, 12:38:37 AM »

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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Cognitive Dissident

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Re: Bryan Caplan Smacks Rothbard
« Reply #6 on: May 13, 2011, 12:40:02 PM »

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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freeAgent

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Re: Bryan Caplan Smacks Rothbard
« Reply #7 on: May 15, 2011, 01:15:34 PM »

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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Tom Foppiano

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Re: Bryan Caplan Smacks Rothbard
« Reply #8 on: May 15, 2011, 09:04:05 PM »

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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Re: Bryan Caplan Smacks Rothbard
« Reply #9 on: May 15, 2011, 09:07:54 PM »

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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Cognitive Dissident

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Re: Bryan Caplan Smacks Rothbard
« Reply #10 on: May 16, 2011, 12:34:37 AM »

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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Cognitive Dissident

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Re: Bryan Caplan Smacks Rothbard
« Reply #11 on: May 16, 2011, 12:36:37 AM »

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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LTKoblinsky

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Re: Bryan Caplan Smacks Rothbard
« Reply #12 on: May 16, 2011, 12:47:33 PM »

"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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Cognitive Dissident

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Re: Bryan Caplan Smacks Rothbard
« Reply #13 on: May 16, 2011, 07:21:51 PM »

"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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Re: Bryan Caplan Smacks Rothbard
« Reply #14 on: May 16, 2011, 08:33:17 PM »

"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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