Quick question, does not a one-hundred percent reserve mandatory standard infer that you are forcing individuals and groups of individuals to comply?
Or is 100% reserve simply a suggestion?
It’s a protection.
Neither.
If you’re warehousing boats, and give people a ticket, then anything except 100% reserve = coercion. In this case the ticket is a contract for a boat.
But if you make it clear that the ticket is not a contract, but more of an investment gamble for the value of tickets, then I don’t really see a problem.
They will tell you that FRB is a priori theft/fraud. “The nineteenth-century English economist Thomas Tooke correctly stated that free trade in banking is tantamount to free trade in swindling." –Murray Rothbard
If you take the same point of view as Rothbard, mandating a 100% reserve is outlawing fraud. By not mandating a full reserve, you allow the bank or warehousing firm to loan out money that is not theirs in the case of demand deposits. This constitutes fraud: the bank uses money that is technically held in its entirety for the depositor to use at any time. That is a distinction between deposits and loans. The loan is not fraud because there is an agreement the bank will be using the creditor’s money for a period of time, disallowing the creditor access to that money for said period of time.
Depends on whether FRB is prosecuted as fraud, or simply if contracts entailing it are simply not upheld and treated as null and void. If it is indeed fraud, then it wouldn’t be initiation of force to treat them as such; personally I do not think FRB is inherently fraud, I just don’t think it will be prevalent in a free society.
I think you’re on the money here. Saying that a free market would “mandate” 100% reserve banking is a misnomer. A deposit that is not guaranteed is not a deposit anyway, so there we have another misnomer.
Basically, the only difference between Bernie Madoff and fractional reserve banking is the law.
Thanks for the law then!
Not respecting a 100% reserve in a deposit is fraud and a violation of property laws.
As someone has said before, if you specify its not a deposit, but a investment or a gamble, then its up to the individual to choose if he wants to participate in that or not.
Here is my 2 cents.
The issue is not 100% reserve being mandatory or even held up by coercion in the market. The issue is legal tender laws, that prohibit the use of anything but federal notes to be used as a money and therefore forces everyone into a fractional reserve banking system.
Whithout these laws everyone would be free to deposit his money at a bank that suits his needs. If someone would deposit money at a bank that uses FRB so be it - although I have doubts if such a bank business would last long in a free market anyway- and if someone else wanted to deposit his money in a bank with 100% reserves he can do that as well. No coercion whatsoever,no?
Ask yourself who benefits from legal tender laws and you will find two major groups. The banks and the government.
I am amazed of how you took such a quote out of context:
Rothbard:
We conclude that, contrary to propaganda and myth, free
banking would lead to hard money and allow very little bank
credit expansion and fractional reserve banking. The hard rigor
of redemption by one bank upon another will keep any one
bank’s expansion severely limited.
Thus, Mises was highly perceptive when he concluded that
It is a mistake to associate with the notion of free banking the
image of a state of affairs under which everybody is free to issue
bank notes and to cheat the public ad libitum. People often refer
to the dictum of an anonymous American quoted by (Thomas)
Tboke: “free trade in banking is free trade in swindling.” However,
freedom in the issuance of banknotes would have narrowed
down the use of banknotes considerably if it had not
entirely suppressed it. It was this idea which (Henri) Cernuschi
advanced in the hearings of the French Banking Inquiry on October
24,1865: "I believe that what is called freedom of banking
would result in a total suppression of banknotes in France. I
want to give everybody the right to issue banknotes so that nobody
should take any banknotes any longer."3
(Mystery of Banking)
No, Not if you view Fractional Reserve Banking as a special privilege granted by the State. Mandating 100% is nothing more then eliminating any special privileges that no other business enjoys.
No more so than mandating that Amazon.com, after taking your money, must deliver the promised goods.
Kind of like a conservative version of an openly fraudulent pyramid scheme?
I think the point was that if your contract clearly stipulates that you’re (potentially) being defrauded, then it’s not coercive and therefore legitimate. Compare involuntary slavery vs slave contracts (semantics notwithstanding).
The quote isn’t from the “Mystery of Banking;” it comes from this article. Next time, ask for the source, and don’t question my intellectual integrity. Why is that so hard for you?
It doesn’t matter. You still took it out of context.
Here is the full text:
The nineteenth-century English economist Thomas Tooke correctly stated that “free trade in banking is tantamount to free trade in swindling.” But under freedom, and without government support, there are some severe hitches in this counterfeiting process, or in what has been termed “free banking.” First: why should anyone trust me? Why should anyone accept the checking deposits of the Rothbard Bank? But second, even if I were trusted, and I were able to con my way into the trust of the gullible, there is another severe problem, caused by the fact that the banking system is competitive, with free entry into the field. After all, the Rothbard Bank is limited in its clientele. After Jones borrows checking deposits from me, he is going to spend it. Why else pay money for a loan? Sooner or later, the money he spends, whether for a vacation, or for expanding his business, will be spent on the goods or services of clients of some other bank, say the Rockwell Bank. The Rockwell Bank is not particularly interested in holding checking accounts on my bank; it wants reserves so that it can pyramid its own counterfeiting on top of cash reserves. And so if, to make the case simple, the Rockwell Bank gets a $10,000 check on the Rothbard Bank, it is going to demand cash so that it can do some inflationary counterfeit-pyramiding of its own. But, I, of course, can’t pay the $10,000, so I’m finished. Bankrupt. Found out. By rights, I should be in jail as an embezzler, but at least my phoney checking deposits and I are out of the game, and out of the money supply.
Hence, under free competition, and without government support and enforcement, there will only be limited scope for fractional-reserve counterfeiting. Banks could form cartels to prop each other up, but generally cartels on the market don’t work well without government enforcement, without the government cracking down on competitors who insist on busting the cartel, in this case, forcing competing banks to pay up.
Why don’t you just admit that you were wrong? That quote perfectly summarizes Rothbard’s position; I don’t need to quote his 2 page nonsensical rationalization. Please, let’s avoid another barren 50 page thread about FRB.