Well, an overarching mandate that requires all banks to practice full reserves would not be libertarian and would not constitute free banking. On the other hand, if individual contracts mandate full reserves then there is no coercion; the bank and the client agreed to the contract voluntarily.
Wrong? Anybody who continues to read that passage after your selective quote realizes what Rothbard was getting at. That free banking with legalized FRB results in a sound banking system due to market checks.
I would think that a deposit is an intrinsic contract that obligates the bank to provide the money on demand. When one deposits money in a bank, one is inherently entrusting the bank with not squandering money that does not belong to it.
Full reserve banking is simply another name for protection from fraud. The legalized fraud that has existed for so many years has clouded people’s minds into thinking that certain businesses known as “banks” have the natural right to mistreat funds entrusted to them while an investment manager does not. Full reserve banking is simply another version of the same regulations that already exist on other businesses such as investment management services.
The “free market” is not the same as anarchy. Anarchy provides no protection from fraud and allows people to lie to each other and break contracts. The free market allows the maximum freedom possible that still obligates people to be honest and uphold their own promises.
Depending on what books you read, both Rothbard and Mises that in a free-market the ability to expand credit would be severely limited, and so if true then it would not be possible for a bank to practice fractional-reserve banking to the degree that it would not be able to meet its client’s demand for money.
So, if you buy a hamburger from McDonalds that looked really good on an advertisement but turned out to be horrible, you would buy it again? In a free-market, protection against fraud would be a question of returning for business; it’s not in a company’s interests to defraud their clients if it means that their clientele will just opt for a competitor.
A free market doesn’t preclude the victim from filing a lawsuit.
If you charge money for a 1/4 hamburger but it turns out you were systematically selling a 1/5lb hamburger, I would say you risk more then just loosing your customers.
Also consumer watchdogs are bound to develop to a much greater extent in the absent of government intervention.
I agree in a sense. Without a mandates full reserve standard a proximity would naturally occur by the market demand to remain solvent precluding much gambling with deposits. However, those banks that would take the chance and would end up insolvent would harm the depositors by being unable to pay them back. The depositors who lost out had little, if anything, available in information to make an informed decision about where to deposit money.
About the hamburger, there needs to be some laws in place that allow a customer to prosecute for “false advertising.” Also, laws must also exist besides market bankruptcy to punish any business that attempted to cut costs by putting known poison in food products.
There is a law in place in a free society for all that stuff, it is called Non Aggression Principle. If someone sells me 1/4 pound beef and I find out it is only 1/5 pound he has commited fraud and therefore aggressed against my property,no?
There should not be any such special laws. If the seller advertises 1/4lb but sells a 1/5lb, then that is a clear case for violation of contract. You can file a complaint, file a lawsuit for fraud, or whatever.
Special laws are problematic because there are no objective standards by which you can decide what is false advertising for example. There is almost no way to devise such laws without them becoming coercive interventions arbitrarily issued by an authoritarian body.
These are all related to losing customers. The seller isn’t required to arbitrate anything with the customer, if a lawsuit is filed. But, it’s within the company’s interests to maintain a good image as to keep their customers.
Not if the terms of the contract says he does, which is likely to be the case. I think most customers would not patronize business owners who protect themselves from lawsuits completely. I’m not saying that they definitely won’t in all cases, but you certainly can’t also say that they will.
How many people are filing because of demand deposits?
Bolding is mine. What drives a company to do certain things is to keep clientele; i.e. remain competitive.
Thanks to central banking there hasn’t been a case of a bank not having the money on hand to meet demand.
Yes, I know. I agree with you. I’m just saying the clentele will demand that the company has reasonable clauses for settling disputes, beyond just not patronizing the seller again. Otherwise, you would have to make the case that there would not be a demand for arbitration agencies and private courts.