You can’t guarantee risk, by definition. You may be able to argue that there is no guarantee in particular cases. However, in practice, the kind of fractional reserve that could both exist and get away with this is not the way it has worked and does work.
Like who?
Wrong too. They never conceded option clauses are necessary. It’s just an invention that can benefit all parties.
Notes circulated with and without such clauses. And they were basically never invoked.
You always refer to the past and we never know what the circumstances were that advantaged one thing or another.
Yuo always discount all evidence even if you show nothing to question the circumstances.
To discount evidence some would need to be presented.
The history is there in numerous books and articles. I don’t know what you are talking about.
The fact of the matter is that FRB is not fraud by definition. The negative externatlities argument, when carried to its logical conclusions, can justify all sorts of absurd market regulations.
Excuse my ignorance, but what do you mean by ‘real savings’? I assume that you are referring to a the bank having a commodity, such as, gold to offset all its liabilities (deposits). Can financial assets ever be ‘savings’?
What would the bank’s balance sheet look like? How could a bank lend? If every time it creates a loan and simultaneously the matching deposit, would the bank then need to ‘search’ for a ‘real’ asset of an amount equal to the loan? Or would bank lending not work like this under a 100% reserve system and the bank would be required to create ‘time deposits’ and only then could it lend?
Most of these analogies better describe a Ponzi scheme than fractional reserve banking. FRB is a POTENTIAL time mis-match, not a deliberate scheme to bilk depositors out of their property. The bank’s rate of investment may be well within the general time preference of society, and if the sect of society that represents the bank’s customers decides to perform a bank run against all deposits, there is still the potential for a FRB to meet all claims - it simply needs assets that are liquid and conform to the greater society’s time preference.
That being said, I like the sandwich analogy. However, rather than have the caretaker consume the sandwiches, they would instead be used to feed the nerdy kids as they built a sandwich-making machine. If they complete the machine before lunch, everyone gets sandwiches and is happy. If not, or the kids demand sandwiches before lunch, the system is exposed as not what was advertised.
Still, I don’t think FRB should be painted as fraud. It can be. But it can also fail due to sincere error. Or it might not fail at all. I would still argue that a free market would prefer full reserve banks, or where there are FRB’s, their reserve ratios would be rather high.
I haven’t seen them. I don’t know what you are talking about. As it stands, you indicated in your answer to my question that you are in favour of state support of FRB. I’ve had monetarists argue fervently that we have a free market in money and that no intervention caused the current paper notes to replace the former money.
Why do you keep talking about regulation?
Free Banking in Britain, The Experience of Free Banking, Good Money. These are just 3 books.
And where did I support state backing exactly?
From de Soto’s Money, Bank Credit, and Economic Cycles:
Neo-banking authors devote strong efforts to historical
studies which they intend to support the thesis that a freebanking
system would protect economies from cycles of boom
and depression, owing to the “monetary equilibrium” mechanism.
Nevertheless the empirical studies produced thus far
have not focused on whether free-banking systems have prevented
credit expansion, artificial booms and economic recessions.
Instead they have centered on whether bank crises and
runs have been more or less frequent and severe in this type of
system than in a central-banking system (which is obviously
quite a different issue).145
Moreover the fact that various historical studies appear to
indicate that fewer bank runs and crises arose in free-banking
systems than in central-banking systems does not mean the
former were completely free of such episodes. Selgin himself
mentions at least three instances in which acute bank crises
devastated free-banking systems: Scotland in 1797, Canada in
1837, and Australia in 1893.152 If Rothbard is correct, and in
the rest of the cases institutional restrictions played the role of
central bank to at least some extent, then the number of bank
crises might have been much larger in the absence of these
restrictions.153 At any rate we must not consider the elimination
of bank crises to be the definitive criterion for determining
which banking system is the best. If this were the case,
even the most radical fractional-reserve free-banking theorists
would be obliged to admit that the best banking system is that
which requires the maintenance of a 100 percent reserve, since
by definition this is the only system which in all circumstances
prevents bank crises and runs.154
Like socialism abolished business cycles?
I mean real consumer goods and services that have been already produced and saved. Saved as in - not consumed. The reduction in consumption frees up those goods and the resources that was required to produce them so that they can be utilized in higher stages of production further away from consumption. These saved resources are valuable assets assuming they are invested “wisely”, that is, if they are channeled into those lines of production that will satisfy consumer demand.
I assume you mean “savings” as in real savings. Yes, and they are when the above takes place. Those financial pieces of paper represent titles of ownership over real capital and its product.
You said you have empirical historical evidence for fractional reserve free banking and I claim that you don’t. Do you have something of value to offer as a counterargument to the objections I have posted in response to this claim of historical evidence? Trying to divert the issue to something else won’t do it.