Normally, if you have an offshore account in say the Bahamas, the people in the Bahamas can not use that bank. The bank is restricted to non residents of the country where the bank is registered. That is what I was trying to say. Normally these banks have less or no guarantees than onshore banks of that country.
At any rate, as I mentioned we can simply look at all accounts that have more than the guaranteed threshold to examine FRB in a free market.
This.
We agree. No need to use the word nor the concept of FRB. Customers will both warehouse and invest their wealth. The proportion of wealth stored in warehouses vs the proportion exposed to risk would determine the lending rates in a free market, and neither requires or needs FRB.
A Ponzi scheme (FRB), on the other hand, is not just risky (in a way launching/investing in a hot-dog stand would be). The chances of a player making money from a Ponzi scheme are ONLY defined by the perception of the other players as to how close to a collapse the whole structure may be i.e. how many bigger fools are likely to join in down the road. In a free market you’re welcome to participate in such a re-distributive, non-wealth-creating (or any other type of) “risk-taking” but I wouldn’t call that investing or lending by any stretch of an imagination. Fools will always find ways to meet with their fraudsters. Free markets will deal with both of them accordingly.
Z.
If we look at accounts above the guaranteed threshold then even if there are requirements to open a bank, the requirements are not that you have to practice FRB. So there is no reason that the market right now could not establish competition in that market with a 100% reserve bank and according to your theory wipe out the FRB in the market above guaranteed thresholds.
Yes, let us get this straight. I haven’t stated a position on FRB. I stay out of these super boring and circular discussions.
My point was, you tried to use a logical fallacy (negative proof) in argument, and I pointed that out so you could stop as it is an error. If you use such an argument and claim it is true, then by virtue of universality, the same negative proof could be demanded of you, and used to refute things you hold dear.
A lack of an opposing argument or lack of proof of an opposing argument, is not proof of your argument.
You argue a lot by assertion and fallacy. If you removed all of the fallacies, your arguments would get stronger.
No. The point is that Banks currently have no market intensive to operate that way due to the existence of a LOR.
There’s a tacit government assurance that ALL deposits (even the one’s above $250k) will be made whole. Britain and Netherlands are putting whole Iceland on the hook for ALL of Landesbanki deposits (in those countries) gone bust. The market knows about the printing presses behind the curtain (the lenders of last resort). As a depositor in the status-quo, one is faced with constantly comparing the risk of the govt NOT coming in to save everyone (i.e. make all taxpayers pay the bill from the fraud) vs the interest the money is making in the account. In addition, this insurance blanket (for the fraud) comes at the cost of inflation and increasing money supply that devalues any cash not “invested” in the Ponzi scheme, so one is left choosing between (1) participation in the Ponzi scheme for the purpose of mere preservation of one’s wealth, and (2) NOT participating but watching one’s wealth melt away.
As for 100% reserve competition not existing… Ask yourself what’s stored in all the deposit boxes and vaults across the globe. What is real-estate and any other type of property but a 100% reserve? None of the smart wealthy people I know keep any significant cash amounts in bank accounts. Most of their wealth is in property, investments, and gold.
Z.
You have stated your position on FRB previously. Your position is based on your assertion that the current banks are committing a fraud with FRB. You say they are doing something which you have no proof of and in fact the contracts that do exist disprove your theory. Your making the claim that the current banks are perpetrating this fraud but you have no evidence to prove that and the evidence that does exist demonstrates the Austrian theory is incorrect.
There are lots of market incentives in the unregulated part of FRB as we are discussing. There is no lender of last resort on non guaranteed money.
So if there is one case where people lost money when a bank failed then you would agree that your argument is false? Can we agree on that, since that would prove that there is at least some uninsured risk?
So we already have 100% reserve banks…safe deposit boxes…and yet these 100% reserve banks have not eliminated FRB in the unregulated FRB portion of banking operations. Isn’t that contrary to your prediction?
Indeed, the general price level is technically immaterial. We should focus on relative price distortions, misdirections of the original means of production towards unwarranted activities, and how the newly created money affects the subjective value scales of individuals, if it does at all. But none of this matters if doesn’t affect time preferences and the market rates position with respect to the natural rate—which is the real cause of intertemporal disequilibrium. You keep talking to me as if god has bestowed upon you some sort of revelation. You continuously place yourself on some kind of pedestal, and I don’t know why.
Now, as you’ve already stated, money substitutes are not money, but merely represent claims to money, and as such, regulating the issue of money substitutes cannot, in anyway, be considered “counterfeiting” or “fraud.” Bonds and securities have been used as money; there are hundreds of things which can be used as money, even bills of exchange.
The issuance of such notes will be entirely contingent upon market forces, that is, the extent to which people demand them, and the extent to which they redeem them for money proper at all times. Why can’t market forces and competition regulate banking? Well, you may say that market forces will drive the banking system towards a 100% reserve rate. But that’s just an assertion without any historical support whatsoever. Also, it doesn’t address the fact that 100% reserves will continuously elevate the market rate above the natural rate. Bohm-Bawerk suggests that only around half the subsistence fund is required for roundabout capitalistic productions—not the full amount at all times (I haven’t heard anyone refute this position).
Most people realize how this process works, and they choose to do business with banks because of obvious advantages. If a bank fails, then it must liquidate and pay back its liabilities and its capital/labor will flow towards better banks. How is this atypical market behavior? Also, you say that fractional reserve banking today is different because it has government and FDIC backing. But such guarantees are entirely illusory; if there are major bank runs then the FED will print a lot of money and pay us back with devalued currency, destroying our savings. So there is no guarantee, and I still choose to leave my savings at the local bank. Nothing you say can make me choose to pay fees at a “warehouse” over earning interest on my savings, and it’s up to me to find a good bank. Not you, nor Rothbard, or whoever, has the right to ban voluntary market activity. It’s not criminal because you say so, and it’s entirely at odds with all other Austrian principles. This is why you choose to ignore my question and continue to
Esuric, why do you continue to dance around my questions? Why are you being a hypocrite?
This too is possible.
All other warehouses. Modern stocks/bonds and commodities. Anyway, there is no free market in banking, so our inability to find examples should surprise no one.
The natural rate? So you think free market banking will elevate interest rates above the free market rate…
And I haven’t heard you defend it. You just drop names. Two arguments: 1) If this were true, why do not other commodities who’s function is to store wealth, like gold, get traded on fractional reserve. 2) This may be true for consumer’s who demand their deposits back, but we’re positing that other banks/creditors on a free market will redeem their notes from other banks as soon as possible to reduce their liability. I have made this argument before, and YOU have ignored it.
I could go on with the rest of your post but you have a bad habit of ignoring people who bring up valid points against you. I’d rather not sink too much of my time into this.
Yes, there is always the risk that the lender of last resort (the printer behind the curtain) is unable or unwilling to lend a helping hand. Depositors (Ponzi players) are constantly on the lookout for such a possibility, and the printers behind the curtain are aware of that, as well. That’s why “confidence in the banking system” is such a priority. All is fine and dandy until the Ponzi players start suspecting, and the printers are there to print enough cash and assurances to alleviate such suspicions for the good of all (!?). How does this prove that my argument is false?
Did you read what you just quoted? Here it is again:
What prediction does this contradict exactly?
Z.
Liar. Remember: you can’t use the rules of what government says now as your base. That’s called legal positivism, and doing such will lead me to say that you believe it was perfectly ok for the nazis to confiscate all the jews had, based on the law.
Which has what to do with your use of fallacy in argumentation?
That’s very interesting, because that is not my position. And thus, a strawman.
So you avoided addressing the logical fallacy I pointed out to you, by proposing a new logical fallacy.
I suppose in MaxLiberty world, that is some sort of progress in the argument.
Is anyone here planning on actually discussing fractional reserve banking or are we just content on bickering over the current state monstrosity in then applying it to fractional reserve banking?
Yes, the current system(s) sucks, but it has no bearing on FRB itself, just as the current highway system(s) has no bearing on private transportation itself.
“Yes, the current system(s) sucks, but it has no bearing on FRB itself, just as the current highway system(s) has no bearing on private transportation itself.”
if fractional reserve banking is a real phnomenon, as i have read here ( people here arent lying are they?) , and occurs now why doesn the current system have any bearing on fractional reserve banking itself.
someone on another thread posted that the federal reserve - an element in the current banking system now pays interest. if thats true, i would say it affects the current fractional reserve system in a new way.
The argument is whether 100% reserve banks will arise on the free market. They say we have no examples, so we have to point out that the status quo doesn’t count, among other things.
Is anyone here planning on actually discussing fractional reserve banking or are we just content on bickering over the current state monstrosity
does fractional reserve banking actually take place now???
