Look, I know Rothbard attempted to prove that the free market creates more prosperity than other types of economic organization do through playing with definitions. But I’d love to hear Rothbardians be forced to admit that they’re willing to impoverish society because of their own quasi-religious beliefs concerning banking.
Of course, that’s just not going to happen. If this topic is an indication Rothbardians will never question their beliefs to fractional reserve banking, no matter what evidence is weighed against it (not that they’ll read any literature that goes against their convictions). I’ve seen few attempts on behalf of Rothbardian 100% bankers to make an even handed assessment of the benefits of fractional reserves. On the other hand, I’ve seen plenty of name calling and challenging of credentials.
See, DD5 disagrees with Angurse (who makes reasonable claims that can be substantiated with empirical evidence), Angurse is therefore a “liar” who “literally makes shit up” and doesn’t have a clue about fractional reserves. Jake, also, has no idea about how fractional reserve banking works and likes to cite “pseudo-economists” to make his arguments. My case, is somewhat more simple, I simple adhere to the teachings of a “deviant” part of the Austrian school (you know, those who adhere to silly teachings like “demand for money” and the belief that the real and the monetary economy can’t be seperated) whilst rambling on about “macroeconomic mumbo-jumbo”.
We’re also intellectual dishonest liars for supporting FRB, on the other hand, DD5 and Esuric can have the liberty of ignoring inconvenient points and, indeed, even entire posts whilst keeping their “honesty”. Honestly though, what’s really telling about this debate is that the consequentialists (myself included) who support the free market on the grounds of prosperity and the ethical subjectivists seems to have no issue with fractional reserves, the Rothbardian “natural right” believers seem to dislike it whatever economic arguments are proposed in its favour.
It’s also worthy to note that Mises and Hayek can have their entire career summed up, at least in regards to FRB, with single sentences and paragraphs. Seriously, Rothbard would be proud of his disciples, and it’s a good thing nobody takes Rothbard seriously because I think we’d have another Keynes on our hands if they did.
When you give out multiple property tittles to the same physical property, then somebody is being defrauded. ###########
Let’s say you buy an apartment that is one of many identical apartments in the same building complex. The market value of such an apartment is $1000. Your property title is worth $1000. You can either live in that apartment or you can go take that title and use it for exchange (sell it) because the apartments in the complex are valued by the neighborhood so they will likely accept it. In fact, many people are buying the apartments for the sake of their exchange value.##########
Now the owner of the apartment next door decides based on his own property title to issue another title and loan it out for interest. The borrower exchanges that title for something else. Now there are two titles for the same property! Even if the new owner accepts the contractual terms and the risk (he fully understands he is not the sole owner and if another owner actually claimed the physical apartment, he is screwed), the other owners have been clearly defrauded, for their title values are now worth less because there are more titles then apartments circulating. #########
You are very naïve to think that the free market would not eliminate such practice. If not by law, then by the mere fact that people will always opt only for a medium of exchange that gains more in value (or looses less value). In the above apartment example, a hard money system would out compete the apartment exchange system easily. ############
The demand for the money has nothing to do with it. A medium that does not increase in quantity will ALWAYS outperform a medium that does.
Okay, you concede the first quote.
Yes, I was putting that quote in context, hence the dots… Look at the contradiction, the 180:
The first part of the quote and the second part, come from different parts of the book. Do I have to quote entire pages again? In the second part of your quote he’s clearly addressing Adam Smith’s objections to commodity standards. You lumped them together, out of context, to make your position seem stronger. Stop wasting time.
… read the quote again…
“The issuers of the fiduciary media are able to induce an extension of the demand for them by reducing the interest demanded to rate below the natural rate of interest, that is below the rate of interest that would be established by supply and demand of the real capital were lent in natura without the mediation of money, whereas on the other hand the demand for fiduciary media would be bound to cease entirely as soon as the rate asked by the bank was raised above the natural rate.” TMC, chapter 17.
The whole book is entirely devoted to destroying FRB and fiduciary media, anyone remotely familiar with Mises/Hayek business cycle theory would understand that business cycles are caused by divergences between the market rate and natural rate of interest; it’s that simple. Mises is flatly saying that Fiduciary media presupposes disconnect between them; in fact, he says that word for word in the book. Only the would-be monetarists can’t seem to figure this out, and “free bankers” who read only part 3 of TMC and misunderstand all of it.
I suggested as answer by mistake.
If there is one thing this forum needs its moderators who are willing to punish users for insulting others. No matter who is right and who is wrong, no debator should resort to trolling and flaming.
Actually. at last year’s Mises U. a friend of mine asked Walter Block a question on the efficiency of FRB. Block admitted that it didn’t matter how efficient it was; FRB was immoral and that was the end of the conversation.
Of course, it is the logical argument for people who demand X and Y, I concede that. And what exactly?
That makes sense, purposefully leaving out the portion where Mises speaks of the efficiency and benefits of fiduciary media puts in into context… the context of someone trying to argue that TMC is devoted to destroying fiduciary media perhaps
Yes, and he agreeing with Smith, as I’ve already explained, your refutation is, well… not there.
Just false, he does attack fiat-regimes and advocates, such as the Banking School, but that doesn’t change a thing.
I’m still waiting for you to show where I mined the part of the quote from another part of the book and where I chopped up passages
I didn’t call anybody a liar or anything so I appreciate it if you don’t engage in false accusations. ################
Having said that, look at your original response to the original question. How dishonest of an anwer is that for a question that is asked about the general thoughts of the entire Austrian School.
“The issuers of the fiduciary media are able to induce an extension of the demand for them by reducing the interest demanded to rate below the natural rate of interest, that is below the rate of interest that would be established by supply and demand of the real capital were lent in natura without the mediation of money, whereas on the other hand the demand for fiduciary media would be bound to cease entirely as soon as the rate asked by the bank was raised above the natural rate.” TMC, chapter 17.
The whole book is entirely devoted to destroying FRB and fiduciary media, anyone remotely familiar with Mises/Hayek business cycle theory would understand that business cycles are caused by divergences between the market rate and natural rate of interest; it’s that simple. Mises is flatly saying that Fiduciary media presupposes disconnect between them; in fact, he says that word for word in the book.
Yes, I was putting it in context. I thought that was pretty obvious.. The point was that Mises was talking about how profitable FRB and fiduciary media are for bankers. I quoted from about 6 pages of TMC only to have you ignore them completely.
Without any sort of option clause you are correct.
If the owner knowingly accepts, then there is no way fraud, screwed possibly, same goes for all other tenants. The other tenants would be defrauded if their titles didn’t have the same option clause, yes.
In my opinion, you are naïve think that anything but markets could create such an efficient system of banking, it would be a step backwards. Just to re-iterate, full-reserve doesn’t guarantee a gain in value by any means, and FRB doesn’t mean a loss in value. You may be right about “hard” apartments being more prominent than the alternative, but that isn’t true for everything, parking lots, student cafeterias, and airplanes being counter-points you should look into. (I’d be more than willing to explain if you’d like)
I wouldn’t expect anything less of the great Dr Block! Of course, coming from an economist this may sound strange, but not if one has the knowledge that Dr Block is indeed a “hardcore” Rothbardian.
My apologies, my accusations will be limited to ignoring posts and challenging the credentials of others on your behalf.
So let me get this straight, I’m dishonest for giving the OP the names of authors belonging to both Austrian and free banking schools (who sort of by definition favour fractional reserves) when he asked for economists who belong to both Austrian and free banking schools (and therefore support fractional reserves). Right, next time an author asks for supports of fractional reserves I’ll point them in the direction of Block, Huelsmann, De Soto and Hoppe. And the next time somebody asks me for authors belonging to the Austrian tradition I’ll point them in the direction of of Samuelson, Krugman and Friedman.
I wouldn’t expect anything less of the great Dr Block! Of course, coming from an economist this may sound strange, but not if one has the knowledge that Dr Block is indeed a “hardcore” Rothbardian.
My apologies, my accusations will be limited to ignoring posts and challenging the credentials of others on your behalf.
So let me get this straight, I’m dishonest for giving the OP the names of authors belonging to both Austrian and free banking schools (who sort of by definition favour fractional reserves) when he asked for economists who belong to both Austrian and free banking schools (and therefore support fractional reserves). Right, next time an author asks for supports of fractional reserves I’ll point them in the direction of Block, Huelsmann, De Soto and Hoppe. And the next time somebody asks me for authors belonging to the Austrian tradition I’ll point them in the direction of of Samuelson, Krugman and Friedman.
How this pertains to his original point is beyond me. He asked how anybody can have rights to the value of their property, which is of course ridiculous (not to Hoppe though!).
What’s really amusing is that this isn’t how fractional reserve banking works, FRB works because the bank issues an IOU to the depositor for the amount that the depositor gave the bank plus interest. If you really wish to construe a deposit solely as a bailment, go for it, but you’re pretty much alone in that regard because nobody, economics and the general public, considers a deposit to work in that way. In fact, there’s no fraud here, and airlines do the exact same thing. Airlines will regularly give more “tickets” to seats on their plane than exist actual places. The thing is, and this is also applicable to fractional reserve banks, that they carefully calculate the probability of people turning up on time and factor this into their decision to give tickets.
Its a critique of the Banking School, as I’ve already said.
The book is devoted toward detroying state banking, like that advocated by the Banking School. And yes, state control of FRB is more dangerous than a commodity standard.
Except he clearly states how efficient it is and how it benefitial it is to the community.
To be fair, as much as I present consequentalist arguments, I do believe in natural rights. You have the right to agree to a contract.
I’m also a big fan of Rothbard. Hes can get stuff wrong too, as can Mises, and Hayek.
I can’t remember where Mises addresses Smith’s point about commodity standards; it’s either in part 3 or part 4. Mises says, somewhere in the book, that Smith was clearly wrong, as the price of gold has only gone up due to its use as an inflation hedge (I have the most recent edition). Quoting Mises is uneccessary though, as money gets its value from gold, not vice versa, as Fisher and others hhave claimed. Removing gold from money doesn’t mean that gold will lose its value, but the other way around, as we’ve seen over the past 80 years.
This is what happens when you don’t read the entire book from start to finish, and cherry pick certain sections. Mises was always pro 100% reserves, which is obvious to anyone who has read his works. Those who say “Mises was first against and then for it” are those who simply misunderstood TMC, didn’t read it in its entirety, or at all. Rothbard, whom I haven’t read, was a Misesean, he was his student, and Mises praised him. There may come a time when the political establishment turns to Austrians for economic guidance, let’s not fuck it up with inherently inflationary, business cycle causing FRB. The worst thing we can do is end up like the Currency School:
“It was the aim of the Currency School to prevent the periodical recurrence of general economic crises by setting a maximum limit to the issue of uncovered bank notes. An obvious further step is to close the gap that was not reckoned with in their theory and consequently not provided for in their policy by limiting the issue of fiduciary media in whatever form, not merely that of bank notes. If this were done it would mean it would no longer be possible for the credit-issuing banks to underbid the equilibrium rate (natural rate) of interest and introduce into circulation new quantities of fiduciary media with the immediate consequence of an artificial stimulus to business and the inevitable final consequence of the dreaded crises.” Page 439, The Theory of Money and Credit.
If this is true then Mises was dead wrong.
The point of TMC was to refute the idea that an artificial drop in the interest rate could lead to long-run changes in the distribution of resources. We have established that the interest rate (market and natural) is the same under FRB and 100% reserves and even non-bank regimes for that matter. Therefore artificial drops in the interest rate can only come from central banks. Unless Mises misunderstood FRB then he must have been arguing against central banks.
The only way for you to refute this is to show that FRB and 100% reserves have a different money multiplier.
The point of TMC was to disprove ABCT?
Oh, we have? I guess we’re all Keynesians now? 100% reserves don’t allow for the creation of fiduciary media which comes on to the market in the form of producer’s credits, thus underbidding the market rate of interest relative to the natural rate. But, according to you, and apparently Mises, this isn’t a problem?
ABCT states that changes in the distribution of resources due to artificially low interest rates only occur in the short run. Malinvestments disappear in the long-run due to the crash and recovery.
This is the crux of the issue so let’s continue with it. How are loans made under 100% reserves?
Of course, because gold just has value. Regardless, I’m sticking with my interpretation, as it makes sense.
What happens exactly, you purposefully leave out parts you can’t come to terms with? Or just can’t find that particular part that shows all your assertions to be true? At any rate, its irrelevant what Mises may or may not have thought. Why Rothbard matters I don’t know, but Rothbard did disagree with Mises at one time or another. If the political establishment comes to Austrians, lets not fuck it up with unlibertarian, un-economic solutions like a gold standard.
Both the Currency School and the Banking School were wrong, there was a third school though, the Free Banking School, who wanted no regulation at all. Of course, free banking was destroyed in the name of the gold standard implemented by the second Peels Act. Lets us not attempt a shown failure again. Its always been government and I think Mises was aware.