How do you think saving is translated into investment? Seriously, I don’t understand your view.
Besides, my point above is unrelated to the conversation in the other threads. The concept is that there is no difference in the amount of loans made in bank and non-bank worlds. This has nothing to do with Keynes.
No, it depends. Is there more or less cash supplied than the demand for it.
Are you gonna loan them out or just let them rot there?
that’s none of your business.
And once again, you completely ignore my points and questions then repeat your assertions.
You keep conflating central banking and free banking. Multiplying the money doesn’t equate misallocation of resources, fractional-reserve doesn’t necessarily lead to monetary overexpansion, you have yet how a leads directly to b.
Yes, excessive growth of the money stock can lead to and worsen business busts. However, the increase of the money stock will not aggravate the boom/bust cycle if it is warranted by a preexisting increase in the public’s demand for money balances. To preserve monetary equilibrium the nominal qunatity of bank notes must adjust to offset changes in the velocity of the already issued money. Central banks meddling with the natural rate of interest is the cause of instability. Ironically, even Rothbard understood that it was the central bank or government at the core of the business cycle. As its simply impossible that in a free market there wouldn’t be a cluster of malinvestment, as entrepreneurs wouldn’t have a uniform rate to follow so errors wouldn’t made in such arrangements and many would quickly take advantage of any temporary mispricing.
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When will the LTV die?
A bank that provides for an increase in the public’s real demand to hold its demand liabilities by increasing their quantity does nothing to push interest rates away from their natural market values.
Hey, thats my non-argument.
I am not conflating anything. I am saying that free banking will not have FRB thriving, which is why Rothbard would blame the central bank, for he correctly recognized that FRB in the absent of a central bank and any other government intervention, could not survive.
Only if you confuse money with wealth. demand for goods is derived from other supply of goods. NOT money! If you multiply the money and inject it into the credit markets, you will distort prices and signals. It is deception. The Central bank by injecting more money simply exacerbates the process. There were boom/bust prior to central banks due to FRB. There were boom/bust cycles in Scotland also during your alleged “free” banking era.
It is an interesting fact that you must resort to meaningless concepts of velocity in order to desperately defend your position, but you cannot explain how 10 apples are saved, but claims for 100 are loaned out without creating problems. How does your “velocity” concept explain this? Or do you prefer to take the Keynesian bypass of simply treating money as wealth.
I don’t think the opponents of FRB understand their own arguments. No one thinks FRB is inherently distortionary, not even Rothbard. Huerta de Soto might believe this but his position is not clear to me. I’ve just gone back and done some reading and Rothbard opposes FRB only because bank runs might collapse the system, not because of “artificial credit expansion” by free banks. He just wanted to eliminate demand deposits and replace them with a combination of warehouses and time-deposits. It is deceptive to call this 100% reserve banking as it would basically function the same way the current system works. A true 100% system would eliminate deposit financed loans altogether. All credit would be based off of capital accumulation by investment firms.
I still haven’t seen a response to the points I made about loans in a non-bank system.
Those two propositions make no sense together. If FRB couldn’t survive without central banks then how did it exist before them?
Oh really? So for a given demand to borrow apples, the price for the loan (interest rate) will be for 10 or 100? So which is the correct supply that determines the natural rate? 10 or 100? or perhaps 1000 for 1% FRB? you seem to imply that it is not 10. But are we lending out real goods or not? Which is it? Is it money that we are lending or real goods that have been saved, and money is just the medium of exchange. If it is real goods then there are only 10 apples that have been produced and saved. 10 and no more!
Now if you want to resort to your “sophisticated” arguments based on “velocity” to show that investments are still equal to real savings despite the fact that you interest rate has been determined based on 100 apples, where only 10 have been saved, then I just don’t know what else I can offer you except go and rethink your position because you are on a slippery slope to Keynesian nonsense!
There were always other special government privileges that exempted the banking sector from the market
Here for example is critique of the free banking in Scotland claim:
I still don’t think you understand how banking works. When a bank gets 10 dollars in deposits it can loan out 10 dollars (assuming no reserve requirement). It can’t loan out 100. The reason why no one has answered your question is it makes no sense.
I don’t understand your position. Is FRB inherently distortionary or is it just susceptible to contagion (two very different things). In the first one it causes business cycles while in the second it just makes them worse.
Accept he put more emphasis on the central banks than many of his contemporaries and basically opposed it because of the risk of bank runs, not so much monetary expansion.
Yes, yes I’ve heard you already. Again, where is the proof as just asserting it (and reasserting it and reasserting it establishes nothing more than you believe an assertion)? Explain your position further. I’ve patiently explained your error, don’t repeat it, refute me. Nobody is confusing money with wealth, rather you don’t seem able to understand that money itself is a good. The central bank by injecting money at an arbitrary interest rate coupled with legal tender laws creates the problem, fractional reserve obviously exacerbates that problem but it isn’t the cause. An expansion of the stock of bank money that only accommodates a prior increase in the demand for money doesn’t add to the flow of spending, it merely keeps that flow from shrinking. Can banks not accommodate shifts in demand? Further, every prior boom/busts can easily be traced to government distortion of the market, and I never once referred to Scotland.
Again money, the claim, is the demanded good! Meaningless concept of velocity? Are you serious, what Austrian denies the ratio of dollars spent per year to dollars held? You have yet to once show how 100 claims for 10 apples automatically creates problems, the burden of proof is on you - the asserter.
I cannot tell you the natural market rate, as a market is required for that. And what constitutes a “real good” is, of course, SUBJECTIVE.
Yep. Everything is SUBJECTIVE.
[url]Austrian fractional-reserve free bankers... - #22 by Juan]
Rothbard: Banking and the Business Cycle
I’ve learned absolutly nothing new from the ‘full reserve bankers’ throughout this discussion. I did however learned a few new points in favour of the monetary equilibrium view.
If it’s that certain; why does it seem to be so hard to come up with real rebuttals? :?
Edit: Roflol. Sorry for turning this into this yellow thingy.
Edit: And before you attack me: I haven’t decided on the issue yet.