Do Libertarians Really Want a Free Market in Banking?

Economics Economics Questions
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http://www.ronpaulforums.com/showthread.php?t=171697

Do Libertarians Really Want a Free Market in Banking?

Libertarians, Ron Paul supporters, ‘community currency advocates’, so-called Austrian ‘economists’…are they serious in their mission or just a bunch of milquetoast, keyboard-commando posers?

Maybe they like the idea of blaming the big bad “STATE”. Or that the Rockefellers control everything, or that the CIA controls our local politicians, or whatever the conspiracy de jour is, because it makes it that much easier to rationalize why it is they aren’t doing squat to fix the situation except parroting some unsourced quote they got when they Googled “banking conspiracy”.

Now I’m sure there might be one out of every hundred of these so-called Libertarians who give a damn, but I’m inclined to agree with Rothbard concerning the majority of them:

"It might be thought that the libertarian, the person committed to the “natural system of liberty” (in Adam Smith’s phrase), almost by definition holds the goal of liberty as his highest political end. But this is often not true; for many libertarians, the desire for self-expression, or for bearing witness to the truth of the excellence of liberty, frequently takes precedence over the goal of the triumph of liberty in the real world. Yet surely…the victory of liberty will never come to pass unless the goal of victory in the real world takes precedence over more esthetic and passive considerations." Murray Rothbard, Ethics of Liberty

Now Mr. Murray says “often not true” but I say “mostly not true”. It is quite clear that the bankers have the upper hand and are screwing us. It is quite clear that sound money is the way forward. If these two things are clear then why is it not clear that we need to start controlling our own banking?

Why are we still using dollars? Why aren’t we starting our own banks? Why aren’t we circulating our own money substitutes backed by precious metals?

It isn’t difficult people. If it were rocket science it wouldn’t be controlled by inbred thugs. So if you want a short lesson-and I know you don’t want a long one, because you’ve almost finished downloading this weeks episode of Heroes, and time is short-so I’ll try to make it fast.

How to Bank

Note to slimy treasonous fractional reserve banking scum: Only real banking explained here, none of that institutionalized thievery you pass off as a business.

Banking can be done easily with four people. It can be done with one, two, or three but four makes it easier to explain so deal with it. Lets call them Alice, Bob, Carol, and Dave. Alice has some gold. Alice would like to spend the gold, but lugging it around is risky and cumbersome. Alice would like to ‘bank’ it, in order to make her life easier. Carol is a notary, we’ll call her the intermediary. Carol doesn’t want to be a bank however, as she doesn’t have a safe in her house. But people in the community know Carol so she offers to be a witness to a contract between Bob, a swarthy gun-clinging redneck, and Alice who has the gold. The contract simply says that Bob will hold the gold for Carol, and will give it to whoever has the receipt that Carol drew up and gave to Alice. So everybody knows Carol, so Alice can buy something from any member of our group.

So there you go. Banking in one paragraph (legitimate banking that is). Any questions? Well, maybe you do have some, but this article is getting long, and like most Americans your eyes are getting tired because you’re not used to reading something that doesn’t fit on the side panel of a box of Fruit Loops. Hmmm, so how do I keep your interest. Maybe you can pretend that if you keep reading there’ll be a prize at the end, or there’ll be a link to some free porn.

Now you might be thinking, why not just have Carol store the gold and that would simplify the model. True, but I did that on purpose to point out that the intermediary doesn’t have to be the reserve holder. The intermediary could simply keep track of where all the reserves are at. Why keep all the reserves in one place? That just makes it easier for the criminal banker to hire his criminal friend to pretend to rob the bank, and then feign ignorance and screw the stockholder, and hide behind his government created corporate veil. It also makes an easy target for government shutdown. I say spread it out amongst trusted people as much as possible.

But you know what, maybe we should keep all the reserves in one place. In fact, lets defeat the State, get our Liberty, and throw off the chains of tyranny just to let the slimy fuckers screw us all over again.

Of course I’m joking. The only way I would support all the reserves being in one place is if we put all the gold on a rocket ship and put it into a big ass pile on the moon that spelled out the words “Bankers Suck”, so that everyday, somewhere in the world someone would be auditing the gold supply and learning a valuable truth about the banking profession.

Or maybe you’re whining that enforcement and auditing would be too problematic. All I have to say to this is how you gonna audit and enforce 100% precious metal backed banking in the “free market” you dream of if you can’t do it in your own community among your peers? Especially when magical free-market land has decentralized private defense contractors all over the place. If its a clusterfuck now it will be a clusterfuck then too. What we need to do is bring back the penal/performance bond and if someone screws around with the reserves, we chuck 'em into a work camp and make them pay that shit back. There will always be thieves, free-market or not.

What’s next, technology? Well, before we go there let me inform you that if you’re going to have reserves AND money substitutes, you’re going to need a program that can handle at least 2 currencies, one to keep track of the reserves and one to keep track of the money substitutes. This is going to severely limit your options (I know I’ve checked) as most community currency programs, or websites, etc. are just one currency and aren’t backed by diddly. If you don’t have a system that can track 2 currencies, then you’re going to be keeping track of reserves on paper, which will probably be a little inefficient, and might hurt you from the trust angle.

So what do you need? A peer-2-peer, multi-currency, open source, accounting program that’s considerate of privacy. Well, you’re in luck. Someone already built it, only no one seems to have noticed it. It’s called RipplePay. Now the author explains it slightly differently but it can be used ‘as is’ for the above mentioned purpose.

What the price of gold rises? What if the price of gold falls? What about legal tender laws? What about tax laws?

Here’s someone else who thought of those questions, so I’m not going to regurgitate:

http://www.kitco.com/ind/Wallenwein/feb282008.html

How about marketing? Can it really be that hard to get a business owner to accept gold-backed currency? If he doesn’t trust it let him hold some gold reserves and be legally responsible for it. If they’re simply stubborn just make sure you let him know how many people aren’t going to shop there because of the decision.

I could go on and on explaining every detail, but what good would it do? I can’t start explaining the benefits of community banking, and the subtleties of distributed reserves until at least one fucking person thinks its possible! My point, and this article/blog/rants title is…Do Libertarians really want a free market in banking? Because guess what? There IS a free-market in banking! What there is NOT is a free-market in the actions and strategies of the so-called Libertarian movement. If there were, they would DO the thing they constantly profess would do the most good and use sound money in their communities. But the idea of Liberty I guess takes precedence over that actual realization of Liberty in the real world.

So I must conclude that they don’t, at least most of them. And by most I mean about 90% of them. Most just want to pass each day rationalizing their inaction. If only THIS would happen then I’d do something! When the economy collapses THEN I’ll do something! When there’s a food shortage then I can say “I TOLD YOU SO!” vicariously via some Austrian academics predictions.

So go read Mises, Rothbard, Hoppe, Bastiat, Hazlitt, Nock, and all the others until your heart is content. Then when the future hell comes you can comfort yourself with the knowledge that if YOU were in power, you would have done it differently. Because you can’t do anything now, because sadly your life is a prison. What a joke! It’s your mind that is the prison. This pretend world you live in where you are the unwittingly victim of oppression. You want to see victims. Why don’t you Google all the dead families and children being financed by the FRN’s you carry around in your wallet and bank account.

I mean seriously, the movement raised 4 million or something in one day for Ron Paul. We got rich guys like Charlie Sheen, and Bruce Willis, and weed-smoking Willie Nelson. How about we stop transacting in frikin’ FRN’s people?! Look at all the money flying around in the movement! What if we could have banked all that money into a gold-backed currency within our communities? We could drive out all this malinvestment (a fancy pants word for bankers make decisions instead of people who made the money making the decisions) and actually produce things that people want and need, rather than what makes bankers and their bedfellows more money.

You want to know what the secret is? There is no secret. That’s the secret. There is no “Mystery of Banking”. Banking is easy. Now I know its a little harder than posting on forums and attending Ron Paul meetups, but only by a little. You do actually have to know how to add and subtract and write things down.

And there may be criminals, but their isn’t any undefeatable conspiracy. But I have no doubt there’s a conspiracy to make you think there is, even if it’s just the conspiracy in your mind of you convincing yourself. It isn’t you vs. the NWO. It is the criminal vs. the indifferent, and the criminals are winning.

You know I’m all for the Libertarian utopia. I love Rothbard! He’s the shit. I can’t wait for legal abortions, legal bribery, debtors prisons, allowing parents to starve their kids, legalizing all drugs, private defense contractors replacing government, and my favorite legalized prostitution!! It sounds so wonderful it makes me want to cry. But guess what, we ain’t there, we’re here. And we can preach about ending the Fed, and overthrowing government but we’re not going to get across to people that way. People are much simpler than that. It’s the economy that matters to them. And running around blaming the government for everything may be waking up some, but its pissing off others. Especially others that-as much as we despise the military-have actually lost families and friends in war.

So does the liberty movement want a free-market in banking?

I say no. Because there is a free-market in banking and they aren’t using it. So please, tell me I’m wrong. Let’s rationalize the incompetence of the liberty movement. Our ability to act is not limited. The movement is suffering from intellectual paralysis. Until we get past that and see the possibility of handling our own banking and taking appropriate action, we’re not going anywhere. Ron Paul will NOT be President in 2012. Stop dreaming. We don’t need to get off the electric ‘grid’. We need to get off the monetary ‘grid’. All the efforts you spend blogging, and emailing congressmen, and spreading news stories, and pretending to be part of some plan that doesn’t exist, is completely wiped out by the fact that your are still using the very thing (FRN’s) responsible for your own destruction.

Maybe it will change, maybe people will get it. Maybe it could go viral, and this ponzi scheme called fractional reserve banking could collapse while a decentralized, worldwide, precious metal-backed currency takes its place. Not by fraud, or shutting down the Fed, just by the sheer force of the economic benefit of using gold-backed money and driving out these poisonous FRN’s from our communities.

Or maybe people would prefer to watch the world their fathers and mothers died for burn while they rationalize their inaction.

The way I see it their are two choices. The path of intellectual paralysis, which is no choice at all, and the path of taking control of our monetary system which is the only real solution. But, as Neo pointed out in Matrix Reloaded, that’s really the problem isn’t it, we actually have to choose our own destiny.

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  1. Too long, didn’t read.

  2. Your title is unappealing.

  3. Reposting from the Ron Paul forums will not win you an audience. Write to us, for us, or you are not going to get much interest. You put little effort in, little will your results be.

  4. This is even worse than your last thread. This style of writing is terrible.

Also, he is Mr. Rothbard, not Mr. Murray, even if you insist people call you Mr. Wizard, it’s still your first name, not your last name.

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Well, I try to communicate and I’m attacked because I’m not a good writer, and I get accused of being self-indulgent and I get all sorts of advice about how better to present my theory. So I thought I’d try a different angle.

  1. It’s shorter and more concise than my last post.

  2. My title is the question and is most important and relevant. Maybe you’re afraid to answer it.

  3. I’m not writing for the “Mises Community” or the “Ron Paul Community”. You’re sounding very collectivist for a Libertarian.

  4. Who cares if my writing is terrible and that its worse than my last thread. No one is reading things to understand. They are reading to see who agrees with their way of thinking and who does not.

I will call Mr. Murray whatever I want. He is dead. He can bitch at me when I go to meet him. Again, very anti-free speech for a Libertarian.

Please put me on your ignore list.

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Right, so you got advice, and then did something different.

I scanned it, and still have no idea what you are getting at. It’s just a lot more fluff. WHAT IS YOUR POINT? Is it possible to sum up your issue in 2 sentences, and then give an idea of your solution in another 2 or 3 sentences?

Who are these libertarians you are challenging? Identify your opponent specifically and make your argument based upon their position. It’s just a gigantic strawman.

And that is your problem. You aren’t writing to your audience, you’re writing for yourself.

Ugh

You don’t have a right to free speech here, and it’s lame that you use that as an excuse to avoid critcism.

We don’t have one. We’re not the Ron Paul Forums (by any stretch of the imagination)

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If you want people to actually read what you have to say, make sure you keep it short enough to get them interested in the first place. I have lots of things to read. It’s all a matter of opportunity costs. Long rants rank very low on my agenda, so I recommend getting this down to 3 paragraphs, at most.

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My roughness is certainly my own fault, and the quips about free-speech were made jokingly. But I will get to the point in a few sentences if that is what your challenge to me is.

I am speaking to whatever human actor is reading this post.

My question to the reader is the title of my original post;

Do libertarians really want a free-market in banking?

More specifically, do YOU want a free market in banking. If you say no, then you are not a libertarian in the Rothbardian sense. If you say yes, then my reply is that there already is one. There may not be a free market in the purchase of precious metals, but a free market in banking does exist. You can ask Lew, or Hoppe, or Kinsella, or Block, or anyone else. No one can show me now that a free market in banking does not exist. The way is only blocked buy our own conditioning of thought.

If we are to believe then, according to all the great works of the Austrians, that sound money is the antidote to statism and tyranny, my question is what is your justification for not acting in the manner most conducive to the realization of liberty? That being, conducting your transactions as much in possible in gold or silver.

So you can answer the question. Not answer the question. Try to show me in some reasoned manner that a free market approach to banking is blocked. Or tell me your justification for inaction.

And then of course there is the option of attacking me.

My answer, is I’m am working towards implementing gold and silver backed community banking. I just paused for a while to ask everyone else why they are not. Why isn’t it on the table, or in the cards? Seems like it should be at the forefront.

-David

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TL;DR

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IMO, you might want to get a blog to post these long posts of yours, get some feedback on your posts (share links to your blog to various individuals of variosu communities; Reddit might help with this), & post the revised & further developed (& streamlined) here. Listen to feedback here, regardless. Post stuff beyond the Ron Paul forums & here, as each community & individuals of communities react differently to your ideas (the difference of audience, once again).

Don’t worry about negative responses; your a newbie. If you can take constructive criticism, you’ll be fine; I see no indication of anyone attacking other than mild annoyance at posts that are deemed not very readable (which shows there is interest in what you want to say, but it’s not being delivered efficiently enough to convey your ideas).

Although, I also have to admit, I’m not entirely sure what your getting at either.

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I think the main point he’s trying to argue is- libertarians talk about liberty and wanting a true free-banking system- but that he sees little to no action from libertarians actually trying to do that in the real world. He argues that we are already free to start our own banks that don’t use the fractional reserve system so what is preventing us from doing so?

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Opportunity cost. Fear of the state.

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Bingo. Not very competitive to offer full reserve when all of your competitors can actual fractional reserve with FDIC.

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Thanks for picking up the gauntlet David. You’ll find this community has a lot to offer.

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I disagree, I think reserve backed banking would be extremely competitive. And whatever economic activity gold-backed banking displaces shrinks the purchasing power of FRN’s causing them to inflate which benefits gold. That’s the whole point of sound money, its unassailable by those who use it, except by criminals who would simply try to steal it or outlaw it.

To consider the argument from the perspective of some shareholder type entity evaluating the profit potential of the bank is to miss the point entirely.

So I deny the “opportunity cost” argument, because it goes against the teachings of Austrian economics from my understanding of it.

Of course, the primary reason no one wants to do it, and I’m glad someone else said it first, is likely fear of the state.

And if the justification for inaction is fear and cowardice, well that’s certainly a reason I cannot deny.

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No. The Austrian view is that profit is the incentive to invest your capital. Since a full reserve bank would have higher demand for initial (and likely, continuing) capital injection, it is very important that the model be profitable.

You may have an ideological reason for full reserve (and I agree with you), but it also has to be profitable to be successful in the market.

Because of state control of money, profits and profit making are skewed, misdirecting capital to FRB.

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If you keep making weak arguments, I may have to stop spending my time responding.

There are no full reserve banks. There are only FRB’s. FRB’s create a legal contradiction and are therefore anti-liberty. Therefore participating in FRB’s is contrary to the libertarian philosophy.

You can’t use the profitability argument for a fradulent/unethical system vs. a ethical reserve backed system.

When more than 1 100% reserve backed bank exists, then we can discuss which is more profitable.

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I think internet banking is the only way to go.Someone will also need to create an IT system that make it incredibly easy for people to do business and online banking with. Also, we must deal with the issue of crediblity. The banks will need to be located somewhere in the world that is unreachable to the world’s states but also easy to verify their content.

The biggest problem is the matter of security from the state and creating an economy around it.

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The tools are already there.

The theory, the software, the know how, the people. But this is not what is lacking.

The problem is not enough action in that direction. But it will come.

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The state is best dealt with by decentralizing the reserves. Make too many targets, so that enforcement becomes counter-productive to their cause and benefits ours.

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I don’t think banks are going to let us look at their dusty cobol code…On the other hand, we get to use modern tools to create our own banking system.

So you said that they will come…but who will do it?

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Fractional reserve banking is so profitable that the bankers that engage in it just use the government to enforce it for the good of those that might otherwise be tempted to engage in full reserve banking.