Well, the more I answer these threads here and in other places I’ve posted, it is obvious that I will have to do it.
No one is going to believe it until they see it as they say. It will probably take me a few weeks to get the skeleton up and running. But as I said, software already exists. Just need to use it.
the profitability you dismiss is a corollary of gresham’s law. the reason FRB comes into existence is that it is a prisoner’s dilemma. If you are a bank in a society where banks are 100% reserve it is highly advantageous for you to switch to FRB. As long as everyone isn’t doing it you can easily get away with it. Your bank is more profitable, other banks notice this and switch to FRB. Even after everyone has switched, the negatives won’t become apparent until there is an economic correction, at which time all the FRB’s try to sell off some of their assets at once…
I’ve also long thought this is the case. Hayek also briefly touches on it in his “Monetary Theory and The Trade Cycle,” explaining that banks, competing with each other for loan business, are obligated to expand in concert for competitive reasons.
But, what about the Bank of Amsterdam? Before it succumbed to the temptations of fractional reserve, how did it survive? Fractional Reserve banking existed at that time too. Have there been any Austrian, or libertarian analysis with regard to how that bank competed in Europe? I’d be curious to read about it.
Oh no! A threat!
The argument isn’t weak. You can’t refute it.
I’m with you 100% of the way so far.
Yes you can. We’re not talking about the theoretical world of what we want. We have to live in the real world. In the real world, the state has majority participation and an army of clown soldiers armed to the teeth. That’s reality.
I see others have replied while I was writing this.
FDIC changes everything. FRB can exist in a free market, but it is an insolvent model, and is susceptible to runs. FDIC or deposit insurance (as we have in Canada) mitigates the risk of lost deposits in runs, in a sense, making sure the depositor/gambler never loses.
Right, it is a prisoners dilemma. And the optimal strategy when solved via game theory is betrayal by all parties of the libertarian ideal (much like the Nash equilibrium solution to the Prisoner’s dilemma). But the best ‘mathematical’ choice, or profit driven choice is not the optimal global solution. It is anti-liberty.
We’re saying two different things. You’re saying that profitability is a factor in the success of FRB’s vs. 100% reserve backed banking. I’m saying arguing against ‘implementing 100% reserve banking’ AS A STRATEGY with the argument that one is less profitable than the other, is invalid if your aim is liberty. Because, as the former statement (that you agreed with) states, participating in FRB’s at all is contrary to the goals of liberty. Now it may not be prudent for a person to do this all at once, but surely we can decide on the direction one should take.
ugh, none of things I’m trying to quote are showing up properly.
Question: what we use for currency?
Wizard, the problem is, amongst the other factors already mentioned, the existence of legal tender. Attempts such as the liberty dollar ended up with state confiscation. While there is one currency everyone is forced to use, the prisoner’s dilemma applies, since banks that keep full reserves are sharing in the costs, without sharing in the benefits, of those banks that engage in fractional reserves.
Only with competing currencies and no legal tender will the prisoner’s dilemma be resolved. This is because if a bank or any other entity can issue its own currency in free competition with other currencies, and cannot force consumers to use it, then those banks that use fractional reserves will see depreciation and inflation, while those banks that adhere to full reserves will lure consumers away from the aforementioned banks by providing a currency that does not lose value, and instead ensures stable, or even falling prices. Besides which, the full reserve banks will also be immune from bank runs, but the currency competition factor is I think more important.
I’m not teasing or mocking you, but I believe the same rationale is employed by communists. They would say, when the goal is socialism, profit doesn’t matter. It doesn’t work. People are motivated by profit.
Yes, participating in FRB is anti-liberty. People place their material wealth above their personal freedom. And that might lead us to Hoppe’s class theories.
Gresham’s law is incorrectly stated. It only applies to government fiat money, in which the exchange rate of one money is arbitrarily set above the market value, or exchange value. And other is undervalued relative to its market price. Hence hoarding occurs with respect to the overvalued money whilst everybody is trying to get rid of the currency that is undervalued. This is impossible on the free market.
No, in reality other banks would ask to exchange their notes for your reserves. If you can’t pay you’re liable to be sued. If you do pay you must call in loans, at which point people withdraw their money and you’re left with a bank run.
Why do you think bankers are so keen to get into bed with the government?
Well, I want a free market banking system. Eliminate the FDIC, eliminate the central banking system, replace these institutions with nothing. Why does government control money? Don’t give me that constitution bs. The less control the government has - the better. Just scrap these institutions and allow the free market to pick up the pieces, there’s no need for any central monetary policy.
There already is a Free Market “Bank”, GoldMoney.com.
And there is also digital gold currency, DGC.
Just need to use it.
Your problem is that you don’t know what free banking is.
A 100% reserve bank thats dealing in US dollars would not be a free market bank. It would be just another branch of the system that distributes Federal Reserve notes.
The Liberty Dollar was raided by the FBI. What more proof do you need that using money not approved by the federal government is illegal.
That hiding your gold in your neighbor’s china cabinate is a totally legitimate banking venture.
It was never a viable business.
I think Paypal would argue that with you.
It appears that few people here read your post.
I think this is a good idea.
Is it illegal? Maybe, maybe not. If it is, what’s wrong with some voluntary nonviolent civil disobedience?
And by distributing the reserves (I’m assuming gold and/or silver) among many local individuals and businesses, it becomes more difficult for the state to confiscate them.
Is there risk? Of course! Does that mean we shouldn’t attempt it? Isn’t fighting for your freedom always risky? Isn’t entrepreneurship always risky? Heck, isn’t using FRN’s risky? Of course the degree of risk individuals recognize and are willing to bare varies.
Isn’t our current banking/monetary system is the main source of power for the state? I think so, but maybe I’m wrong on that. But if it is, and if we work around that system and build up our own banking/monetary systems, wouldn’t that begin to eat away at the source of the government’s power?
Now I don’t know much about RipplePay and how well it meets the needs of a hard-money currency/banking system, but if software development is needed, I’d be willing to help out.
Will the idea work? I think it can work. I think it’s a matter of individuals choosing to make it work. It comes down to real action. I’d be willing to participate in a local, decentralized, metal backed currency and banking system. If I had the resources that it would take to keep some of the metals secure, I’d participate in holding some reserves, too.
A few local currencies pose little threat to the FRN and the Federal Reserve cartel, and therefore they would have little incentive to stop it (there are actually quite a few local currencies around the U.S., though I don’t know if any are backed by gold or silver). Larger, more popular ones, such as the Liberty Dollar, have been raided by the Feds. I’m unaware of any local currencies that have had problems with the Feds, but I have not researched this.
This reminds me of the quote:
“In the beginning of a change, the patriot is a scarce man, brave, hated, and scorned. When his cause succeeds however, the timid join him, for then it costs nothing to be a patriot.” - Mark Twain
I skimmed a lot of this, but it looks like everyone is wrong in my opinion.
One problem is simply legal, dealing with contract enforcement, which is required for large-scale business.
But another is simply about power. The US government has a lot of power, in certain aspects of society. It would probably have a very difficult time shaking down countless individuals, trying to confiscate their gold or any other such measure. On the other hand, they can destroy capital especially easily - look at how quick we destroyed pretty much Iraq’s entire infrastructure.
What you effectively want is not simply a banking system; it’s a revolution. You are talking about having the power to challenge the US government, not in court, but on a battlefield. You would be required to enforce the contracts and preserve private property rights, not simply against random criminals but against the government.
Otherwise, essential producers will not demand your currency, and will not sell their mass-produced products to the public in exchange for your currency.