I don’t remember exactly but I heardsuch numbers from Jeff Hummel and Larry White.
TO COUNTERFEIT, criminal law. To make something false, in the semblance of that which is true; it always implies a fraudulent intent. Vide Vin. Ab. h. t. Forgery. (Bouvier’s Law Dictionary, 1856)
Is there fraudulent intent by producing more on demand certificates then one has the ability to pay?
Is the amount of certificates in the semblance of the amount of true amount of deposits on hand?
For sake of argument and so we can better understand each other, please make up a contract as an example to reference what you are speaking of. I’m not sure we are talking the same things here. Thanks. [:)]
A contract to do the impossible is ipso facto invalid. You’re saying it’s OK to contract to have your cake and eat it too, and then blaming the government for allowing the person who ate the cake to not give it up - well, obviously he can’t do that, with or without any government aid; the alternative would be for the bank to go out of business and the customer never to get his money back - from the individual customer’s point of view, that would be worse.
What is impossible? A call loan is impossible? A repurchase agreement is impossible? Why are they invalid?
Money is used for it’s ability to purchase our limited resources, labor, and property. The purchasing power is part of the property. Any loan that would expand the money supply is basically stealing(taking without consent) a fraction of that purchasing power from every other unit of that currency and centralizing it into the loan. Stealing property has never been acceptable in society.
Now I’m still waiting for that example of such a contract you are referring to.
Does that mean gold mining should be illegal? Or converting gold used in electronics or jewellery into gold coins? Those reduce purchasing power too. You are talking about the value of property or some kind of intellectual property. After all purchasing power depends on how others evaluate your offer. That this is nonsense should not even be controversial among libertarians.
You keep claiming that a contract that makes fractional reserve banking possible is somehow impossible, illegal, void. The burden of proof is on you to prove individuals cannot voluntarily agree to such contract, despite the fact that they existed for centuries. An example of a contract that started with fixed term and after expiration became demandable is given in The Rise and Decline of the Medici Bank: 1397-1494. The account document
The problem isn’t even about fractional reserve anymore. It’s about the banks borrowing short-term and lending long-term. When the government stopped subsidizing short-term rates, the system collapsed.
Fractional reserve deposits are just one aspect of this larger dilemma, a deposit being a loan with term 0.
If you and I agree together on a contract but that contract involves stealing from everyone else, then it is illegal. Unless you have the consent with everyone else actually contributing their own money to that loan and not caring that the bank keeps the interest, then it is illegal.
So suppose that the contract between the lending institution and the debtor is such that the debtor is aware that the warehouse receipt they are receiving is not 100% backed by money. And then they go and spend that receipt as though it were. That’s fraud. Unless they let the next party to hold it know that this receipt truly isn’t backed 100% and let them know how much it is backed by, and everyone who is enticed to use that receipt in exchanges are made aware of such, then those who knowledgeably used it in commerce without disclosing that the receipt was only partly backed: they are guilty of fraud and stealing property through fraud.
The affects on the economy is NOT what makes it illegal. The damage is only the result of injustice. A tornado happens and does damage to someone’s house, but that doesn’t make it injustice. What makes something injustice is when a human is violating the person, property, or liberties of others.
Me taking my gold necklace and having it minted into coin is not injustice. It was my own property that was being used in the process. That’s not injustice just like someone planting corn will inevitably raise the supply and bring down the price of all other corn. Those affects are not the result of injustice.
But if I promised something that I did not possess, then that is fraud. If I gave something I did not have, that is fraud. If I took fool’s gold and tried to pass it off as real, that is fraud. If I made a warehouse receipt for corn and tried to sell it to you, but when you went to the warehouse there was no such corn there, or only a fraction of the amount on the receipt that is fraud.
Likewise, if I make a warehouse receipt for money that doesn’t exist, then it is fraud.
These are all forms of violating property through fraud. That is injustice and what we institute government to secure us against.
Historically people have voluntarily agreed together to take someone else’s life too, but does that make murder acceptable just because it has historically occurred?
If it is lending to a debtor then it is NOT a warehouse receipt. If I take a loan then I can go and spend it, there is no need to return same items I was lent.
The next party only has to know that he can redeem the notes as they claim. As long as this happens there is no fraud.
Of course I can promise something I do not possess. When I take a loan I do not possess the interest I eventually have to pay, but it is not fraud.
Of course. But actually can someone sell warehouse receipt itself at all? I mean who is supposed to pay the warehousing fee and when?
Naturally, but we are not talking about warehouse receipts.
But for them to pay the next party when that party redeems that receipt requires that they take from someone else’s stored money. At that point they have committed injustice against the property of another depositor.
We are talking about warehouse receipts of money. They are claiming to be able to furnish money they do not have. They provide the debtor with a receipt that can be exchanged for money. What is being warehoused is totally irrelevant. Whether it be corn, computers, or money: it is an object stored that is expected to be stored on your behalf, and not given to someone else.
Of course you can exchange a warehouse receipt for money or anything really. That’s up to the person exchanging it and receiving it at what value. The warehouse fee is totally irrelevant.
A receipt for something is far different then a promissory note. When making exchanges the party accepting the fraudulent receipt makes the exchange under the belief that the receipt is instantly redeemable for the money described. But when it isn’t(fraud), and the bank takes someone else’s deposits to cover it(theft), then property has been violated(either through fraud or theft).
So suppose the next party goes to the bank with his receipt and redeems it. Where does the bank get the money to pay for it? The bank must use someone else’s money(property) that is being stored. That is a violation of that person’s property.
Well what do they “loan” you? RECEIPTS FOR MONEY!!! Or maybe they loan you money. But either way, violation of someone’s property is now inevitable if they have loaned that isn’t theirs and which they haven’t been granted permission to loan, or if they create more receipts then they have in deposits to cover.
Often times we can get confused in terms. To better help us understand each other let’s define these terms so we can further identify if there is in fact injustice occurring. If you have a dispute with any of the terms being defined, let’s dispute those each individually or we’ll just keep going around in circles like this.
MONEY. Gold, silver, and some other less precious metals, in the progress of civilization and commerce, have become the common standards of value; in order to avoid the delay and inconvenience of regulating their weight and quality whenever passed, the governments of the civilized world have caused them to be manufactured in certain portions, and marked with a Stamp which attests their value; this is called money. 1 Inst. 207; 1 Hale’s Hist. 188; 1 Pardess. n. 22; Dom. Lois civ. liv. prel. t. 3, s. 2, n. 6.
RECEIPT, contracts. A receipt is an acknowledgment in writing that the party giving the same has received from the person therein named, the money or other thing therein specified.
BANK, com. law. 1. A place for the deposit of money. A warehouse of money.
WAREHOUSE. A place adapted to the reception and storage of goods and merchandise, etc.
I think you’re right. Let’s just look at how the US government oppreses digital gold currency providers and Liberty Dollars on their territory, seizing the gold and the notes. It looks like they do whatever they can to destroy the reputation of such alternatives, alternatives which represent full-reserve banking.
Wrong. Purchasing power is subjective. You do not own or have a right to what others value your property at.
Wrong again. It is fraudulent when the bank’s clientelle have agreed to a full reserve deposit, but If no agreement to full reserves has been made, the bank is free to do as it pleases. Of course that’s an unrealistic scenario since a reserve ratio would likely be included with any account contract.
He’s describing contractual consent in a client bank relationship where the bank is permitted to loan out x% of clients savings and the client can make y% interest on the savings they’ve deposited.
Everyone who uses the bank implicitly contracts to it, everyone who exchanges goods for the banks notes contracts to the use of the banks notes. There is no violation of property. Unless the bank fraudulently prints money where it has said it wouldn’t and then distributes that money as actual refundable credit it has done nothing wrong in inflating it’s own currency and/or setting up it’s accounts with reserve ratios below 100. If you think a certain banks note is worthless don’t trade for it. The fact is, banks with high inflation rates will be beaten by the market.
No, it’s only fraud to exchange something and claim that isn’t the thing you’ve exchanged. For instance, I trade you a priceless painting but it turns out the painting was really a knock off. Counterfeit is only fraud when the notes are exchanged.
Personally, I have no problem with a system that doesn’t run on gold. I’m open to the interpretation that gold isn’t the best system to go by and I would love to see its flaws corrected.
The thing that is, however, the most malicious part of the current system of banking isn’t so much that it is “fractional reserve,” so much as it is the mechanism by which the money supply increases.
In some ways, the system today is not at all fractional reserve. There are such things, for example, as safety deposit boxes, are there not?
Two people having access to the same dollar at the same time is what’s impossible.
I agree. From what I read in Rothbard’s book “Mystery of Banking” a fractional reserve system, while unfavorable, would not be a problem in an unregulated banking industry.
Every time a bank (say Bank A) engaged in fractional reserve lending, and the borrower (a customer of Bank A) spent Bank A’s note to purchase a good or service from a customer of Bank B, the note would be deposited in Bank B, who would redeem it immediately from Bank A. Neither bank would be able to inflate their money supply by very much at all, because their notes would be being called in constantly from other banks. The result surprisingly would be hard money.
The major problems come in when a central bank gets involved. (Of course Rothbard explains it far better - I’m a beginner!).
Of course, all dollar notes are the property of whoever holds them. There is no problem of ownership.
Sounds good in theory, but not necessarily in practice. Historicaly in free banking systems the reserve ratios generally varied from 2 to 20 percent. The freer the more stable the lower the reserve ratios.
Then he could rephrase: two people having access to the same underlying money-good that the money-substitute represents.
-Jon