This is the assetion you are touting but without any proof why a loan must have a strictly fixed term. Which is the issue.
On the one hand, the entire point of taking a loan is to use the money for something. You wouldn’t bother if you were just going to sit on a pile of cash for a while and then return it, right? But if you put it to use, you don’t have it available to return at any instance; only at some time in the future. Therefore it makes no sense to have a loan with zero term. (E.g., say you take out a loan to buy machinery and improve production capacity in your widget factory; a little while later, after the upgrades are paid for out of your loan but before you’ve earned anything from them, the bank suddenly decides it wants its money back - oops; you can’t easily liquidate the new machinery, etc…)
On the other, that’s really not the point anyway; a bank taking “demand” deposits and treating it as a loan is not the same thing as a proper loan, because both parties have (supposed) access to the same money at the same time - if you loan your money to the bank, you don’t have it any more.
How is this inconsistent with anarchism, then? I have the feeling you don’t really know what it is.
-Jon
He appears to be missing the point. He writes ‘Huerta de Soto later declares (pp. 17-18) that “it is impossible to imagine a monetary loan contract without a fixed term”. Loan contracts with prepayment or call options are apparently unknown to his imagination, or for some reason do not qualify as loan contracts.’ but early payment isn’t relevant to HdS’s point (the loan having a fixed term doesn’t preclude early repayment!), and a “callable” loan is never callable on demand - it’s a requirement that the loan be repaid within some time, perhaps as short as 24 hours, but never on the instant; in other words, it’s really a short term loan (e.g., 24 hours, not zero) that continuously rolls over. A demand deposit at a bank bears the requirement for instant payment. A “instant callable” loan would be pointless, because the borrower would have to just sit on the cash in the event that it’s recalled - why borrow money if you’re not going to use it?
Darn, don’t make me read the whole thread [:P]
Have a great time.
I think this is just nitpicking. In practice there is not so much difference between 24 hours and on demand. I mean does the bank reloans and collects the money every 24 hours? If not, there is no real difference. Anyway, calling thing pointless is pointless, because others might have different ideas what business practices make sense.
i suppose that depends on who is defining anarchism. So many different kinds of anarchists out there. [:P] Many only understand justice in terms of the free market. I am saying justice is something that is superior to the free market and originates from the individual.
I haven’t read this yet, but it sounds promising =]
Rights pre-exist and are the necessary precondition for the market. Their enforcement is a good (and certainly not a right), to be handled like any other, on the market, whether in the form of charity or a service sold at a fee. That is all the anarchist claims.
-Jon
Rothbard :
From the beginning, there is one embarrassing and evident fact that Professor White has to cope with: that “free” Scottish banks suspended specie payment when England did, in 1797, and, like England, maintained that suspension until 1821.
White professes to be puzzled at this strange action of the Scottish banks. Why, he asks, did they not “remain tied to specie and let their currency float against the Bank of England note?” His puzzlement would vanish if he acknowledged an evident answer: that Scottish banks were not free, that they were in no position to pay in specie, and that they pyramided credit on top of the Bank of England.6
Professor Checkland, indeed, presents a far more complete and very different account of the suspension crisis. It began, not in 1797, but four years earlier, in the banking panic that struck on the advent of the war with France. Representatives of two leading Scottish banks immediately went to London, pleading for government intervention to bail them out. The British government promptly complied, issuing Treasury bills to “basically sound” banks, of which £400,000 went to Scotland.
Before the Scottish banks suspended payment, all Scottish bank offices were crowded with depositors demanding gold and small-note holders demanding silver in payment. They were treated with contempt and loathing by the bankers, who denounced them as the “lowest and most ignorant classes” of society, presumably for the high crime of wanting their money out of the shaky and inherently bankrupt banking system. Not only the bankers, but even elite merchants from Edinburgh and throughout Scotland complained, in 1764, of “obscure people” demanding cash from the banks, which they then had the effrontery to send to London and profit from the rate of exchange.8
No; it automatically rolls over continuously; when the bank wants the money back it phones the borrower and says “you have 24 hours to return our money”. If you, as a depositor, turn up at the bank and say to the teller “I’d like to withdraw $100 from my account”, the teller immediately hands you $100, s/he doesn’t say “OK; come back tomorrow and it’ll be here”. That’s the difference between 24 hours and on demand.
Interesting… learn something new everyday. I’ve only run across a few self-proclaimed anarchists so I suppose I was unfair in mis characterizing all anarchists based on those experiences. I do apologize.
I noticed that the NY Fed website linked is an organization website, meaning it has .org and not a government website, like .gov…Though I think a lot of people think the Federal Reserve is a goverment agency, when it is really a hybrid, i.e. a banking cartel
"Is there fraudulent intent by producing more on demand certificates then one has the ability to pay? "
if you are producing more of them (on demand certificates) doesnt that mean you have the ability to pay (in on demand certificates)?
"Which means that money is at the same time loaned and available on demand, but that is a logical and physical impossibility, so FRB is doomed to failure. "
“This is the assetion you are touting but without any proof why a loan must have a strictly fixed term. Which is the issue.”
sure…anyone could loan someone money with a pay back at your leisure term.
i am not sure here…is there a difference if i look at it this way . i have just earned $100. i place my $100 dollars in the DD account. the bank loans $90 to someone. $10 of what i deposited still resides with the bank but i have $100 of spending ability at my demand?? (based on a 10 percent ratio of course) my statement says so.
$10 dollars for sure (maybe sitting in front of the teller in a cash drawer)…, and also $90 of spendable ‘stuff’ that is likely someone elses $10 residing with the bank and maybe $20 they can quickly grab from the VP’s wallet (to satisfy my demand) super fast. then they sell the wall clock the on ebay that was hanging at the local branch for a quick $30. and another $10 from a guy who just made a payemnt on his credit card. ok..demand satisfied…but if 100 people do this an uberbank will make up similar looking pieces of paper or spendable ‘stuff’ pretty close to when demanded to top off all the accounts - all the while my bank statement never changes.
first…did i describe something incorrect as far as money being loaned and available on demand in the process i describe above.
second…is " money “at the same time loaned and available on demand” really an impossibility?
or does the uberbank step in enough to constantly un-failure the banks?
thanks for any clarification