We’re just bored by your lies and strawmen.
Where does it say it is a bailment?
““If I deposit money into a bank, in a savings accout, that gains average interest, with the stipulation that I may remove my money at any time, have I agreed to make my money inaccessible?””
a communicated and understood amount of money would probobly be more accurate since the fed notes are fungible in nature.
i_f i understand the deposit scheme correctly_ (and if its true to begin with) the 10 percent reserve ratio for banks with (i dont even know is they use the term demand on accounts anymore) deposit accounts…i guess the bank is holding 10 percent of the account-balance in a physical amount of paper(dollar) and coin money ( in cash drawers and a vault i assume)…the remaining 90 percent of account-balance money is (hoped for repayment) dollar-credit of the loan made by the bank from the deposit. i dont know if there is a difference if it is a check or physical cash deposit
is this correct?
what does a bank have to do satisfy cash demands beyond the 10 percent (or wahtever hypothetical reserve ratio) if numerous depositors demand physical cash not held with a bank company?
ask a few other banks for physical cash and hope for the best?
go to a governement agency and ask for a insta-print of the amount of cash necessary to meet customer demand?
sell imported brass railings in the main branch on ebay for some quick cash to satisfy demand?
have talented tellers to desk dances charging cash admission for cash raising?
i am not sure. i guess if one knows that the bank cannot meet all cash demands its up to the individual whether to let the bank loan out (a lot of) their deposited cash in order to spend bank-cash-credit with a check or debi-carrd.
i have just called it an operational falsehood because what ones account balance (the amount of cash and credi-cash?) says in “$” terms is not what the bank actually has…unless the symbol “$” means a little bit of cash on hand but not all on demand.
i wish they would say that on deposit contracts.
clarificati0n appreciated
More legal positivism? Didn’t you learn your lesson about that already?
That is what happens…
Max, two points:
- Austrians don’t wish to do anything, Austrian economics is strictly value free. Perhaps Rothbardian libertarians wish to prohibit FRB, but Austrian economists qua economists don’t advocate anything.
- Not all Austrians do wish to prohibit FRB. I wouldn’t call myself an Austrian economist (not yet at least) but I do adhere largely to the teachings of the Austrian school, and I am pro - FRB. Similarly, Horwitz, Garrison, White and Selgin may all be considered Austrians and yet all of them have written pro - FRB articles and books.
What? No. How can you consider yourself and Austrian and be pro FRB? The creation of fiduciary media, and the suppression of the market rate of interest below the natural rate is what creates the boom-bust cycle. The only way to stop this cycle would be to stop FRB.
It’s pretty obvious that the author of this post isn’t looking for an answer, but rather a fight.
Go out and educate yourself to find the answer!
FRB isn’t quite the same without legal tender laws and central banks propping it up…
I’ve read far more of the literature that argues against both the legitimacy and viability of FRB than I have of the literature that is in favour of FRB. That said, Steven Horwitz makes a very compelling argument for FRB. The problem with your argument is that you assume FRB does indeed push the market rate of interest below the natural rate. My problem with 100% reserve banking is that in reality demand deposits do represent goods that are foregone, in spite of this, these goods cannot be used in investment by entrepreneurs. This causes a host of problem, to begin with this puts a downward pressure on prices and an upward pressure on interest rates. Causing the structure of production to be artificially shortened and the relative price structure to be distorted due to the different rigidities of various prices.
I think what most people who argue against FRB miss is that the loan market is the market for time in the form of money. As long as demand for and supply of money are in equilbrium so will ex post saving and investment.
evidence? sources? argument?
legitimate practices cause credit to be its true cost rather than praxeologically unsound/illegitimate practices that are ‘easy money’ ? and this is bad?
i think you are rather assuming that naturally credit should be easy and super low cost, and to help with legitimate bank practices that artifically scarcifies it. but thats nonsense. doing what is just, and making logically possible(i.e.non-contradictary) contracts is not making things artifical or scarce, any more than the institution of private property artificially scarceness the unbound artificial resources that the society of man could otherwise enjoy (and other socialist nonsense)
frb is about confusing the loan ‘market’ with the hoarding/warehousing ‘market’
A demand deposit is a bailment because the bank warehouses other people’s money. If it was a loan, it couldn’t be demanded.
jon you don’t understand, its a bailmentloan! all the gamblebanks are doing it…
wooooooooooooot
throw out the law of non-contradiction and FRB can be your best friend.
Just about all people who argue against FRB maintain that hoarding cash is not a form of saving. Now, whilst in praxeological sense hoarding is not considered saving, it most certainly does represent goods foregone.
Now, I’d argue that what you call “legitimate practises” entirely ignore the demand side in regards to the money market and focus exclusively on the supply side. Here’s the thing, if there is a sudden increase in the demand for money without a consequent increase in the supply of money, this will cause the market rate of interest to rise as people take more loans. The problem with this is that it artificially shortens the structure of production and causes a number of distortions in the allocation of real resources as a result of monetary rigidities.
Stop moralizing. I’m not assuming anything, I don’t come down firmly on either side of this debate. Before I read the Horwitz piece I was anti - FRB, now I’m probably in favour of fractional reserve banking. As for the notion of “just” and “logically possible” contracts, at the end of the day your argument boils down to the point that banks practising fractional reserves should call their bank notes lottery tickets instead of bank notes. Also, I don’t see how those arguing against fractional reserves can accomodate callable loans and other such financial instruments that play a huge role in modern financial markerts.
how much attention would you like me to give to this? can I cut to the chase and ask you if you are wanting to say that savings->investments is a false and broken paradigm which should really be savings and other stuff that are not savings->investment
money is a good. when i dont spend money, i can enjoy having the money ‘at hand’, am i foregoing having money at hand? no i am not.
you havent even mentioned prices for other goods. prices could be bid down as people try to hold on to their cash and spend less, and the purchasing power of money would increase
i mentioned nature and i was accused of moralising, yet you mention artifical and you are not moralizing. theres our H word again.
So what? That’s why there are also time deposits. Bemoaning the lack of use of demand deposits borders on Keynesian “WE MUST ALL SPEND EVERYTHING AND THEN SOME”.
No, the two are not the same thing. Keynesian economics ignores the central economic issue of scarcity, what I’m arguing that is 100% reserves cause poor allocations of economy’s scarce resources. Since demand deposits represent goods not bought, goods that could be bought if the money was lent out.
I wondering if there is a viable argumentative difference between loans lent using, for example, an (1) investment firm thus money that is the investment firms compared to loans lent using somebody else’s money aka (2) bank?
1- using money already in circulation and money that is their money doesn’t devalue purchasing power and secondly risk will be looked at more closely
2- making more money that is not circulation already is devaluing purchasing power and secondly risk is not looked at closely
I don’t really understand what you’re saying to be honest, it might help if you learned to construct a coherent sentence. What I’m saying is that the very act of holding money represents goods foregone, what isn’t to understand? IOW, the goods that could have been bought with a particular amount of money represent the opportunity cost of holding the money.
What? I don’t know what point you’re trying to make. It seems as if you’re attempted to say is that acquiring a good does not entail an opportunity cost of itself. In which case, I suppose, the only answer is “obviously”. You’re ignoring the obvious fact that in an advanced economy, money isn’t simply “a good”, it is a good that connects every single market and changes in the price will have effects felt throughout the economy.
Your assuming perfectly flexible prices and wages, which simply does not occur in the real world. It may well be that in the long run the economy will adjust to the new demand for money. In the meantime, however, the structure of relative prices will be altered and the cost of various goods will not represent their value. Moreover, it is entirely plausible that in the short run the increased demand for cash will translate into an increased price of loanable funds, which will cause the structure of production to be shortened, meaning, the intertemporal allocation of resources will not match the pattern of the intertemporal wants of consumers.
No, you were accused of moralizing because you used words such as “just”, which are words that are not compatible with value freedom. The word “artificial” in this context is perfectly legitimate, since it merely means that the government has caused an allocatio of resources that is not the same as that which would have occured on an entirely free market.