Fractional Reserve and Property Rights

[Maxliberty]

@Knight_of_BAAWA

@Maxliberty

The bank takes in 1000 ounces and issues a 1000 notes.

False analogy. The banknotes are NOT loans.

I didn’t make an analogy. I provided a contract. I can understand why your unwilling to address it though, because it blows your whole arguement out of the water. So you are better offer pretending I am talking about something else.

[Maxliberty]

@nirgrahamUK

yes, shopkeepers should be allowed to accept mere promises, so long as these arent confused with real assets (i.e. real enforceable contract) when they are offered.you have made it clear that the notes are not receipts for real assets in storage.

How is the contract I described not enforceable? So what you are saying is that the contract is valid and this form of banking is acceptable. Is that right?

[Maxliberty]

@Juan

@MaxLiberty

@Juan

Let’s say that 1000 ounces are deposited and 900 ounces lent out - the bank keeps 100 ounces as ‘reserve’ and issues tickets for 900 ounces. Can those tickets be ‘spent’ right now ?

The bank takes in 1000 ounces and issues a 1000 notes. The bank then is responsible for its asset mix. Is that fraud? Please answer that question.

1. you are not answering my question. I might answer yours if you first answer mine.

2. I’m trying to establish whether your bank operations turn 1000 ounces of gold spendable now into 1000 ounces of gold spendable now PLUS tickets ‘supposedly’ worth 900 additional ounces which can also be spent now.

That is :

Before banking enters the picture we have :
1000 units of gold money

After banking :
we have 1000 units of gold money + 900 units of tickets which are as good as gold ?

Lets see, we have 1000 ounces of gold turned in for 1000 bank notes. The bank can now convert this gold into other assets, ie loan the gold to other people in exchange for financial assets like loan contracts. Does that answer your question? Now your turn.

[Maxliberty]

@Daniel

@Maxliberty

@Daniel

@Maxliberty

Giles,

Here is a couple of points for you:

Either FRB is fraud or it is not. If it’s not then there is no point in discussing it because it is just people acting in the free market. If it is then we need to ask the Anti-FRB group what exactly is the fraud?

The Anti-FRB response is that its fraud because the bank says they are holding the money for you and you can have it at any time with no restrictions but secretly wihtout your knowledge or permission the bank is loaning the money out and only holding a portion of the redeemable item. If the bank was doing this I think we can all agree it would be fraud.

Of course the banks do not do this, in fact the contracts they have with customers come with all kinds of restrictions about the nature of the relationship with the bank and the circumstances under which a depositor may have their funds. The Anti-FRB/Anti-freedom crowd says that these contracts are contradictory. When asked to explain how, they can only say it is a square circle and can not address the actual contracts. As you rightly pointed out the idea of a callable loan becomes fraud if we were to accept their definitions. The idea of a mixed commodity bank becomes fraud because the conversion of an asset to meet redemptions is considered fraud by the Anti-freedom crowd.

I am not pro-FRB just pro freedom.

Just because something is not fraud, it does not follow that it is compatible with the free market. Austrian economiist cannot make value judgements; however, libertarians can. Instead, Austrian economists simply explain what would happen during FRB, not should FRB be allowed. Furthermore, there are those Austro-libertarians who do make value judgements; that is, not only do they explain what would happen during FRB, but they also maintain that FRB should not be allowed.

With regard to FRB itself, how can two people each have 100% rights to the same specific object? Liberterians are anti-FRB because there is a contradiction of rights; right cannot conflict.

Explain how the contract I describe is a violation of someone’s rights? By making the deposit you accept certain risks and restrictions on the gold you deposited.

Why? I didn’t say your proposed contract was a violation of rights. What I did say was that FRB is a contradiction of rights. Anyway, the contract you propose doesn’t seem to be FRB.

Doesn’t the contract create a fractional reserve bank? That is to say the bank is only holding a fraction of some of the redeemable reserves or possibly even zero of a particular redeemable reserve.

[nirgrahamUK]

well you are consistently ambigious about your ‘contracts’. i suppose its hard for someone who is not capable of clearly stating their position to state their position, but it does make it hard for me to agree or disagree with you.

it seems you are on a fork though.

either these notes are mere promises, not enforceable, certainly it is not unlibertarian for people to whisper sweet nothings to each other, as such your proposals would be legitimate, but marginalised, in a word ‘ridiculous’. This is the angle you seem to have been pushing the most lately.

on the other hand, if these notes are real assets you will have to put in the effort to describing how they can be debased, how they can only be good for a fraction of what they claim to be the full amount of. i.e. how they can be less than what they are, how they can have two seperate total-owners, how they can be square circles.

[DanielMuffinburg]

@Maxliberty

@Daniel

@Maxliberty

@Daniel

@Maxliberty

Giles,

Here is a couple of points for you:

Either FRB is fraud or it is not. If it’s not then there is no point in discussing it because it is just people acting in the free market. If it is then we need to ask the Anti-FRB group what exactly is the fraud?

The Anti-FRB response is that its fraud because the bank says they are holding the money for you and you can have it at any time with no restrictions but secretly wihtout your knowledge or permission the bank is loaning the money out and only holding a portion of the redeemable item. If the bank was doing this I think we can all agree it would be fraud.

Of course the banks do not do this, in fact the contracts they have with customers come with all kinds of restrictions about the nature of the relationship with the bank and the circumstances under which a depositor may have their funds. The Anti-FRB/Anti-freedom crowd says that these contracts are contradictory. When asked to explain how, they can only say it is a square circle and can not address the actual contracts. As you rightly pointed out the idea of a callable loan becomes fraud if we were to accept their definitions. The idea of a mixed commodity bank becomes fraud because the conversion of an asset to meet redemptions is considered fraud by the Anti-freedom crowd.

I am not pro-FRB just pro freedom.

Just because something is not fraud, it does not follow that it is compatible with the free market. Austrian economiist cannot make value judgements; however, libertarians can. Instead, Austrian economists simply explain what would happen during FRB, not should FRB be allowed. Furthermore, there are those Austro-libertarians who do make value judgements; that is, not only do they explain what would happen during FRB, but they also maintain that FRB should not be allowed.

With regard to FRB itself, how can two people each have 100% rights to the same specific object? Liberterians are anti-FRB because there is a contradiction of rights; right cannot conflict.

Explain how the contract I describe is a violation of someone’s rights? By making the deposit you accept certain risks and restrictions on the gold you deposited.

Why? I didn’t say your proposed contract was a violation of rights. What I did say was that FRB is a contradiction of rights. Anyway, the contract you propose doesn’t seem to be FRB.

Doesn’t the contract create a fractional reserve bank? That is to say the bank is only holding a fraction of some of the redeemable reserves or possibly even zero of a particular redeemable reserve.

Please link me to the post where you succinctly describe your contract.

[Maxliberty]

@nirgrahamUK

well you are consistently ambigious about your ‘contracts’. i suppose its hard for someone who is not capable of clearly stating their position to state their position, but it does make it hard for me to agree or disagree with you.

it seems you are on a fork though.

either these notes are mere promises, not enforceable, certainly it is not unlibertarian for people to whisper sweet nothings to each other, as such your proposals would be legitimate, but marginalised, in a word ‘ridiculous’. This is the angle you seem to have been pushing the most lately.

on the other hand, if these notes are real assets you will have to put in the effort to describing how they can be debased, how they can only be good for a fraction of what they claim to be the full amount of. i.e. how they can be less than what they are, how they can have two seperate total-owners, how they can be square circles.

All contracts are just promises to do things. Perhaps you don’t understand what a contract is. Who says the notes are being debased? How is there more than one owner of the note? How are they only worth a fraction of what the claim? Are these just last minute desperation attempts on your part? From the contract provided you have zero evidence about any of those claims you just made.

Simple questions that you will be unable to answer I am sure, because like baawa to admit the obvious destroys your arguement.

[Maxliberty]

@Daniel

@Maxliberty

@Daniel

@Maxliberty

@Daniel

@Maxliberty

Giles,

Here is a couple of points for you:

Either FRB is fraud or it is not. If it’s not then there is no point in discussing it because it is just people acting in the free market. If it is then we need to ask the Anti-FRB group what exactly is the fraud?

The Anti-FRB response is that its fraud because the bank says they are holding the money for you and you can have it at any time with no restrictions but secretly wihtout your knowledge or permission the bank is loaning the money out and only holding a portion of the redeemable item. If the bank was doing this I think we can all agree it would be fraud.

Of course the banks do not do this, in fact the contracts they have with customers come with all kinds of restrictions about the nature of the relationship with the bank and the circumstances under which a depositor may have their funds. The Anti-FRB/Anti-freedom crowd says that these contracts are contradictory. When asked to explain how, they can only say it is a square circle and can not address the actual contracts. As you rightly pointed out the idea of a callable loan becomes fraud if we were to accept their definitions. The idea of a mixed commodity bank becomes fraud because the conversion of an asset to meet redemptions is considered fraud by the Anti-freedom crowd.

I am not pro-FRB just pro freedom.

Just because something is not fraud, it does not follow that it is compatible with the free market. Austrian economiist cannot make value judgements; however, libertarians can. Instead, Austrian economists simply explain what would happen during FRB, not should FRB be allowed. Furthermore, there are those Austro-libertarians who do make value judgements; that is, not only do they explain what would happen during FRB, but they also maintain that FRB should not be allowed.

With regard to FRB itself, how can two people each have 100% rights to the same specific object? Liberterians are anti-FRB because there is a contradiction of rights; right cannot conflict.

Explain how the contract I describe is a violation of someone’s rights? By making the deposit you accept certain risks and restrictions on the gold you deposited.

Why? I didn’t say your proposed contract was a violation of rights. What I did say was that FRB is a contradiction of rights. Anyway, the contract you propose doesn’t seem to be FRB.

Doesn’t the contract create a fractional reserve bank? That is to say the bank is only holding a fraction of some of the redeemable reserves or possibly even zero of a particular redeemable reserve.

Please link me to the post where you succinctly describe your contract.

Here is the contract.

You deposit your 1 oz of gold in the freedom bank. The bank contract says you will receive 1 bank note that can be redeemed for one oz of gold or the equivalent amount of ounces of silver based on the current days prices. The contract also says that in the event that the note holder requests redemption and there are not sufficient either gold or silver reserves to meet immediate demand then the note holder agrees to give the bank up to 60 days to meet the demand request. The contract also states that the bank is not obligated to hold any particular mix of assets backing the bank notes and that there is some risk that the assets the bank may hold may be inadequate to meet all demand requests and that the depositor accepts this risk.

Is that fraud?

[nirgrahamUK]

you dont know the first thing about the (Rothbardian) Title transfer theory of contract, do you? you have admitted as much…, not knowing the difference between contracts and mere-promises is seriously going to hold you back from being a capable liberarian, even outside of FRB issues.

[Maxliberty]

@nirgrahamUK

you dont know the first thing about the (Rothbardian) Title transfer theory of contract, do you? you have admitted as much…, not knowing the difference between contracts and mere-promises is seriously going to hold you back from being a capable liberarian, even outside of FRB issues.

About the answer I expected from you, that is to say a non-answer. I don’t think I am being held back by anything. So I guess this is your surrender moment where you run off pouting and screaming “but Rothbard said…”. Try thinking for yourself for a change. This is where all FRB debates end with the anti-freedom group like yourself. Unable to answer simple questions you either begin name calling or stop responding. I won’t wait for an answer to the contract question.

[nirgrahamUK]

method for detecting whether what you describe is an enforceable contract :

has what you described transferred property titles between parties

Yes - It is a contract. further analyses can proceed as to whether it is a valid contract.

No - It is not a contract, if anything it is a mere promise, further analysis on the question of contractual validity would be a nonsense.

My prediction : You are going to be tempted to say Yes, and then you are going to struggle as to explain what property titles are transferred.

[DanielMuffinburg]

@Maxliberty

@Daniel

@Maxliberty

@Daniel

@Maxliberty

@Daniel

@Maxliberty

Giles,

Here is a couple of points for you:

Either FRB is fraud or it is not. If it’s not then there is no point in discussing it because it is just people acting in the free market. If it is then we need to ask the Anti-FRB group what exactly is the fraud?

The Anti-FRB response is that its fraud because the bank says they are holding the money for you and you can have it at any time with no restrictions but secretly wihtout your knowledge or permission the bank is loaning the money out and only holding a portion of the redeemable item. If the bank was doing this I think we can all agree it would be fraud.

Of course the banks do not do this, in fact the contracts they have with customers come with all kinds of restrictions about the nature of the relationship with the bank and the circumstances under which a depositor may have their funds. The Anti-FRB/Anti-freedom crowd says that these contracts are contradictory. When asked to explain how, they can only say it is a square circle and can not address the actual contracts. As you rightly pointed out the idea of a callable loan becomes fraud if we were to accept their definitions. The idea of a mixed commodity bank becomes fraud because the conversion of an asset to meet redemptions is considered fraud by the Anti-freedom crowd.

I am not pro-FRB just pro freedom.

Just because something is not fraud, it does not follow that it is compatible with the free market. Austrian economiist cannot make value judgements; however, libertarians can. Instead, Austrian economists simply explain what would happen during FRB, not should FRB be allowed. Furthermore, there are those Austro-libertarians who do make value judgements; that is, not only do they explain what would happen during FRB, but they also maintain that FRB should not be allowed.

With regard to FRB itself, how can two people each have 100% rights to the same specific object? Liberterians are anti-FRB because there is a contradiction of rights; right cannot conflict.

Explain how the contract I describe is a violation of someone’s rights? By making the deposit you accept certain risks and restrictions on the gold you deposited.

Why? I didn’t say your proposed contract was a violation of rights. What I did say was that FRB is a contradiction of rights. Anyway, the contract you propose doesn’t seem to be FRB.

Doesn’t the contract create a fractional reserve bank? That is to say the bank is only holding a fraction of some of the redeemable reserves or possibly even zero of a particular redeemable reserve.

Please link me to the post where you succinctly describe your contract.

Here is the contract.

You deposit your 1 oz of gold in the freedom bank. The bank contract says you will receive 1 bank note that can be redeemed for one oz of gold or the equivalent amount of ounces of silver based on the current days prices. The contract also says that in the event that the note holder requests redemption and there are not sufficient either gold or silver reserves to meet immediate demand then the note holder agrees to give the bank up to 60 days to meet the demand request. The contract also states that the bank is not obligated to hold any particular mix of assets backing the bank notes and that there is some risk that the assets the bank may hold may be inadequate to meet all demand requests and that the depositor accepts this risk.

Is that fraud?

It’s not FRB. It’s not fraud. It’s not a bank I would ever put anything into. However, it does entail just about the stupidest business plan for a bank evarr!

Why would the bank ever bother to have the gold (or whatever) ready for deman? Why woulnd’t it just keep it for those extra sixty day? What would the motto for this bank be, “Give us your money and we will give it back to you whenever you want, unless we decide not to”?

[Knight_of_BAAWA]

@Maxliberty

I didn’t make an analogy.

Yes, you did. I know that you wish to pretend that you didn’t, because your false analogy has been noted and blown out of the water, but that’s YOUR problem, Max. It’s time you started taking responsibility for your problems.

[Juan]

@MaxLiberty

Lets see, we have 1000 ounces of gold turned in for 1000 bank notes. The bank can now convert this gold into other assets, ie loan the gold to other people in exchange for financial assets like loan contracts. Does that answer your question? Now your turn.

No it doesn’t. I want to know if the bank notes will be used as money at the same time that the original gold deposited (but lent) will be used. I know that people who borrow gold money from the bank will spend it. I want to know if the depositors who got bank notes in exchange for their gold can also spend their bank notes directly, or they need to exchange them for gold before trying to use them ?

I can’t say if your system is a fraud or not until you fully explain how it works.

[Knight_of_BAAWA]

@Maxliberty

Lets see, we have 1000 ounces of gold turned in for 1000 bank notes. The bank can now convert this gold into other assets

No, because the banknotes are simply notes to give the gold on demand. They are warehouse receipts.

[scineram]

@Juan

I want to know if the bank notes will be used as money at the same time that the original gold deposited (but lent) will be used. I know that people who borrow gold money from the bank will spend it. I want to know if the depositors who got bank notes in exchange for their gold can also spend their bank notes directly, or they need to exchange them for gold before trying to use them ?

Why couldn’t they? If the seller accepts them.

[Harry_Felker]

@scineram

Why couldn’t they? If the seller accepts them.

I am sorry for interrupting, but I got a question…

Lets say Jim deposits 1000 units of gold in the Bank of Scineram, and gets 1000 bank notes, then spends 1000 bank notes at Bob’s General Store, now lets say the Bank of Scineram uses the gold Jim deposits on other assets (loans) in order to create wealth, (you know profitting)…

Let’s say Bob’s supplier only accepts Gold, and when Bob goes to the Bank of Scineram, what happens when Bob wants the gold?

Bob has no contract with the bank, so there is no implication that he should know better than to try to retrieve the gold, is the gold of Jim to be in two places at once?

[Maxliberty]

@Harry Felker

@scineram

Why couldn’t they? If the seller accepts them.

I am sorry for interrupting, but I got a question…

Lets say Jim deposits 1000 units of gold in the Bank of Scineram, and gets 1000 bank notes, then spends 1000 bank notes at Bob’s General Store, now lets say the Bank of Scineram uses the gold Jim deposits on other assets (loans) in order to create wealth, (you know profitting)…

Let’s say Bob’s supplier only accepts Gold, and when Bob goes to the Bank of Scineram, what happens when Bob wants the gold?

Bob has no contract with the bank, so there is no implication that he should know better than to try to retrieve the gold, is the gold of Jim to be in two places at once?

It says right on the bank note that this note is from the Bank of Scineram and can be redeemed based on the terms and conditions of the Bank of Scineram…please go to the Bank of Scineram website for further details.

Are you suggesting the shopkeeper would accept the money and have no idea what the likelihood of redemption is?

[Maxliberty]

@Knight_of_BAAWA

@Maxliberty

I didn’t make an analogy.

Yes, you did. I know that you wish to pretend that you didn’t, because your false analogy has been noted and blown out of the water, but that’s YOUR problem, Max. It’s time you started taking responsibility for your problems.

I know its tough being constantly trounced in debates with me. Maybe ask your parents for an increase in your allowance that should make you feel better.

[Maxliberty]

@Knight_of_BAAWA

@Maxliberty

Lets see, we have 1000 ounces of gold turned in for 1000 bank notes. The bank can now convert this gold into other assets

No, because the banknotes are simply notes to give the gold on demand. They are warehouse receipts.

Making things up again, the bank notes say nothing of the sort.