Ok. So PROVE that issuance of a banknote IS ALWAYS IDENTICAL TO FRB. Prove it now. Further, provide the paper where Block says there is no logical difference between demand and time deposits. Then prove that there is no logical difference, because quite clearly there is a logical and functional difference.
Your anti-freedom position makes me laugh. And yes: I will just call your position anti-freedom now. It will be so much fun to watch you whine.
What has a silly paragraph made up by you got to do with basic economics ?
Your IOUs can’t trade at face value unless they are fully backed by specie - but they are not.
So, your issuing IOUs with a nominal value which is not the real value is fraud…or stupid…or both.
I was asked to post the contract again, which i did.
IOU’s are perfectly capable of being traded at face value. There is no requirement that an IOU be backed specifically by specie in order to trade at face value.
The bank notes are issued with what is bleieved to be their real value. The notes do carry risk like any loan would carry risks of default. I would point out that notes 100% backed by gold carry risk as well, that is that someone will steal the gold making the note worthless.
possibly or maybe something as simple as…“For complete terms and restrictions of this note go to www.whateverbank.com”
The legal issue is explained by Jesús Huerta de Soto in Money, Bank Credit and Economic Cycles. When you put money in a checking deposit the contract is that the bank will safeguard your money, and in return it promises to pay back this money on demand. The only ownership that goes to the bank is the ability to transfer it from vault to vault, to ensure its protection. The only capital that a bank owns is that which it makes itself, off its services, and capital deposited in the bank under a savings account. Usually, in fact, the depositor of a checkings account should pay the bank for its services.
And so, when a bank loans out money from a checking account it is inherently breaking the contract signed with the depositor. It is loaning the money that has to remain in the vaults, because the depositor can take it out on demand. The money has to exist in order to give it back. Banks operate under the assumption that somebody will not come back for their entire stock of capital at any one time, so operate with fractional reserves. Jesús Huerta de Soto explains how this inevitably leads to a collapse in credit due to malinvestments (and also shows how historically banks have failed when they begin operating with fractional reserves).
I think you are overstating the depositor’s knowledge on the contract. For example, the following are unknowns:
Credit expansion leads to malinvestments (the relationship is not known to the majority of people).
How banks work (let alone fraction reserve banking systems).
For the most part, the bank fulfills the contract by opening a brand new account. In other words, let’s say that depositor A leaves $1,000 in the bank. The bank loans out $900 to an investor. Depositor A’s account remains the same, but the bank has to record that it lent out $900, so temporarily (until the loan is theoretically paid back) the bank has $1,900. It doesn’t work quite exactly like this, but the picture is accurate for the sake of the image it is supposed to give. And so, they give the illusion that your money is safe. This backfires when the bank goes under, which it inevitably would.
I don’t think many people actually care, because they assume the system works. Even today, the majority of people do not equate the current economic crisis with fractional reserve banking. When they begin bank runs, they assume that their money is still there, otherwise they would have not gone to withdraw it all.
I didn’t notice the other 20 pages of discussion. Silly me.
Is that what he thinks the law should be? If he’s claiming that it’s actually illegal, then has it ever been enforced?
Block’s presentation recently that was discussed in this forum and the audio was listed on the site discusses the idea that a time deposit could be defined as little as 1 second or 10 seconds or whatever so that is where he tries to explain the problem that the bank has of borrowing short and lending long. A one second time deposit has negligible distinction between an instant demand deposit.
The obvious flaw is the Austrians say time-deposits can be loaned out. So what is a time deposit? How long does a time deposit have to last? What requirements does the bank have in order to repay time deposits? Is the bank required to match dollar for dollar the exact duration of every loan with every time deposit? If you loan $20 dollars to your friend for lunch to be repaid tomorrow is he required to supply you with a detailed plan of how he will pay you back?
Once we establish that you are loaning the money then you bear the risk of default. By functionally eliminating demand deposits with one second time deposits we eliminate all the FRB objections.
Well, the discussion is what should be banned not what you think is better. I propose that the market decide and we not ban this activity because I can see no reason it should be labeled fraud.
The business cycle is caused by two things, humans are naturally optimistic and misinformation. Anything, that increases misinformation which is what the government constantly does encourages the cycles to be longer and more pronounced than needed. Cycles will still exist without government but they will be much shorter and less severe.
I use the example of the gold rush, humans in their optimism all flock in search of gold and the little town turns quickly into a thriving city only to wither once the gold seekers realize their is not nearly enough to support them all and they then move on in search of the next rush. The misinformation is about how much gold there is, this doesn’t require government intervention. Government makes everything worse though because it’s efforts to control things interfere with the normal flow of infomation ie prices.
Absent fraud, no, they are not, because credit is not cash, just like a cow is not a dog or more generally, A is not B.
In your mind.
I’ll translate : We fraudsters strive to float IOUs backed by partial reserves. We claim to ‘believe’ that the ‘real value’ of unbacked paper is no different than the ‘real value’ of gold. Since we claim to ‘believe’ in absurdities, absurdities are not absurdities.
Yes they carry risk, unlike gold money, which can’t default.
Yeah, 100% backed notes, in your mind, carry the same risk as 50% backed notes. That’s why, in your mind, printed paper is no different than gold, or chickens from planes. Well, chickens and planes both fly - they must be the same entity.
You are trying to misrepresent the nature of credit money and pretend it’s no different from cash.
There is a very common expression in US business and that is “30 days same as cash” and what that means is the shop will give you thirty days to pay without any penalty. In essence they are accepting your IOU at face value. Happens all the time.
We discussed this, other things can have value besides gold. So other things can be the backing for bank notes.
i am not misrepresenting anything. It is you and your Gestapo friends who are trying to impose your arbitrary rules on a free society.
LOL. And dollars are backed by the “full faith and credit” of the united states gang. And “in god you trust”.
Keep on obfuscating - but the Fact remains - credit is not cash.
Max, you are an ‘ex-soldier’ ‘ex-murderer’ of the american military - you have ZERO moral authority to call anyone a member of the gestapo - YOU were a member of the gestapo.
Now you are a financial fraudster as well.
Too bad such financial instruments simply are not just as “liquid as commodities” just look at the current housing market.
And being that value is completely subjective, banks will have to liquidate such instruments and then convert them into my originally deposited form… upon my demand.
Please show where I made the assertion that the value of bank commodities would be zero, if you can’t you are just plain lying.
Good luck.
The truth is that they are quite liquid except not at the prices they are trying to sell at. What you implied previously was that when people wanted to redeem their notes that converting other assets would not yield sufficient funds to match redemption and while that is possible it is not a always the case. Imagine the current housing crisis for banks if they had laoned on 50% value of the houses versus100%. In the case where the bank had loaned on 50% value of the house the liquidation would be quite fast and the bank would in general be suffering zero losses. You will always suffer if you loan money to any entity and they make poor decisions with that money. That is not something we need to outlaw.
So its agreed, under FRB, even with a demand deposit the bank can still lose your money. Also “quite liquid” isn’t even in the same ballpark as “redeemable upon demand.”
That is nothing more than an assertion, but it is irrelevant, as creating a demand deposit isn’t the same as a loan!
Agreed, nor should it be institutionalised.
The truth is that you keep on lying.
That’s really nice. However, you didn’t actually provide a link. Further, the very notion of a one-second time deposit strikes me as the ad hoc fallacy.
And when will you prove that the issuance of a banknote is ALWAYS identical to fractional-reserve? Why are you evading that? Is it because your anti-freedom position is also anti-logic?
“I must admit that I’ve never understood the clain (did you mean claim) that two individuals claim the same property under fractional-reserve banking.”
i dont know that anyone ever said that two individuals claim the same property under fractional reserve banking.
i thought the claim was that one is spending a dollar and another is spending a ‘claim’ to that dollar but that are both called a dollar when that are different things.
i did a search on wells fargo, wachovia, and citibank with the term ‘reserves’ and could find nothing at all saying how much cash the bank held for deposit accounts. the websites were very vague and confusing.