Right in theory but are you sure that term deposits are really locked like bond. Rothbard wrote that in 30s its term deposits were demanded during bank runs and bank themselves did not consider them truly term. Savings account had formal 1 month notice but again banks paid on demad. In my country all types of bank deposits are demandable according to civil law. The only penalty is loss of interest. Russia recently tried to legally ban early withdrawal of term deposits but failed due to central bank resistance.
I am not surprised. Freedom of contract was always such a burden.
Deposit types: The rules on paper do not apply when it is different in practice. As prices arise from the values individuals place on things, and the “How much money do you have” question calls into examination bank account numbers, it affects the final value you’re willing to pay. The FACT that CD deposits have higher interest rates than checking accounts demonstrates clearly that there IS a difference.
The ambiguous use of the word bank is a problem here. Some are arguing “IS” in an “OUGHT” discussion. Let’s clean it up - Deposit Banking and Loan Banking. If my 10 friends, after accumulating savings, wished to pool some funds and start a “Loan Bank”, we could do so. We would not consider funds loaned out as part of our own money, it would not influence our valuation of prices. Reserve requirement would be absurd because reserve requirement merely satisfies the possibility of one of us wanting out of the bank.. and the Bank association, we assume, is contractual.
Juan,
Could you give me your opinion on this? My belief is that the mere act of FRB whether it be voluntary or not is fraud because it is essentially counterfeiting. FRB loans out money which does not really even exist. The people then buy goods and services that do exist with this phony money. Is it not similar to me paying for a new Suit with a 1 oz. gold coin that is no really gold at all but is just an inferior metal, say aluminum with some gold finish on it. Wouldn’t I be defrauding the Tailor in the same manor that a recipient of FRB money would? Because I was paying for something with money that wasnt real money. It is just a counterfeit.
A question is why would people save money, when inflation will rob them of their value?
and so, if their is no powerful motivation o savings, then individual investments is the only counter to FRB.
There was a recent Bank run too… it was stopped by the Goverment.
