If they agreed to wait 60 days, then there’s not a problem; and that’s not an example of fractional reserve banking. The problem is where they didn’t agree to wait 60 days - where the bank agreed to return their money instantly, on demand.
What? They’re lending out demand deposits, but he isn’t paying a fee so it’s somehow not fraud? Pull the other one.
The two are inextricably tied together - the only way the bank can lend money out of a demand deposit is by creating new money, because, by the very definition of demand deposit, the money is simultaneously available to the depositor (even though the bank might not have the cash available, it can still be moved from one account to another - I can buy stuff and pay for it by a book entry moving money from my account to the seller’s account, without ever having to have cash available to the bank)
Same thing is true of wheat. Yet its illegal for a wheat warehouse to have more outstanding claims then they have wheat.
As Mises said: A theft occurs when the item is removed, not when the owner discovers the item is gone.
What you call demand deposit is a loan to the bank. So it is not fraud to relend it.
People are warehousing wheat. They do not loan it to the depository.
I have to disagree. As long as it is deposited by definiton it is not available to you. It cannot be simultaneously available. That would be intellectual property. 
Have you ever actually used a bank?
Every time a society or civilization embarks on a journey down the road called ‘fractional reserve banking’ it has always ended in disaster. There is no occurence in history where once FRB is adopted that the fractional amount didn’t become lower and lower until it eventually became zero. None.
FRB and therefore fractional money is receipt money in transition to FIAT money. Fractional money always becomes FIAT because the amount of reserves held against newly created money will always be reduced to nothing.
FRB is in itself inflationary and if we could seperate people from money you would be correct. But this is not the case. FRB robs a man of his labour. You can not seperate money from labour - this is what FRB seeks to do and this is why golds purchasing power remains constant throughout time irrespective of how much paper money is in the system. That is because gold is intrinsicly linked to labour - you may be able to create money out of thin air with FIAT or almost out of thin air with fractional money but you can never create labour out of thin air. The story of gold and labour is essential to understanding FRB. Effectively when FRB is invoked which does not lead to inflation but is inflation- that is inflation of the currency, the monetary unit is diluted. Money representing a mans labour is effectively taken from him seemingly unnoticed through higher prices as the market eventually works out what is happening to the monetary unit. Therefore when fractional reserve banking is inacted, those lending this fractional money spend it into existence at it’s birth. At its inception it is potent but as it cycles through society it is diluted giving the appearance of rising prices which is obviously illusionary - for what is occurring is the debasement of currency. In essence therefore FRB robs a man of his labour, his lifes work - there has been a transfer of labour from those who have done the work to those who haven’t lifted a finger. A purchase in gold can capture a mans labour for that day - if sent to his future he can guarantee that he will preserve his lifes labour and efforts, the gold ultimately buying him in his future what it bought him on the day of his efforts.
Cheers,
Matt
To clarify the situation and use the same language, so we can keep this debate in order.
From Wikipedia
A bank account is a financial account with a banking institution recording the financial transactions between the customer and the bank and the resulting financial position of the customer with the bank.
Savings accounts are accounts maintained by retail financial institutions that pay interest but can not be used directly as money (by, for example, writing a cheque). These accounts let customers set aside a portion of their liquid assets while earning a monetary return.
A time deposit (also known as a term deposit, particularly in Canada, Australia and New Zealand; a bond in the United Kingdom) is a money deposit at a banking institution that cannot be withdrawn for a certain “term” or period of time. When the term is over it can be withdrawn or it can be held for another term. Generally speaking, the longer the term the better the yield on the money. A certificate of deposit is a time-deposit product.
The opposite is a sight deposit which can be withdrawn at any time.
In the United States transactions deposit is a term used by the Federal Reserve for checkable deposits and other accounts that can be used directly as cash without withdrawal limits or restrictions. They are the only bank deposits that require the bank to keep reserves at the central bank. This is in contrast to “time deposits” (aka term deposits).
A certificate of deposit or CD is a time deposit, a financial product commonly offered to consumers by banks, thrift institutions, and credit unions.
CDs are similar to savings accounts in that they are insured and thus virtually risk-free; they are “money in the bank” (CDs are insured by the FDIC for banks or by the NCUA for credit unions). They are different from savings accounts in that the CD has a specific, fixed term (often three months, six months, or one to five years), and, usually, a fixed interest rate. It is intended that the CD be held until maturity, at which time the money may be withdrawn together with the accrued interest.
In exchange for keeping the money on deposit for the agreed-on term, institutions usually grant higher interest rates than they do on accounts from which money may be withdrawn on demand, although this may not be the case in an inverted yield curve situation. Fixed rates are common, but some institutions offer CDs with various forms of variable rates. For example, in mid-2004, with interest rates expected to rise, many banks and credit unions began to offer CDs with a “bump-up” feature. These allow for a single readjustment of the interest rate, at a time of the consumer’s choosing, during the term of the CD. Sometimes, CDs that are indexed to the stock market, the bond market, or other indices are introduced.
A transactional account (North America: checking account or chequing account,[1] United Kingdom and some other countries: current account or cheque account) is a deposit account held at a bank or other financial institution, for the purpose of securely and quickly providing frequent access to funds on demand, through a variety of different channels. Because money is available on demand these accounts are also referred to as demand accounts or demand deposit accounts.
Transactional accounts are meant neither for the purpose of earning interest nor for the purpose of savings, but for convenience of the business or personal client; hence they tend to not bear interest. Instead, a customer can deposit or withdraw any amount of money any number of times, subject to availability of funds.
Current accounts
Current account is the name given to a transactional account in the United Kingdom and countries with a UK banking heritage, offering various flexible payment methods to allow customers to distribute money directly to others. Most current accounts come with a cheque book and offer the facility to arrange standing orders, direct debits and payment via a debit card. Current accounts may also allow borrowing via an overdraft facility.
Lending
Current accounts have two different ways in which money can be lent: overdraft and offset mortgage.
Overdraft
In the UK, virtually all current accounts offer a pre-agreed overdraft facility the size of which is based upon affordability and credit history. This overdraft facility can be used at any time without consulting the bank and can be maintained indefinitely (subject to ad-hoc reviews). Although an overdraft facility may be authorised, technically the money is repayable on demand by the bank. In reality this is a rare occurrence as the overdrafts are profitable for the bank and expensive for the customer.
Offset mortgage
An offset mortgage is a type of mortgage common in the United Kingdom used for the purchase of domestic property, the key principle is the reduction of interest charged by “offsetting” a credit balance against the mortgage debt. This can be achieved via one of two methods either lenders provide a single account for all transactions (often referred to as a current account mortgage) or they make multiple accounts available which allow the borrowers to notionally split their money according to purpose whilst all accounts are offset each day against the mortgage debt.
Interest
In the UK some online banks offer rates as high as many savings accounts along with free banking (no charges for transactions) as institutions which offer centralised services (telephone, internet of postal based) tend to pay higher levels of interest. The same holds true for banks within the EURO currency zone.
So, it’s only transactions deposits that make the problem. Does anyone have a copy of the legislation on FRB? I want to know if the reserves required are a percentage of all transactions deposits or of all deposits (including savings and term deposits)
In the case of transactions deposits, it is your money and they shouldn’t use it. Period. A 100% reserve should be the standard for that.
In the case of savings and term deposits, the bank works as a commissioner (an intermediary who works for a fee that amounts to a percentage of the business). You could lend the money yourself to make a profit, but you would have to deal with engineers and financial advisers to evaluate the projects, with lawyers to take insolvent debtors to the court, with auctioneers to sell confiscated properties, and you might not be able to loan to the most interesting businesses because you just haven’t got 800 million dollars to finance the construction of a new coal-based electricity plant. A bank makes it easier for you and lets you pool resources with other investors. That’s why a time deposit pays an interest.
In this example there was still a run on the bank. The bank was practicing fractional reserve and had on hand, just enough cash as it turned out, to meet the demands for the day.
If I run a bank and tell you in the fine print that there could be a delay in receiving your funds of up to 60 days to receive your funds but through good cash management I always have enough for your when you want to take out money, how is this fraud?
No, I don’t think you can call it a loan. If I loaned you some money, would you accept the condition that I could come and take it back at any time?
Even if you thought of it as a loan, there is a big problem. The bank relends the money like doing a time deposit. So, they guarantee you that the money is available on demand, but they time-deposited (a part of) them to another entity. This guarantee simply can’t be true.
This is because nobody really likes the collusion between loans and on-demand deposits. The banks artificially separate what has been artificially colluded in the first place.
If it says in the fine print that there will be a delay then this would be a timed deposit and not a demand deposit therefore no fraud has taken place.
If it says that your money is available ‘on demand’ but they don’t have enough money to fulfill this contract, for whatever reason, then they are engaging in fraudulent activity.
On an account that serves as ‘cash on hand’ such as a checking/debit card account you have every reason to believe that if you write a check on the account that the bank will redeem the check ‘on demand’ to whomever you write the check out to. The check itself serves as ‘money’ (or fiduciary media as Mises calls it) and is treated as such by both the issuer and person accepting it.
As soon as the bank runs out of reserves to pay out all the ‘on demand’ accounts, for whatever reason, this is the very definition of bankruptcy. Just because they practice ‘good cash management’ and this doesn’t happen very often doesn’t in any way change the nature of the fradulent activity or the inherent insolvency of the system they chose to operate under.
If everyone you wrote a check to understood that there may be a delay up to 60 days in receiving their funds from your bank then they are in effect extending you a line of credit. That’s not the way it works in actual practice, is it? Business are under the impression that if they accept your check or run your debit card they will receive (close to) immediate payment and structure their business activities around this. If they were forced to wait 60 days to redeem your check or have their account credited from your debit card they would have to restructure their ‘good cash management’ which would probably include a premium charged for this extension of credit to you as a customer.
But they usually do. If the bank has 100 million liability in demand deposits but only 1 million in reserves yet the biggest account is 100,000$ they do have enough to pay your demands.
As has been screamed at you several times already, a demand deposit is not a loan.
But what you are saying is that if the warehouse owned the wheat itself, it could issue as many claims to it that it wants?
It would still be fractional reserve because their money can not actually be called in within 60 days. 60 days is just an arbitrary buffer. The time delay on the withdrawal would have to be the same as the legnth of the loan.
They don’t have enough money to pay all demands.
If for some odd reason 30% of all outstanding accounts showed up at the door at once and they didn’t have enough money to cover them then ‘they usually do’ doesn’t help all the people coming to claim their money that is available ‘on demand’.
Why would people who ‘loaned’ their money to a bank in the form of a demand deposit account come demanding payment as soon as they felt the bank might be insolvent if they in fact loaned their money to the bank for a set period of time?
But as the 20 or so other threads on this subject have shown there is no way to convince someone who believes that a bank who successfully manages their ponzi scheme is acting within their contractual obligations in regards to a demand deposit account that they are in fact engaging in fradulent activities.
It’s a losing game and honestly is becomming quite tedious.
Scineram, did you check Rothbard’s paper about non-existent scottish ‘free’ banking ?
No new money is being created.
If the bank has a timed deposit coming due they could either get another timed deposit and give the cash from that to the initial depositor or sell the loan backing the asset to another bank and use that cash to pay back the depositor.
That’s why they get paid as a middleman, to juggle around all the different accounts so someone doesn’t have to have their money tied up for a longer period of time than they wish and other people can get longer term loans than any individual investor is willing to give.