Money originates in the market place like every other commodity. Governments over time have taken over and monopolized this market either directly or by means of central banking.
What do you think the Fed open market transactions are? Buying assets with newly created money. He does not lend out the money. He simply spends it.
“It is perhaps a “second-best” solution to the ideal of treating fractional-reserve bankers as embezzlers, but it would suffice at least as an excellent solution for the time being, that is, until people are ready to press on to full 100 percent banking.”
– Murray N. Rothbard. The Case Against the Fed. Pages 150-151. (Emphasis mine).
He’s advocating and explaining a plan, and even stating that the ideal would be to treat them as embezzlers. Sounds like support.
liquidity is bailout!
Without the government, the question of whether people are deceived or not into accepting the checks as cash substitutes becomes relevant. Without the government, a check that is not backed by 100% is not a cash substitute. It will only be accepted as a substitute if people were deceived. Such is the origin of FRB and why it is fraudulent.
without government securing the deposits, a deposit certificate with a clause could not be traded as a deposit certificate without a clause. At best, it would be some sort of a financial instrument, but certainly not cash substitutes.
Legalized FRB is a contrictory of terms. If deposits are not backed by 100% and there is no deception (by a visible clause) , then they are not demand deposits but some financial scheme at best, or more accurately in this case, some sort of a lottery game that resembles a ponzi-scheme.
lol. Yeah, like that is soo descriptive. Money does not in any way come from government. Money comes from banks, regardless the government propaganda that obviously has you duped.
lol
Printed money is lent to local banks. Ledger money is transferred from bank to bank through the Fed. The fed is a print shop with a megalomaniac complex
Good Rothbardian research. ..But, let’s face it, Rothbard’s suggestion of allowing fractional reserve banking to continue after abolishing the Fed is a lot like Obama saying “If you like your insurance, you can keep your insurance”…while requiring insurance companies to take on pre-existing conditioners. Insurance companies will soon be out of business…and so would fractional reserve banks without a Fed.
There seems to be some confusion on this forum that I can’t explain.
The fraud element is not complicated. I commit fraud when I promise something that I have no intention of living up to. A fraud is a lie. If a bank says (by way of its express policy) that all deposits are always available for withdrawal upon demand, then it would seem that it must have all funds always on hand, or it is lying. A run on a fractional reserve bank in which the bank runs out of funds, is merely the bank being caught in a lie that already existed.
And it isn’t enough for a bank to say “In 100 years of banking experience, we have never had to release more than 5% of our deposits.” They still must have all funds available to not be lying, or they must change their policy for demand deposits so as to put some restriction upon withdrawals.
But there is the question of how to regulate that fraud. Have we decided that a state is necessary to right all wrongs, or can the free market effectively regulate some things? If, in fact, a bank does figure out a way to always meet withdrawal requests–if it is never caught in a fraud in spite of practicing some degree of fractional reserve banking–must the iron fist of the state fall upon them? Perhaps the banker discovered some new financial instrument or practice that really does make FRB solvent–maybe something Rothbard never thought of. If people know this, and place their money with them, is not the market the best way to sort out this potential innovation?
Exactly. An acting lender of last resort distorts the market. So critiquing FRB via government bailouts is a just non-sequitar. Moreover, you completely left out a myriad of other distortions that the government cause, making further critiques (within a modern context) completely inapt. Not that it matters.
You are forgetting that I am the one who selected the quote. I don’t know what you are arguing with. My attribution to Rothbard is true, and you stand corrected.
Listen, you suffer from a severe case of socialist indoctrination virus, which is having a tendency to learn all of your economics from cranks.
Banks create money by the privelege granted to them by the State. The Central bank and all of its legal power is a creation of government legislatures.
No, he buys assets from the public. Anybody who has for sale what the Fed wants receives this new money.
There is so much confusion out there due to really really bad popular books and youtube clips out there; “web of debt”, “money masters” or whatever
I’ve responded to the case without government in the previous post.
I agree with you entirely. And this is completely consistent with my original post. So what is the contention?
Expecting a practice to wither in a free market is NOT the same as expressly banning it.
It is correct to discuss Rothbard’s ideas outside of the context of anarchocapitalism? It surely seems like that is what some folks here are doing. Rothbard may not be the most consistent on the matter, but why should it suprise anyone that he didn’t always immediately call for the state to right all wrongs?
Oh good gravy! You think that money in circulation has to be spent by the printer of it? With ideas like that, it is no wonder that politicians spend like drunken sailors.
The big error of most cranks is the thought that all good things come from government intervention. So why is it that I am trying to convince you that money does not come from government?
Banks were creating money long before the existence of central banks. Central banks are an addendum to the money supply and not a foundation of.
Ah, that is where the confusion comes from. I read deposit, not loan, because people don’t loan banks money, they deposit money with banks. For some reason there are those of you that confuse a bank with an investment institution. People could loan a grocery store money to invest. But a grocery store is somewhere you go to buy food, not loan money for investments. So when someone says bank, that only means a place to deposit your money/valuables for safe-keeping. Conflating that with a place to go and make investments is confusing.
Show us please one privilege, power, or any special benefit that banks have that does not rely on government fiat. Can you point to just one?
Where does their power rest on? The government or the market? No evasive answer will be accepted. It is either one or the other. Nothing in between.
In my libertarian world (and perhaps Rothbard’s too?), private owners might “ban” behavior on their property, like “No Personal Card Decks Allowed at this Casino”…Anyone proposing to “ban fraud at everyone’s property” would be looked upon as a quaint newcomer. I would gently remind him that it wasn’t his business to tell someone else what to do with their property. If, however, a customer walks into one of your yet to be invented “Super Fractional Reserve No-Defaults-Ever (patent pending) Banks – Demand Deposits Back in Full Anytime” – and then loans/deposits (same thing) them $100…then comes back in a week and finds they’re “temporarily out of stock” – THEN that customer would likely sue that bank for property damage/loss due to fraud at the neighborhood private arbitration court. …So, in a rather long-winded way, in my world, fractional reserve banking would not be banned. P.S. I think some of these topics would be more easily understood if people – including me – would refrain from the passive tense. “Be banned” begs the question “By who?”. There would be no totalitarian state in my world [:)] to do the banning anyway!
What is a mortgage loan if not an investment? A car loan? A college loan? A small business loan? Are you saying that these are not traditional investments that people typically associate with banks? Have you ever encountered a bank that was NOT an investment institution? Do you know of any from any time in history?
And what do you call a certificate of deposit? Is that not really a loan that you make to a bank? You agree to give them money, and they agree to pay it back with interest at a predetermined future date.
These are things that have ALWAYS been part of banking, and well understood by the people at large. That is why moving to a free banking system without demand deposit fractional reserve banking would be a very easy adjustment for consumers. There truly is nothing new to understand. Some aspects of your relationship to your bank would likely change a little, like maybe a greater use of staggered CD accounts instead of demand savings, and greater diversification and diligence in choosing banks, but nothing people could not almost instantly adapt to.
Because we have ALWAYS had governments. So what?
Have you ever lived somewhere that did not have a government?
To think someone would necessarily use a bank to make these kind of investments where they deposit their money is akin to thinking someone would use a grocery store to make these kind of investments as well. It is a BANK. Again, a BANK is where one DEPOSITS his or her money, just like a grocery store is where one buys food.
The MAIN reason banks make loans, is because the government allows them to lend out ten times what they have on deposit.
Not all loans are investments. Consumer loans such as car loans are actually acts of dissavings.
Remove FDIC and demand deposits can no longer be guaranteed to be available on demand. Either it is available on demand or it is not. Available maybee on demand is not a demand deposit but a lottery ticket.
All things in banking today exist with government approval. All things in banking existed without government approval before. Your mistake is in thinking that the government approval means anything. It doesn’t!
Money is created on the bank ledger when you take out a loan. It is not normally expressed in a government issued coupon, but with numbers on a ledger account. Every bank loan creates circulating money. Every payment on principle depletes circulating money. 90% of all circulating money is not in the form of government notes. Prior to the existence of government notes, all circulating money was in the form of bank approval only.
I find it bizarre that so much hey is made about money and banking by the likes of Rothbard when they obviously have a very superficial comprehension of what money is made of.
Credit. Money is credit of the banking system. Without government approval, banks must examine the credit of other banks themselves, in order to accept deposits of checks and negotiables. Banks do not run out of money by running out of anything of substance, but are out of business when sister banks will not accept their credit.
The brew ha ha about fractional reserve is backwards. Time was that banks didn’t have anything of government issue. The requirement of a reserve of government approval is an unnecessary government dithering into something they (and you) don’t understand
Their credit is worthless if I am not required by law to accept it. There is nothing mystical about the money they issue. The monopoly on such credit is always enforced by government fiat and never by the market. This is not only a matter of history, but a matter of pure logic.
I told you that no evasive answer will be accepted. The fact is that you could not come up with one example yet you still managed to give a lengthy answer.
Go back to your Ellen Browns or whom ever today is preaching the same old mercantile economic fallacies from more the 300 years ago