The mafia is cool.
Money is not capital, but allows for capital accumulation. When there is a scarcity of capital, that is, necessary goods which are to be employed in production and supplied by savers, then the interest rate is high. Thus, when society demands more money, what they’re really demanding is the depression of the market rate of interest, so that their unwarranted economic activities become economically possible. But, of course, without an actual increase in subsistence (savings), none of the investment ventures which require the arbitrarily reduced interest rate will be completed profitably. Suppressing the market rate of interest through inflation does not change the natural rate of interest–societies time preference, which is a real independent economic phenomena (the case of all economic activity).
The question isn’t whether FRB is fraudulent, because it isn’t. The question is if FRB must necessarily depress the market rate of interest below the natural rate. The demand for money is linked to the natural rate of interest, to the capital and labor markets. The free bankers must show that FRB, left to its own devices (void of any and all intervention) can keep the market rate of interest at or near the natural rate.
No, I said that a demand for money is not the same thing as a demand for capital.
I’m not sure why you think that’s a valid argument, but I’m interested to hear an explanation. Demand for money is demand to hold money as cash or in demand deposits, as a form of providing liquidity. I have already said that money is not capital, it represents capital. An increase in the supply of money does not create an increase in the supply of capital.
Why? You haven’t provided a reason.
The two conditions cannot coexist. If it is not fraudulent, then it does not make sense to say that it can still depresses the market natural rate of interest.
Why? What makes anything legal optimal?
Well, first of all, there are those who believe that FRB doesn’t necessarily suppress the market rate of interest below the natural rate. Fractional reserve banking has beneficial implications for both savers and banks, which is why it emerged naturally though voluntary activity. This assertion only holds when one believes, without a doubt, that all voluntary activities must necessarily yield economic harmony–but this is just an assertion. Economic harmony may not be possible.
That’s not what I said.
The market is a process of voluntary exchange. What ever prices arise in this exchange is the natural price or rate.
If FRB is not fraudulent and credit expansion is possible in some productive way, then the interest rate is the market rate, no matter how that expansion influences the interest rate.
I don’t see how FRB is any different than taking the petty cash fund on friday and putting it back on monday. Certainly this constitutes a voluntary action on someones part but does that mean it has emerged through natural voluntary action.
See my above reply to Ensuric
Can you please respond to my response to Jonathan Catalan regarding defrauding the “third party” here: https://forum.freecapitalists.org/t/fractional-reserve-banking/4329
I don’t agree with this assertion at all.
Savers are paid interest with FRB.
ok this maybe an advantage of FRB but it in no way explains how it came about voluntarily.
So if everyone agrees it’s still fraud? I don’t understand your position here.
Please read everything before you respond.
Again:
“Now of course, if these new gold accounts are NOT introduced into the market as real gold substitutes backed up by 100% the face amount and safely secured in some vault, then no fraud takes place at all, but then we are no longer talking about anything even remotely related to fractional reserve banking”
If its engaged in voluntarily, it doesn’t really matter how it may have come about. It no longer continues to be a form of fraud even if it started as one.
You’re defining it as fraud right off the bat. If all parties agree, that is, without compulsion, how can it be fraudulent?
If everyone agrees, then
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You are no longer talking about demand deposits, but something else; i.e., demand deposit with a clause
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If these claim tickets do not masquerade as demand deposits, then they are no different then other financial instruments, but they are not money. They cannot possibly hold on to their face value.
This is not a Fractional Reserve Banking system.
How do you come to this conclusion? As long as the supply of money does not exceed the demand for cash holdings, the purchasing power of money will not decline. Theoretically, frb can be sensitive to changes in the demand for money and react to it efficiently.
So some people don’t understand how banking operates whatsoever? Are you saying that they’re exploited? You sound like the “liberal” who demands government intervention because people are “ignorant” and therefore not able to make their own decisions.
How would everyone engage in FRB voluntarily. In an FRB system everyone is effected by it regardless of whether they wish to or not.