I mean, they would just tell you that this statement does not correspond to the facts. And I would say that the banks, through competition, and the other various techniques, would protect themselves from runs.
Inventory changes a very common in any business what do you prupose will maintain this perfect harmony
Momentarily is the keyword here. and producing more cars won’t devalue the price of a call girl.
Typical market mechanisms and competition. This is what free-bankers have to show–the actual process (maybe they have). How will the banks know that demand for money has changed? Can they distinguish between a real fall in the demand for money and one caused by an arbitrary reduction in the market rate of interest? How will banks, as competitive entities, respond to one (or a few) rogue banks artificially suppressing the market rate of interest? These are good questions and arguments, at least in my opinion; this fraud nonsense doesn’t cut it.
People have it backwards. There are no regular mass redemptions because of low reserve ratios. The reserve ratios are low because regularly few redemptions are taking place.
Even if it did, it doesn’t matter.
And I say that you are substituting rhetoric with logic. Maybee you would like to consider the possibility that the historical data may have been misinterpreted before you accept the absurd logical conclusion that everybody can be familiar with the FRB scheme, and still remain calm while they are at the mercy of others (just 10%) also remain calm. Especially when any event can trigger a panic.
I’m afraid that this argument is misguided. The 100% reserve advocates define FRB as:
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demand deposits (no clause)
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claim tickets masquerade as money substitutes
You claim that neither 1 and 2 necessarily must take place. perhaps it’s time to understand that 100% advocates (and Rothbard) are not talking about what you are talking about. They would have no problem with what you suggest, but they will insist that this is not FRB. But I’m afraid that many free bankers like Angurse (and perhaps you) continuer to contradict yourself by claiming that it is possible for the public to accept these tickets as money substitutes when you define them as NOT (due to the clause).
Currently demand deposits are not demand deposits with a clause. If they were we’d have no need for fdic. So as it exist currently I have no qualms with labeling it fraud. Maybe they could coexist but you’d have to give me a hell of alot more than .9% before I would ever agree to the clause. Even still it seems to me that people unable or unwilling to take advantage of whatever the interest rate would be, are end losers.
As I understand it the demand for the notes of a particular bank manifests itself in the willingness to hold them, as in not redeeming them. In an unrestricted competitive environment a bank cannot just issue more notes if the public is unwilling to hold them. It can put them into circulation, but they will be returned and reserves will eventually run out. That is why the Ayr Bank went down in short order with better managed competitors taking its place.
I said they were not “demand deposits” (no clause) not that they weren’t money-substitutes. Unless you are using some bizarre terminology, bank notes and “demand deposits with a clause” both fully constitute fiduciary media (a money-substitute) as defined by Mises.
reference please.
The Theory of Money and Credit, liberty fund edition, page 526.
Nir says: Mises says that fiduciary media are the portion of bank notes not fully backed by commodity.
Mises Made Easier GLossary Says:
Fiduciary media. Money-substitutes freely accepted at face value which consist in claims to payment on demand of specified sums of money in excess of the monetary reserves held for their redemption. Fiduciary money includes token money, bank or treasury notes anddemand deposits (deposit currency or checkbook money) which exceed the amount of cash reserves immediately available for their conversion into money proper. Fiduciary media are money-substitutes (q.v.) and "Money in the broader senses (q.v.) but not"money in the narrower sense" (q.v.).
Where does he say that fiduciary media can be “demand deposits with a clause” (or similar)? Can you please provide the quote?
“Part of the money-substitutes functioning as money in the cash holdings of individuals are ‘covered’ by sums of money held as ‘redemption funds’ at the place where the money-substitutes are cashable, which is usually, although not necessarily, the issuing concern. We shall use the term Money-Certificates for those money-substitutes that are completely covered by the reservation of corresponding sums of money, and the term Fiduciary Media1 for those which are not covered in this way.”
The Theory of Money and Credit, pg 133
“For want of a better equivalent, therefore, the expression ‘fiduciary medium’ has been adopted. It accords with Professor Mises’ definition of Umlaufsmitteln as money-substitutes not covered by moneyl”
The Theory of Money and Credit, Appendix B, pg 482
“If the money reserve kept by the debtor against the money-substitutes issued is less than the total amount of such substitutes, we call that amount of substitutes which exceeds the reserve fiduciary media.”
Human Action, pg 433
What? Uncovered bank deposits and notes are examples of fiduciary media, and therefore money substitutes (which also includes money certificates). This clause nonsense is something you’re hung up on.
You are right that clause is nonsense
Angurse and Scienram are hung up on them, not me! perhaps you should debate them and not me.
The clause, according to them, is the part in the contract that makes the depositor agree to the fact that there is no 100% guarantee of redemption, thus, demand deposit with a clause. This is the only way they can get out of the “defrauding of depositor” argument.
And now you’re back to where we started:
Are these demand deposits where redemption on demand can be guaranteed at all times or not? It is a simple question.
There is a guarantee of redemption, its called an option clause for a reason. The bank has the option to defer payment, since the notes are not fully covered by money, but by assets, they aren’t as liquid.
So they are not demand deposits because you cannot guarantee redemption on demand. You retain the right to defer payment and the risks in case of a bank run are obviously known. We are talking about demand deposits and not just deposits.