If you are part of the Austrian free-banking crowd then the above scenario can not be done with a contract. If I were to say that person B was in fact a bank then the scenario outlined is fractional-reserve banking via contract. If you are willing to say the above scenario is ok with a contract then banks can have all the functional aspects of fractional reserve banking via a contract. The only difference is that the deposits are not guaranteed to be demand deposits but only are available at the desire of the bank, but the practical working functionality is the same.
Most banks right now don’t make this claim. If you carefully read most contracts when you open bank accounts you will find many times the relationship is like a loan not a demand deposit. So the Austrians are argueing against a fiction.
No, it isn’t. Stop lying, there’s no deposit contract here which is exactly where the issue lies in regard to FRB, in which a deposit is incorrectly treated as a loan.
This is where your analogy fails, and what you tried to quietly slip in there(such intellectual dishonesty is detestable) is exactly the reason that FRB is fraud and is doomed to failure. You do not agree to have your money to be paid back in 60 days, you both agree that person B will hold the money for you, which you may retrieve, in its entirety, at any time. Here’s a more accurate analogy.
What you will find is this is basically a cult topic for a lot of Austrians. For example, You (person A) loan your friend (Person B) $100. You both agree that the money is to be paid back whenever you want it. After 30 days You ask your friend if he has the monay and can pay you back now, your friend says he only has 10% of your money, and has loaned out the rest. At this point the Austrian “free” banking police swoop in and arrest your friend for stealing 90 dollars from you. If you think that the police are right and this is fraud then welcome to Austrian “free” banking. If you think this sounds insane and that you and your friend did nothing wrong then you might want to think twice before you sip the “free” bankng Kool-aid.
No it will tell you that bankers are attempted to defraud you by labelling a loan contract a demand deposit contract. The two are entirely different in their nature and cannot be equated.
That is why what the contract says matters. I should have the right to make a contract like the above scenario. The Austrians disagree because they want to label the above scenario a demand deposit even though the contract specifically lays out the terms of the loan and in fact the money is not guaranteed to be returned on demand.
This is the Austrian cult part because what a contract actually says doesn’t matter to you. The Austrians will label any contract that punches holes in their theory as a demand deposit irregardless of what the actual contract says. In the scenario I described, how can you consider Person A to have made a demand deposit?
That is what fractional reserve banking via contract does, it changes the demand deposit into a request based on availability of funds. The practical application is that fractional reserve banking would continue. In a completely unregulated banking environment we should expect to see banks operating with fractional reserves via contract. The depositors could request their funds based on availability not demand and the bank would keep a fraction of the total deposits to meet these redemption requests.
No it doesn’t. Merely asking if the person has the capability is not the same as demanding payment of any amount. This will be repeated to you until such time as you grasp it.
How can you describe the scenario I layed out as anything other than a loan contract? Person A puts money in the bank. The bank says we will be making loans with the money you put in the bank. The bank says if you request your money back we have until 60 days to meet that request. The bank says that if you request some or all of your money back and we have the funds on hand we will approve your request immediately. Person A agrees to those terms.
That is what banks will do. I see absolutely no fraud in that scenario. I can see no reason why people should not be allowed to enter into contracts like that.
This time try analyzing the scenario and explain exactly who is being defrauded and why you are willing to use force to prevent people from making these contracts?