No you are missing the point. The banks are not doing what you say they are doing. I take it from your post though that you are in agreement with me that contracts that remove the demand requirement for the bank make this form of banking acceptable. So there will be banks in an unregulated banking environment that practice fractional reserve banking which only means that the bank will not have 100% reserves of all deposits. The assets of the bank will be divided up into cash reserves and the value of loans made.
So the notion that there will only be two types of banks, 100% reserves and essentially 0% reserves is false. A 0% reserve bank would be a bank that does not honor any requests for customer funds until the time limit on the deposit expires because the bank is loaning out all of the money.
Why can’t you just address what I am proposing and offer your verdict on whether that woul dbe aloed in your “free society” ? That is my only issue in this post.
]No, I’m not. 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.
Except that the the bank will never have the funds on hand because in order to make a profit the bank must loan whatever money people put in it.
So, although your scheme is not technically a fraud, it still is a scam of sorts in that you suggest you might have funds available on demand, but actually you don’t.
It would be allowed, because as Juan pointed out it’s a time deposit (e.g. loan), not a demand deposit. As such it would be allowed. Your “business” would just become insolvent very quickly.
also, despite the fact that the impractical system of banking Max proposes might be ‘allowed’; it is decidedly NOT what currently happens in FRB participating banks, and does NOT describe their contracts with their depositors. hence Max’s contribution’s to this thread have been non-sequiturs.
The other thing to keep in mind is that banks, in the instances scineram is correct about, do everything possible to obfuscate the true nature of the contract into which one is entering
Why would the bank be required to always have all the money loaned out. In fact it would be impossible for the bank to loan out money immediately after you purchased your CD. So all banks even “time-deposit” banks have some cash on hand. So you are saying any bank that had cash on hand at some point would be insolvent?
What I am demonstrating is that the idea of fractional-reserve banking is not inherently fraudulent. It is only fraudulent if I guarantee the funds on demand to the original depositor. Once I remove the on demand requirement then fractional reserve banking is no different than any other banking that loans out money.
Also, I am discussing banking in a society without government. Fractional reserve banking covers any bank that loans out money.
We are discussing banking in a free society. The approved answers to the OP are that in a free society only two types of banks will exist, 100% reserve banks (demand deposit) and essentially 0% reserve banks (time-deposit). I have simply demonstrated that is in fact false. Through contracts fractional reserve banking is not fraudulent as long as the guarantee of return on demand is eliminated. There is no inherent reason that fractional reserve banking under contract should be disallowed.
Since, even a timed-deposit bank will frequently have some cash on hand the only difference between a timed-deposit bank and a fractional reserve bank is that the timed-deposit bank will not let you have your money back early even if they have it, whereas a fractional reserve bank with contracts will.
Nobody. I propose that “we” remove those that are artificially propping the corrupt system up. You seem to assume FRB is a free market institution, it isn’t. It’s gone hand in hand with statist intervention, from the beginning of its existance.
ok max, well , we started out with two contrasting definitions for deposit accounts, and we analysed how they could be implemented legitametly.
if you recall, these were Timed Deposits, and Demand Deposits. it seems you think it worthwhile to introduce a THIRD type of deposit account, I propose the name for your account to be Perhaps Deposits. Such that one might make a deposit, and when you want to make a withdrawal, the bank in question will decide whether it will smile positively or negatively in your favour at your time of request. and so perhaps they have the funds and you get reunited, and perhaps they dont, and you wont. This does well to emphasise the point that Demand Deposit accounts are not only different from Timed Deposit ACcounts, but Perhaps Deposit accounts as well.
Because any other bank, upon realizing the nature of this one would quickly exchange the notes they received from that bank for reserves? Thus the reserves of the bank in question would decrease and the bank would quickly become insolvent. That’s ignoring a whole host of issues, by the way.
I didn’t say ‘required’ but explained why they will do it anyway. Why did you reply to my post if you didn’t read it ? Alternatively you could say that in order to stay in business banks will be required (by market forces) to loan money.
Once you remove the “on demand” requirement it’s not FRB. You don’t know basic terminlogy.
You know what ? I define apple = flying pig, and house = cow. I can make up any definition I want…