There’s no such thing as FRB through contract. The whole issue of FRB arises because of a, purposeful, confusion of contracts.
Exactly, that’s the point. Since, from this the issue arises that two people both own the same good (in this case, money) at the same time. Which is where the credit expansion comes from.
FRB would naturally dissapear when rational customers demand that banks be independantly audited.
At some times it will not be possible for them to loan out all the money all the time. By definition they will have some portion in cash at sometimes.
Your definition of fractional reserve banking does not make sense since it does not deal with the amount that the bank has in reserves. You have defined FRB as when a bank is providing a demand deposit guarantee on a funds that have been loaned out. If I remove the demand guarantee I have not changed the reserve amount. Since your only objection to FRB is the demand requirement the concept of fractional reserves can not be considered fraud.
The FRB bank with contracts is no more likely to be insolvent than a timed-deposit bank.
Exchanging the notes for reserves would not make the bank insolvent. The bank would only be unable to meet redemption requests made prior to the 60 days. Maybe you don’t undrestand what the word insolvent means. The bank would be insolvent if after 60 days it was not able to liquidate its loan positions to pay the depositors. This is the same scenario with any bank that lends money, there is default risk.
if I accept your definiton then all banks that lend money will become insolvent since all banks at some point will have some cash on hand. You have failed to prove how having some cash on hand results in insolvency.
Again, you have failed to show why the contract I described is impossible or how it is fraud? i have removed the only part to which you have objection and all other elements have stayed the same. Please prove your claim that there is an inherent fraud in the contract I have described?
Perhaps it would be best if you realised that you were the ignorant one here and as such that you should probably drop the condescending tone.
It is not the issue with any bank that lends money, since banks that lend money will not become insolvent unless they make a bad loan. Which, is entirely possible. The bank you are describing would be insolvent by it’s very nature. Since, individuals could ask for their money at any time, any no doubt, they would. The bank would most likely never have the sufficient liquidity to meet all of it’s obligations. As such it would be forced to constantly liquidate its loan, now this might be feasible for some time, but sooner or later it will run into difficulties.
That’s because that’s a strawman. Like almost all your other posts.
You’re missing the point. Whether or not it is fraud does not concern any discussion regarding FRB, because it isn’t FRB. Not once does it pretend to be a deposit contract, whereas all FRB is the misappropriation of deposits.
That’s what frac-reserve is all about, Max. It’s not about time-deposits; it’s about demand-deposits.
I think it is helpful to think of bank notes versus government backed legal tender.
The evolution of the bank sprang from gold-smiths who held valuable commodities like precious metals in heavy vaults and issue certificates of deposit. They figured out that there is about an 8:1 chance a customer will come back to return the certificates of the deposit, rather than simply trade the certificates themselves. This principle is the origin of the fractional reserve system.
So, without government decree-backed legal tender, people would deposit assets with banks such as commodities and borrow bank notes (or other certified representation of “credit”) against collateral such as real estate, etc in return for a convenience fee over a period of time or interest. Our system is so muddled we cannot even see how simple the concept is. The further from remove you get from handling actual commodities like precious metals (or tobacco, salt, seashells, etc.) the more difficult it is to imagine money as being fundamentally a representation of commodities in the final analysis. The purpose of the money is to facilitate the trade of produced goods. What we have now should not even be called money or capital in my opinion. It should be called “sucker vouchers” or some equivalent.
The government uses the abstraction of fiat money as slack in the rope we use to hang ourselves (easy credit, slow devaluation over time leading to more man-hours worked per household per week, etc.).
It is the Austrian cult view on this subject that is condescending. Since we are only discussing what types of banks will occur in a free society the Austrian position that there will only be two types 100% reserve and 0% reserve has been demonstrated to be false. Your definition of a Fractional Reserve Bank is meaningless because in many cases deposits are treated as loans and not demand deposits so you are argueing against something that does not exist. Secondly, you agree that with a simple modification to the contract that would define all deposits as loans then these banks could continue exactly what they are doing now.
So your entire position consists of changing the language in the contract.
So in a free society we should expect to see banks that have the entire range of reserves related to funds supplied by customers not 100% reserves and 0% reserves as you advocate. As you point out, once the demand guarantee is eliminated then all deposits become time-deposits. So the only banks that will have demand deposits will be 100% reserve. However, the banks with 99% reserves (with no demand guarantee) will function from the perspective of the customer exactly the same as the company with 100% reserve. So your entire crusade will do little more than change the wording in the intial account contract.
There’s no such thing as a 0% reserve bank. That sort of “bank” does not hold reserves since that it is not its purpose. It’s purpose is to act as a true financial intermediary.
That’s my point, thank you for proving it though. FRB consists of treating a true demand deposit as a loan. Which is fraud.
No, if it is defined as a loan, it is exactly that and no issue arises.
strawman, the position is that time-deposits accounts may conceivably maintain ANY reserve ratio, so long as they dont necessitate insovlancy at the time that they contract to hold someones deposit for some time; (i.e. they dong positievly guarantee to not have the money)
wheras, Deman Deposits, must have 100% reserves, because that is NECESSARY to be a Demand Desposit Account.
of course, as you posit Perhaps Deposit Accounts, the reserves are not necessary, but these ARE NOT demand deposit accounts, but some other mythological beast.
attempted to edit above post for spelling and little clarity, but there seems to be an error on the forum edit function
This is why your entire arguement and fixation with FRB as you define it is meaningless. In a free society, which is all we are discussing, there will be no functional change to what currently happens right now, only a change in the language of the initial contracts with the banks. Is it that hard for you to see that by simply changing the language the bank could still operate exactly as it does now? Changing the language does not require the bank to change it’s operations. These hybrid banks that loan money and allow customers to withdraw cash would continue just as they do now.
The entire Austrian Cult anti-FRB fanaticism is pointless.
Remind me again, what are you doing here?
Guess what? There’s the a reason central banks exist: FRB isn’t economically viable without them. To answer your question there clearly would be a different, since without a central bank, other banks that practised FRB would become insolvent and go bankrupt one by one, please stop lying.
Any anytime you’d like to answer my posts you can. I find it amusing that the guy who wants to lead a bunch of people to a place in Africa without telling them before hand should be calling others members of a cult.
Are you saying it’s cult members only?
See now you are trying to add a different arguement. You spent the entire time argueing that it was the demand guarantee that was the issue and now you are saying it is something else. I might remind you that we are discussing banking in a free society without any governement so your attempt to draw in the central bank is in fact irrelevant but a common technique for the Austrian cult.
You have yet to prove that a bank with fractional reserves that did not guarantee demand return of funds would be by design insolvent. Why don’t you try proving your assertion?
Why don’t you listen, what you just described, is not fractional reserve banking. By the way, I did answer that and you ignored it.
You’re missing the point, you stated nothing with change in a free society. I said it would, since it would lack a central bank. And a central bank is the only way the FRB can survive.
Preferably. I’m done arguing with an intellectual bankrupt fool.
so a change in language that is a NECESSARY CHANGE need not change the function.
i agree that functions dont change when uneccessary changes to the language are proposed.
instead of ‘walk my dog’ the contract says ‘walk my canine’. this is no functional change, and is uneccesary to boot.
but you imagine that a NECESSARY change happen in the language of the contract and that this does not chage the Function of the contract. this is absurd.
i suppose you are kind of arguing like this. at the moment the contract says ‘walk my dog’, we should change the contract to 'walk my dog, but never on tuesdays, or especiialy on tuesdays ’ and perhaps if before i so happened to never walk it on tuesdays, or contrariwise had i always walked it on tuesdays anyhow, then the change to the contract is necessary to accurately express what is being contracted, but does not add to the function. (i.e. how it look sto outsiders). hopefully my example demonstrates the falsity. it is only speculation that the function hasnt changed. if the change to the contract is necessary, then its necessary for a reason, the reason is the entailments of the bad contract lead to problems and absurdities or the possibility of the wrong function pertaining, and so the contract needs to be improved to improve the function.
changing the language would not allow banks to function JUST AS they do now. if they could function legitimately just as they do now why would they need to change the language?