You wish it lied to you. It never said it will hold the money. A demand deposit is a loan as I have proven.
No. A demand-deposit properly is a bailment. When you put items in a warehouse, you are NOT loaning them to the warehouse-owner, are you?
Of course not. Only an idiot would believe you are.
So why would you believe that it would be the case that a demand-deposit is a loan?
Actually, my distinction between two different things is not misplaced. You continue to talk over and around it.
The length of time is not the issue. I would ask that you not create strawmen, and instead argue honestly.
Your example with the bank making an overnight loan (due to technology) also doesn’t account for my going to an after hours ATM and withdrawing my cash (also a product of technology). Not that your example is even remotely relevant to the discussion or what I wrote.
Strawman. Did I say fraud? Also, you can’t have a bank that doesn’t distinguish between the two, unless they have the power of the state making it legal for them to engage in counterfeit. In a free market, they simply could not loan the same property and deliver back to the depositor on demand. if I take 10 ounces of gold to the bank, and they loan out 9, and I come back for 10, they are bankrupt. Period. Only 10 bars of gold exist.
Again, insurance doesn’t work for an insolvent model. The risk premium would price the insurance beyond what it would cost to do full reserve banking.
Second, a change in the agreement is fine, but now you are talking about a different model. In a free market for banking, FRB would be like investing, there would be a risk of loss if there was a run on the bank. People who wanted to save, store and use money in the financial system would choose full reserve institutions for that purpose.
The probability is 100%. It is like insuring a terminally ill cancer patient against death. You already know they are going to die, and die soon. In order to make the insurance profitable for the insurance company to provide it, the risk premiums will err on the side a quick death, otherwise the insurance company will not have collected enough premiums to pay out and be profitable, in which case it will go bankrupt, or not even exist because people do not organize capital towards unprofitable businesses.
The creation of multiple titles to the same property Max. Now, it can be done. But it’s not banking. It’s gambling. Understand that.
When you and I agree to make a loan then we make a loan not a damned bailment
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Merriam-Webster’s Dictionary of Law - Cite This Source - Share This
Main Entry: cred·i·tor
Pronunciation: 'kre-d&-t&r, -"tor
Function: noun
: a person to whom a debt is owed; especially : a person to whom money or goods are due
my interpretation whilst it is incorrect to say that all creditors are bailors
yet, it is true that all bailors are creditors.
comment?
And no loan is made in a demand-deposit, your utter misconception and attempt at legal positivism nothwithstanding.
You by definition are saying that the bank is commiting fraud. If your not saying this then there is no problem.
And if you loan your nine gold bars for one year and come back in a year and the bank doesn’t have your gold bars you are faced with the exact same situation. I will keep it simple for you, if you loan money to banks or people then you have some risk that it won’t be paid back. Please explain why loaning money is fraud because that is what you are saying. What you want to say is that when you go to the bank that you are going to make an agreement with them that they can’t loan your money, fine. Why is it fraud if i make an agreement that they can loan my money out?
Only if you believe that loaning money by definition will always default.
There are no multiple titles, loaning money does not create multiple titles.
Now answer these questions please.
Is it fraud if I make an agreement with a bank that says they can loan out my money while I am not using it?
Is it fraud if I agree that I will wait 60 days for my money in the event of an emergency?
Is it fraud to insure loans against default?
Is insurance fraud? Because by your definition all insurance must be fraud because no insurance company has the money in reserves to pay in the event that all events they have insured occur simultaneously.
An actual contract is now legal positivism?
A contract based on fraud is a valid contract?
In the moral sense, it is fraud. Under the laws of your Constitutional Republic, it is not. Or it is, if you still believe in that scrap of paper the Constitution is written on. IANAL
The difference is, why would the bank (in a loan situation) deliberately make itself insolvent, by loaning past the date of redemption of my loan? They wouldn’t.
Right. Most people just want to deposit, not make loans through their bank. Banks pay poor returns on cash.
Strawman. I never said that loaning money was fraud. Counterfeit, or the production of titles without the property to back them, is fraud. You and I can’t do it. Banks can only do it (fiat) with government collaboration.
When I go to the bank, there is an understanding, that I can come back at any time, and get my money, in full. What they do with it, in the meantime, is irrelevant to me as a depositor, as long as it is all there when I come back for it. The only way a bank can make fix termed loan with capital it can lose title to instantly, is to allow titles to exist both in the form of loans out, and deposits returned.
This is very simple stuff max. Stop thinking paper money, and imagine hard money. Then you will understand why it is impossible to do this (honestly) with money that has backing.
And it will.
Full reserve, you are correct. Fractional, you are incorrect.
If I put $10 in your bank, and you loan $9 to scineram, and provide me with my $10 on demand, there are now $19 in the economy unless you call scineram’s loan. How did this happen? You adjusted your reserve ration downwards. When it gets below 0%, you are broke.
That’s an investment, not a deposit. If you call it a deposit and guarantee the money back on demand, while allowing the loan to exist simultaneously, it is fraud.
This is a stupid question. If you make a contractual agreement, I am for it. However, if you lie (have opposing clauses) in a contract, that is fraud. Saying you will loan out money on fixed terms, while providing redemption on demand is a lie. A business which does this will be insolvent.
No, it is just prohibitavely expensive and will likely lead to business failure, either of the frb bank or the insurer. Either the bank is insolvent, or the insurance company is insolvent. One of them has to pay. The insurer has to charge more than the amount the bank is insolvent in order to turn a profit and cover expenses, thus the bank must pay more in premiums than if it kept a full reserve.
I believe insurance is a scam if you believe collecting on your claims is guaranteed. It’s another form of gambling. The insurance company gambles that an event won’t occur for “x” time, and you gamble that it will happen sooner.
If most people understood banking, they would hide their money under their mattresses.
I’m kinda tired of arguing with you. You can never admit you’re wrong, and in this case, you are very wrong. It’s pointless to continue. Whether or not something constitutes legal fraud, is irrelevant in the empire of lies. Morally, having multiple titles in play, is counterfeit. Period. And counterfeit is fraud. The FDIC exists because only the government, through a lender of last resort (the FED) can cover the losses of insolvent banks, through cartelized counterfeit. The private market would never insure insolvent businesses, cheaply enough to be affordable. The cost in premiums would kill the host.
I’d suggest you read some of Rothbard’s work on money and banking.
tell me who has the gold bars in your scenario?, and do they have them justly?
when the debtor fails to payback the capital on the loan. has he breached the lending contract or hasnt he? i say he has. it seems you want to say he doesnt.
your comprehension has let you down. what can you cite to indicate we believe the practice of lending some good to another is fraudulent. who do you think we say it defrauds, the borrower or the lender? what we say is that loaning out a sum of money which is has been entrusted to a bank to store is the bank defrauding the depositor.
yes, we do make those agreements, they are called demand deposits.
its not fraud to do that, its called a timed deposit account.
of course it does. as lib student posted if a depositor pays in 10 gold bars, and the bank loans out 9. we still try to say that the depositor owns 10 bars, whilst maintaining that whoever has 9 gold bars owns them (until loan repayment date comes along). so during that time there is 1 gold bar with one owner, and 9 gold bars with 2 owners.
not if their lending on the basis that the funds they lend can be recalled by them, to synchronize with the depositors withdrawal demand.
no, just naive.
no.
it may or may not be depending on what is promised.
if the insurers are clear on exactly this point , that the payouts are not guaranteed.(in life insurance if mortality spikes unexpectedly)
the concept of insurance, involves the sharing of risk, not the absolvment of risk.
This is a timely article up today on LRC.
I read this article. The problem with the anti-frb arguement is that it is fixated on this deifference between a time deposit and a demand deposit. So let’s examine and see if this makes sense.
I can have a time deposit due in ten seconds. Before those ten seconds are up the bank can without fraud loan the money out according to the anti-frb group. So as long as the bank has some established time delay between when you request the money and when it is paid then the bank is acting appropriately. Please correct me if I am missing something in the anti-frb arguement.
Max, I don’t want to argue with you anymore. Just because you are resolute in your ignorance, doesn’t mean you have a case. You’ve been answered numerous times, and repeating the same fallacious argument I have refuted at least twice, shows you’re not being honest. Now you are just grasping at anything to carry on the argument. Surely you have better things to do. I know I do.
Have a nice day.
This micro time deposit is on eare where the anti-frb arguement falters. If loaning money for ten seconds is acceptable without fraud then for all practical purposes FRB as practiced now is not inherently fraudulent.
“…an agreement that says you can have your money on demand but in case of emergency the bank reserves the right to delay up to 60 days…”
what exactly would a “bank emergency” be if…depositors placed money into a ‘bank’ and the deposit agreement terms stated that some percentage, . say 10 percent, of the deposit would be taken by the bank to go into some type of pool of money for loans. so, if 100 grams of gold was deposited, 10 grams taken (loaned to the bank) and say 1 gram of gold charged to the account for storage and transaction handling. now 89 grams of gold left in deposit account.
if the bank made numerous bad loans wouldnt the losses be confined to the risk capital…just the percentage of gold that was lent and not have any effects on the deposits?? thus no emergency would delay acces to deposited money???
just wondering.
And since you can’t loan money for ten seconds, your argument fails. EOD.
It doesn’t matter what the emergency is. The arguement you are making is that I can no have an arrangement like this without it being fraud. Example, you open an account and make a deposit. The agreement you make is that if the bank has the funds available you can request withdraws from your account on demand and if the bank doesn’t have your funds available you may have to wait up to sixty days to receive your funds. The 60 days represents the time frame the bank has to liquidate its loans and pay its creditors/depositors. I say this is not fraud and you say this contract is by defintion fraud. This is not fraud because there is no deception and all parties are aware of the risks. Make your case why this is fraud.
See here is the issue. What is the time limit in your mind? If I said one year you would say that is possible. How about a month, a week, a day, 6 hours, an hour? You can loan money for any time frame that people are willing to borrow it.
Which after maturity can be automatically renewed making it a deposit with waiting time withdrawal. The limiting case of wich is a demand deposit.
That atriicle falters when accusing Posner of using positive law. Posner recognizes that the contract makes it a loan instead of bailment.