Yes/No.
Credit expansion leads to inflation only when in excess of the demand for money.
That’s not exactly true. The people you loan out money to should also receive something of consistent value, if that’s what you promised them.
In other words, the distinction between money (goods) and tickets is very important. It doesn’t actually make sense for someone to invest a certain amount of goods, and then to hand over anything but those goods to entrepreneurs.
The theorists of fractional reserve free banking assume that that the amount of fiduciary media would not exceed the demand to hold that media. So if you hold $100 in a bank, then they may lend say $90 out out of that. if you decide to spend that $100, then clearance mechanisms of rival banks will force the bank to contract back its loan. No uniform credit expansion. No multiplier factor.
I got the impression from a brief history of money, that Rothbard never had a problem with the fractional reserve practiced by independent banks so long as there wasn’t the moral hazard of governments suspending specie payments so the banks wouldn’t go bankrupt.
In a free market fractional reserve would be kept in check by competing banks who could just trigger a run on over extended banks by cashing in the competing bank notes themselves.
There was also a chapter on the suffolk system as a near free market central bank that increased specie redemtion by alot. The whole point i took away from that was that the free market will handle banking in the same way it will handle everything else: We don’t know what innovations entrepeneurs will make, just that they will make them.
If you give me your bicycle, then a week later I will return to you two bicycles! Well.. not actually two bicycles but two tickets. You can exchange those two tickets for a total of 3/4th of a bicycle on the market.
Fraud or normal business proposal? (or both?)
Fiduciary media is not money.
This makes as much sense as - demand to hold money under a mattress is not demand to hold money. So you have to make the distinction. In fact, you do it yourself by your own attempt to explain the difference.
So let’s be accurate here. You’re talking about demand to hold fiduciary media, and not money in the “broader sense”.
Sure it does. you’re still cutting back on consumption. You’re saving! And as Mises showed, the changes in prices will coordinate a lengthening of the productive structure just like if the money was loaned out. Hoarding has the same effect on the structure as investment. hoarding is saving.
Which legislation?
The one that allows them to lend out the money while still obligated to fulfill their contractual obligation of liquidity on demand.
Show me any other business under current law that can do this without committing the crime of misappropriation.
If you can show me any other business, I may condede your point.
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 and demand 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.).
Fiduciary media is money in the broader sense
Money in the broader sense. Everything commonly used as money or readily convertible to money at face value. Money in the narrower sense and all money-substitutes (q.v.), including token money and fiduciary media. NOTE: While the term “money in the broader sense” includes both money in the narrower sense and all forms of money-substitutes, the quantity of money in the broader sense excludes any duplication of claims to money in the narrower sense and such money in the narrower sense that is held as a reserve against such claims. Money in the broader sense is the basic economic definition of money, as distinguished from legal definitions. It is the sense in which the term “money” is used in discussions of the problems of catallactics (q.v.) and the money relation (q.v.).
Banks loans only come from savings, money under a mattress isn’t in the bank, so it cannot be loaned out. The market co-ordinating as if the money was loaned out doesn’t change that clear fact, so again it poses no problem for MET.
The contract does that you sign.
Show me the actual law granting privileges.
..isn’t it crazy how millions of children (including myself) have been brainwashed with the Scrooge McDuck myth; where he has a whole warehouse full of money and it never circulates.
And this definition you chose is engraved in some holly script? I don’t get it. Your definition is wrong. I can do the same and we’ll get nowhere.
By your own account, you distinguish between cash and fiduciary media. So why are we arguing over this? Banks can’t respond to demand to hold money, but only demand to hold fiduciary media. Why would you possibly insist on not making this distinction when you acknowledge this yourself that the two are not the same from the bank’s own perspective.
That’s not what you said before:
These children are now running the show.
Sorry, I like Mises’ terms. You are the one making a big deal over my (appropriate) use of the term money, perhaps you should accept the definition or provide a better, more correct, one.
Fiduciary media is a form of money, so you aren’t saying a thing. There are other forms certainly, you having a problem with generally accepted terms seems like the only issue here. You already know what is meant (I assume) so there really isn’t anything to be gained from this.
You’re right, I had to elaborate, earlier I assumed we were talking about banks and loans (you know, generate interest, make loans). I’m still waiting for a point.
And Mises makes the distinction between “money in the broader sense” (cash + money substitutes + fiduciary media) and the different sub components of that money. They are not always treated the same.
The point is that demand to hold money and demand to hold fiduciary media are not the same thing.
And arguing that holding money can earn interest in a fractional reserve system is false. It is only when one wishes to hold fiduciary media. It is an important distinction because in such a system of FR free banking, one is still engaging in the risk of investment when holding fiduciary media. This doesn’t qualify as hoarding or holding money.
DD5 are you trying to make a point or not?
If you mean the demand to hold coins (a form of money) isn’t the same as the demand to hold fid. media sure, but since fid. media is money they can mean the same thing until further elaboration.
The fact that there are distinctions between fid. media, and money substitutes doesn’t mean I used the term money or money in the broader sense incorrectly.
Which leaves me with:
How can it possibly not qualify, given the fact that fiduciary media is defined as (a form of) money. You have yet to put forth an actual alternate definition of money, you are just loosely using it to mean “not fiduciary media.” If specifics are important to you, act like they are important by example. And your first sentence is false. Holding money (as in putting it into savings or depositing (a call-loan) it into a bank, and not stored under a mattress) can certainly earn interest. You risk investment just as any other person who puts their money into a 100% savings account, its loaned out, there is always a risk, so what? Obviously, if nobody wants a loan then you won’t earn interest but that isn’t an FRB problem as much as it is a world problem.
Exactly, but that is a time deposit and not a demand deposit where a person wishes to hold cash and places it for safekeeping.
Here is the point:
You keep conflating investing with holding money as if they were the same thing. They’re not! You are either holding money or investing it.
The often heard claim of “why would you hold money in a 100% reserve bank when you could earn interest in a FRB bank” is a fallacious dichotomy. It’s tantamount to saying why would you hold money when you can invest it. You practically have to reject or ridicule the concept of demand to hold money and basically Austrian theory on money and credit, in order to make such a claim.
FRB is perfectly legitimate, as long as banks can fulfill all of their contractual obligations, without resorting to coercion, either directly or indirectly. However, it may not be practical under this restriction.
That is why its a “demand deposit” as in call loan. Its purpose is to to store money, earn interest, while still having his funds available (to be removed from investment). The difference is between the loans made (short-term vs long-term) which is also presented in the different interest generated. Their isn’t any conflation, they are different only in degrees.
As long as we agree that FRB would basically not exist in a free market i’m fine.