Accidentally edited by Thedesolateone
time.
I know, but clearly there’s an effective “price” of money at any time.
Oops
Did I just edit your response to say what I wanted to say?!
Bad economics, this. Demand for money isn’t “infinite,” demand is never infinite, because resources aren’t infinite! To demand something, you have to be willing to fork over somne wealth or current income to get it! To demand money, you have to be willing to refrain from spending it on other things.
…unless. a bank will imagine it can use someones money twice and loans it to you… hey…
The quote from Hoppe about conservativism and libertarianism illustrates his way of reasoning in all its naked glory: a sweeping assertion, emphatically stated using pretentious terms, that happens to be either meaningless or just plain false. You might as well substitute “black” and “white” for “libertarianism” and “conservatism”: the statement would remain equally insightful.
Admittedly, the quote from Hoppe is at least less obnoxious than that from Aquinas, praising the burning of persons for not holding the right beliefs! Or perhaps Hoppe has proven that Aquinas’ view is really perfectly consistent with libertarianism!
why do you prefer to discuss qoutes out of context when you could be discussing criticisms of arguments that you are party to?
I could not find an accessible response by White either. But surely, you should be able to comment on it yourself since you are clearly relying on this fact. Rothbard’s analysis is crystal clear. It is only a matter of disputing the actual historical facts. The facts as presented if taken to be accurate, can only lead to one conclusion: The free banking in is a myth.
There is therefore no reason to assume that FRB could flourish in a free banking system. Mises and later Rothbard showed that free banking would lead to a hard money near 100% reserve banking system. Can you at least show in theory (Praxeology) that such a system could flourish?
Proffesor White is lecturing about free banking at the FEE sumer seminar in NY. I want to go, just so I confront him on this issue.
Well, I’m doing both, aren’t I? But really, these little quotations are too revealing to pass without comment. And there was a thread going about libertarianism, was there not?
I was being rhetorical.
DD5, you can’t derive an empirical fact “praxeologically”–that’s what history is for! So of course I can’t “prove” theoretically that fractional-reserve banking can survive in a free market–but on the other hand I don’t have to! And yes, I know both Rothbard’s article and White’s response well enough to say that the former is perfectly misleading: in no important respect did the Scottish system depart from genuine laissez-faire; and in it fractional reserve banking emphatically did flourish. No amount of praxeological deduction, or repeated contrary assertions, can alter that truth! Rothbard simply persused the sources for any “dirt” he could find to try and soil the Scottish system with–although he wrote as an economist he was in fact a muckraker down to his toes! But he didn’t find much, and what he found he exaggerated or distorted. he said that the Scottish banks relied on the bank of England for last-resort loans, whereas generally they lent to it–and not the other way 'round. (One or two did once borrowed, but not during an emergency–just some normal business.) He claimed the system depended on unlimited liability, whereas the chartered banks, some of the biggest, had limited liability. And so on. (I’m relying on memory but this was the gist of it.) Of course the Scottish system didn’t involve pristine laissez-faire. Whatever does? But there’s absolutely no evidence to suggest that the public’s great confidence in Scottish banks depended on anything save their efficiency and stability over the course of many decades.
But suppose you don’t want to take the Scottish case seriously. Then I could say the same of Canada, Switzerland, and numerous other instances of free or relatively free banking. On the other hand, 100-percent reserve banking exists almost exclusively in the minds of about half-a-dozen living econ. Ph.D.s. It was never of much importance historically, because fractional reserve banking clobbered it in the marketplace, and did so without any need for state assistance. Yes, such assistance ended up corrupting it, and very badly. We all agree on that. But the claim that fractional-reserve banking was corrupt all along is just so much mental bilgewater.
there are two distinct questions, whether FRB can persist in a market, and whether its actions breach natural law.
if the contracts are to be made explicit lend to banks on short call with risk of default basis, then as acknowledge FRB can operate in harmony with natural law, it is not to be indicted on moral grounds anymore than any gambling instituion is. and the fact that it is in a freemarket will necessarily dampen its rapacious moneyexpansion to less than one would expect from a socialised banking system, i.e. fed reserve version of it.
so i say there are two forks one can take.
A)suggest FRB is a worthwhile system for entrepeneurs to consider launching, but they must be explicit in their advertising and contracts with customers that the customers are making risky call loans; then there might come to pass legitimate institutions of the gamblebank nature, likely be in competition with weplaysafebanks.
or
B) suggest that FRB is a worthwhile system for entrepeneurs to consider launching, but they can have bizarrely confused contracts, like ‘your money is kept safe for you on demand’ , ‘we pay you interest by lending out your money when you dont demand it’ and this is to promote illegitimate contracts, and fraud, etc.
im not sure which of the two FRB supporters are pushing for
Heh. Mr Selgin, my quote of Aquinas is there because I totally disagree with Aquinas and with people who see Aquinas as an advocate of natural rights.
As to Hoppe conflating conservatism and libertarianism, I strongly disagree with his point of view too (I don’t quote Hoppe, Giles does).
For the record, I don’t think FRB should be outlawed in a free society, though I believe FRB entails deception.
I think it’s worthwhile to investigate the flaws in FRB from an economic point of view - the idea that there’s something wrong with FRB is way older than Hoppe or Rothbard - there might be some truth in it…
Selgin,
The last thing I want is to be dogmatic about the issue.
I didn’t mean for you to derive praxeologically an historical fact. I asked if you can derive praxeologically how such a system can work in theory, in a true free market system.
If you can’t provide a theoretical explanation to how FRB can evolve in a free-market, then you don’t have a theory at all. That is, in the scientific sense. You cannot simply observe an event in history and deduce from that anything scientifically meaningful. You must be able to explain what you observe. You could have observed a rare coincidental event that appears as though FRB evolved in a free banking system, or more likely, that the system was not as free as you portray it to be.
Here are just 2 examples from Rothbard. I would like to understand what is misleading about them.
According to Rothbard, based on White’s own acknowledgement, Scottish banks suspended specie payment when did. Is this not true? I have no problem of you saying that it isn’t if you think that is the case, but please don’t tell me that suspension of specie payment is not a departure from genuine laissez-faire.
Also, according to Rothbard: “In fact, in a book that Professor White acknowledges to be the definitive history of Scottish banking, Professor Sydney Checkland points out that Scotish banks expanded and contracted credit in a length series of boom-bust cycles, in particular in the years surrounding the crisis of the 1760s, 1772, 1778, 1793, 1797, 1802-03, 1809-10, 1810-11, 1818-19, 1825-26, 1836-37, 1839, and 1845-47. Apparently, the Schottish banks escaped none of the destabilizing, cycle-generating behavior of their English Cousins”
If the above is true, then doesn’t it imply that FRB didn’t work? The system was as cyclical in nature as the one in , as expected.
Hayek use to refer to “forced” savings, as an explanation by some economist as to how FRB can be productive, namely that it is real savings, only it is “forced” because real wealth is still transferred by inflation. He of course, refutes this idea. But doesn’t’ the “forced” imply fraud? How can you justify savings that are forced on individuals?
On the contrary, people want a bigger economy, which necessitates more capital goods and more innovation. Often, however, they are not willing to make the sacrifices for that kind of economy by saving. FRB is able to side step this problem by funding the long term projects so vital to economic prosperity. Of course, FRB would lead to occassional crises, but these crises would not be nearly as large as anything we’ve seen recently, since credit expansion would be limited by the market to a great extent and because corrections would last no longer than 9 months, most likely. I doubt that in a free market unemployment would ever exceed 7% either.
How is FRB a scam if both parties involved voluntarily agree to participate in it and understand the risks?
As I’ve already explained, tech companies are long term projects, low interest rates make long term projects more viable, thus, low interest rates would spur technological innovation. The dot com and telecom bubble in the late 90s and early 00s is an example of this. The dot com/telecom bubble has laid much of the foundation for today’s internet. Without the thousands of miles of cables laid down by telecom companies, the internet would be much slower and less efficient.
Here’s an interesting note by LeFevre. It seems that in ancient times, banking did not have ‘assistance’ by the state…since banking was an outright department of the state.
In modern times FRB did not need state assistance…yet it received state assistance…Odd
The banking industry is a cartel and that fact lets bankers easily create so called fiduciary media. They are privileged but they never asked for any privilege…Again, odd…
So, the banking system being ‘corrupted’ sounds as if the poor innocent bankers were deceived by the evil government ? When in reality, it’s kinda obvious for libertarians that mercantilism was and is rampant ?
Do they ? Or are you just assuming what you need to prove ?
Babbling. I suggest you give up Mises.org and join Keynes.org.
The 90’s laid the foundation, perhaps. But not the bubble. The bubble is an over-investment/mal-investment. There was a real growing demand for technology, that is, there was real savings also to fuel this technology growth. But thanks to “credit out of thin air”, we over-invested and over-speculated due to artificially low interest rates. Why else would so many technology and .com companies go out of business in less then a year. worthless start-up companies were overvalued due to the speculative boom. cheap money found its way into worthless .com start-ups all because their speculative value was expected to go up despite the fact they had no real product. It was the housing bubble in technology, thanks to central banking and FRB.
If I put my money in a bank which I know practices fractional reserve banking, then yes, they do.
I suggest you stop trolling before you get temp banned. What I said was based on Misesian and Bohm-Bawerkian theory of interest rates and capital structure. It is also derived from the unorthodox Austrian economist Joseph Schumpeter.
referring back to my post https://forum.freecapitalists.org/t/how-do-selgin-white-defend-frb/5555/92
do you imagine paying into an FRB account of type A or B ?