It seems that in a 100% fractional reserve standard which does not apply to time deposits, that time deposits create the same money creation and therefore business cycle problems as non-100% Fractional Reserve Banking. I understand the degree will be less, but why would the effect not be the same?
Very good point. We discussed it recently in another thread. The same way with demand deposits we could make transactions with time deposits. Altough that would be of lesser degree because they are less liquid, the effects should be the same. If one makes for business cycles the other should too.
Wrong.
100 % reserve means that deposits’ and loans’ maturities are matched so resource misallocation is not possible.
Whether they are matched is a question of enterpreneurial decision made by the bankers. Resource misallocation is therefore very much possible.
Wrong. Matched here means that if Smith puts his money in the bank for six months, Jones can borrow that money for six months. Because, you know, ‘things’ like money can’t be both loaned and available on demand. This has nothing to do with ‘entrepreneurial decision’.
That is why only some of it is available and only some of it is loaned out.
In fractional scamming, by definition, reserves are not enough to cover all deposits.
That’s wrong as well. And indeed there was a thread in which it was explained why timed deposits are different than demand deposits.
They only have to cover whatever is demanded at any time. I am not holding my breath that you will ever undersand that.
and if they are all demanded at any time then the bank fails, and this is evidence of prior criminality.
No, that means bad business decisions were made. Do we really want to go down the illegal to fail road?
there are bad business decisions that as you say are just entrepeneurial errors. it would be a horrible mistake to prosecute them for illegality, they are not illegal, it is not illegal to fail.
but also criminal decisions are; i would think, bad for legitimate business prospects, and so there is a definite subset of bad business decisions that are illegal, because they were criminal in their own right. multiplying claims of ownership over some quantity of money is criminal.
I’m not holding my breath that you’ll ever understand why inflation is a bad idea from an economic point of view, not to mention detrimental for property rights. You’re also unable to understand the crucial difference between commodity money and fiat money.
Now, as far as I’m concerned, there’s no point in outlawing the scam you advocate. If there were no state to prop it, it would be wiped out in no time. Hell, even today, despite massive subsidies, the financial system is almost bankrupt.
This baseless statement apparently is what it always boils down to. Without that it becomes obvious that banks always only loan out what they have. And the pyramid of credit is just that, loans after loans, which is totally fine.
yes they are lending out what they have in their posession, but what they have are things that they gave no right to lend out, given the fact that they have already promised to keep it available for the original depositer on demand, no ifs or buts.
Yes, on demand. Before the demanding actually happens they have no obligation to keep anything.
so for you ‘they only have the obligation to keep it when the demand happens’, but then its too late, and yet they’ve done nothing wrong, not failed any obligations.. so by your logic, the bank never have an obligation to return a deposit!
What the hell do you mean by too late? If they can pay due to sufficient reserves when someone asks then fine. If not then breach of contract should be prosecuted.
- That’s not possible, due to the very process that FRB sets in place.
- That goes against the nature of the contract, ergo it is fraudulent.
Yet that is how things worked almost all the time.
Not if this is just what the contract says.