Obviously, you have the choice to withdraw your gold and deposit it in another bank.
Of course it does. No one denied that. How does affect what has been said?
But the physical Gold is being devalued. If the Grocery store treats in the exact same way your 1oz gold coin and 1oz gold claim ticket, then the claim tickets are parading as real gold substitutes. They are obviously not. The owners of the physical Gold are defrauded regardless if they give a dam about any bank notes. Do you see what I mean? There is no choice here. The gold owners are victims of counterfeiting. No contract can remedy this problem.
Can you say “strawman”? If you use notes from a bank that contractually obligates itself to hold 100% reserves, then its guilty of contract violation and possibly fraud. If it is one that explicitly states it operates on FRB and you go ahead anyway, you’ve no cause for complaint, because that is the condition of the deal. Counterfeiting and FRB are not the same thing. My point was that in a free market no one can be forced to participate in a scheme they don’t like and if they are they can take action against it. Voluntarily entered into FRB is not one of those things.
It makes no sense. The grocery treats coins and claims in whatever way it wishes. The owners of actual gold still can do with their property whatever they want.
Not quite. Inflation IMO is expansion of the money supply, but if one is free to drop the currency at any point and adopt one which is based on 100% reserves and the banks are allowed to fail, there’s no robbery. For prices to rise businesses will have to choose to accept the FRB notes, and if they believe they’re of suspect quality they might not or they might heavily discount them. So the increase in prices that obtains in the current system due to increases in the money supply might not occasion if vendors can simply refuse to accept the currency. Legal tender laws IOW.
There would be multiple issuers of currency, so I’m not sure how the gold itself would lose value if what the bank is doing is reducing the value of each unit of credit or whatever form of currency it’s using. The value of the gold itself should remain the same ceteris paribus (unless there is an increase or decrease in the supply of gold), and so when the depositor takes out his gold from the bank the original value exists. The value of the banknote is irrelevant, in this case, because the depositor has opted to redeem the original gold deposit (as allowed in the contract).
The only way I would see fraud is if the bank necessitated the conversion of banknotes back into gold. That is, say that for your deposit of 1,000oz. of gold you got $100 (let’s just assume that the dollar is this particular bank’s private currency). Inflation occurs and your $100 is only worth 800oz. of gold. You go redeem your original deposit of gold and the bank gives you 800oz. as accorded to you by the ratio between the note and the gold. That is fraud, in my opinion. The contract should return the original deposit in weight, not in value.
The currency is a claim ticket for the full amount of deposited Gold. When it starts to ciruclate, it is treated as a gold substitute. So the total money stock of the money is the physical gold + circulating notes pyramiding on top of Gold. Money supplied has increased! Physical Gold is devalued for the precise reason that the subsitutes are based on the deceptive element that they are gold substitutes.
And that’s what we’re debating here. Fractional Reserve Banking backed up by a real commodity money. Not competitive bank notes not backed by anyghing.
If you deposit 1,000oz of gold, you’ll get a claim ticket for 1000oz of gold. Inflation occurs, say the bank issues 10 more 1000oz claim tickets for a total of 10,000oz worth of tickets pyramiding on top of the 1,000oz physical gold. There is 10,000oz worth of claim tickets in circulation treated as genuine gold substitutes, which are actually involved in exchange. Owners of Gold who have not agreed to the deposit contract have been defrauded. You are focusing only on the 2 parties: depositor and banker and forgetting the 3rd party; all other owners of gold not involved in your FRB deposit contract. If I recall, de Soto himself makes this point in an article. I will try to find it.
You aren’t making any sense.
Giving people copper and telling them its gold is fraud, giving people a claim for gold with a clause and telling them its “a claim for gold with a clause” they are passed traded only as what they are.
What clause? You’re not making any sense! It is a fact that people using these notes in exchange do not know of any clause, because if they did know of a clause, they would treat your notes different from the real money commodity. So either your bank notes circulates as a full substitute for the Gold or it doesn’t. And if it doesn’t, it MUST have s a different market value then the money commodity, for they are now different products. But if they are different products, then we are no longer talking about Fractional Reserve banking. No matter how you look at FRB, it’s illogical! From every angle! ########
I think it was you who refused to accept that, in fact, money is created out of thin air in FRB. Even White or Selgin acknowlege that money is created out of thin air.
Very well. If counterfeiting and FRB are not the same thing, then the bank notes would not circulate as gold substitutes, and they would have a different market value then physical gold. That is, your 10oz claim ticket with a clause would not be worth the same as a real 10oz gold coin. Would you agree?
Stop. You are conflating the current system with that of free banking. Jon made the distinction at the very beginning of this and just re-iterated it.
You’ve confusing fiduciary media with money-certificates (among many things). Its obviously a full substitute for people willing to accept it, otherwise they wouldn’t, which means it isn’t fraud. Stick to the context.
Yeah, money isn’t created out of thin air, Selgin and White acknowledge that fiat is created from thin air, not fiduciary media.
And I have said in the beginning that competitive currency issued by who ever in a free market is not fraud. Nobody claims that! But when commodity money such as gold is used as a base to pyramid claim tickets that are paraded as substitutes, then that is FRAUD. If they are not paraded as substitutes, please answer the question I just asked Jon.
Yeah, that makes no sense. FRB isn’t fraud unless it uses a commodity base? Clauses can’t cover commodities?
It depends. The bank may have a negative reputation so their notes will probably trade at a lower value. If there is enough confidence in the bank the fiduciary media will trade at face value.
Without deception, how does a 10oz claim equal to a 10oz gold bullion, when there are 10X the amount of claims then the actual gold?
If they trade for face value, then they are treated as gold substitutes. You cannot say that a 10oz claim is equivalent to a 10oz bullion and maintain that they are not substitutes. Market sees them as equal! It cannot see them as equal if the notes are not paraded as substitutes, that is, for every 10oz claim there is a 10oz gold bullion in some vault. Your argument is full of logical contradictions and economic absurdities.
By the terms of agreement. How does a 10oz claimequal to a 10oz gold bullion, when they are full reserve. Its still an agreement and there is still a risk.
What argument are you talking about I never said fiduciary media couldn’t be treated as a substitute. I said using fiduciary media isn’t fraud. If people accept claims to gold with a clause at the value of gold then they are prima facie a substitute. I think I clarified this:
If there is no deception, why would a claim for a chair be treated as a substitute when everybody knows that there are about 10x the amount of claims then actual physical chairs? It follows then that if they are treated as substitutes, they MUST be based on deception. It’s a logical conclusion!
If they are NOT treated as substitutes, and they are worth less, then how can the banker, when the claim is presented, trade the claim ticket for the face value amount of bullion gold? You run into a logical contradiction, an absurdity!
It follows that FRB can only be practiced by deception. You should reconsider.
You mean would-be recipients may discount its value depending on the soundness of the issuer? Yes.
Again, you are confusing the theoretical possibility with your opinion of how people will treat them. It clearly isn’t fraud as defined by Rothbard as a "failure to fulfill a voluntarily-agreed upon transfer of property. The fact that people simply trust the bank to fulfill their obligations seems to allude you. And again, if you really believe what you are saying then you must be against all forms of money-substitutes as why would you necessarily believe your claim will be fulfilled at all?
That’s not a logical contradiction, its a problem for the bank.
You should stop setting up completely false claims and then making “logical” conclusions from them.
Well, yes and no. Clearly they’re different instruments, but they’re both forms of inside money. The key point is that even if the government has legal tender laws there’s still competition in the production of inside money. I’m not saying that legal tender laws are irrelevant, clearly they’re not, but the point is that they’re not sufficient to ensure that fiat currency is accepted, nor is removing them sufficient for fiat money to be dropped as a form of money (what do you think would happen if the government declared dodo bones to be money?)
For what it’s worth, my opinion of Rothbard isn’t nearly as low as you think it is.