Because you cannot sit on a claim to a chair. Claims to gold however are substitutes for actual gold coins. So this is a nonsequitur.
You are clearly avoiding (or evading) the logical incosistencies that arise in order to justify the soundness of your claims at all costs. A claim to a chair can only be a substitute if there is 1 claim per chair. If there are 2 claims, it is no longer a substitute but something else! If you cannot follow this simple logic, then we have reached a dead end!
Only because the market is fooled into believing that for each 1oz gold claim there is a 1oz gold bullion in a vault! fooled is the key word! Basic economic theory will tell you that if they weren’t fooled, the 1 oz gold claim would be worth less then a 1oz bullion due to their being more claims then gold. It’s basic monetary theory! If you stop thinking backwards for a minute (from “known” conclusion to theory), maybe you’ll see this.
You are merely re-stating what you have yet to prove.
1). A claim to a chair can only be a substitute if there is 1 claim per chair.
2). There are two claims to a chair.
Therefore
3). Its not a substitute.
Check premise 1.
The claims are nothing more than IOU’s. Of course, a person holding a redeemable bank IOU is free to spend or cash the IOU at any moment; but until the IOU is spent or cashed, holders are not saving. it is no less engaged in an act of saving than someone holding a bond having the same face value. There is nothing fraudulent or illogical about there being more IOUs in existence at any moment than of what the issuer promises of them in existence at any moment than the total supply of what they promise to deliver. The IOU is simply an acknowledgment of the banks own debt. If you want to re-define money-substitute to only equate full-reserve claims I could really care less.
The denial of premise 1 is clearly proof of how your entire argument is based on false logic. Premise 1 is as self evident as a square is a square. And if the market accepts the square as a circle, then it must be fooled (by some optical illusion or other deception) that it is a circle. The deception does NOT make the square a circle. But that is exactly what must happen in order for your argument to work. Likewise, your “substitutes” are based on deception. All Gold owners are defrauded!
Not preceded by real savings! ########
By the way, I am responding to almost 3 different arguments that are all incoherent with each other.
Are there no substitute goods used in lieu of something else?
Gold owners have everything they had before IOUs were introduced.
And your proof is…? Premise 1 clearly isn’t self-evident if multiple people are challenging it.
Again false analogy. The market is accepting squares (IOUs) instead of circles, with the attached option to exchange them for circles with a clause. The square isn’t a circle. The IOUs are not gold. Its obvious that people know that the money held is not gold. For my argument to work, it requires trust, which is ultimately no different than full-reserve bank notes. You’ve ignored the factor of public willingness for some time now.
And you’ve yet to prove that assertion as well.
who are these people?
To prove something requires a little bit more than just an assertion, no matter how many times you are willing repeat it.
The assertion - claim to a good can only be treated as a 1 to 1 substitute for that good if and only if the recipient of that claim thinks that there is 1 good per claim. This is what you are going to deny in order for you NOT be proven wrong! ###########I’m wasting my time with you. Have a nice day!
And when you prove that if and only if your assertion may be more than just an assertion.
The IOU’s would be able to circulate at par value if the public and other banks recognized that the likelihood of the banks using the clause or having trouble redeeming the IOU’s. Again, I’ve already mentioned the public’s willingness and trust being an important factor. And you’ve repeatedly ignored it.
But the point is not ‘perception’ and ‘trust’ but reality. You can invoke ‘subjective’ value all you want to muddy the waters, but the cold hard fact is that the amount of goods is fixed and that you can only magically create IOUs, not the stuff that the IOUs buy.
And? You can’t magically create IOUs that people will accept.
Yes, the amount of goods is fixed, hence the option clause, to defer payment. The IOUs are as grounded in trust and perception as any warehouse receipt.
Yes you can, for a while. It’s called fraud.
So that a default is not really a default eh ?
Nonsense. Reality is not what people wrongly think it is. A warehouse receipt represents a real amount of goods. Trust doesn’t enter the picture.
At any rate, advocates of fraudulent reserve banking don’t really understand that in a real free market nobody will accept their fraudulent notes. In a free market, good money drives out bad money.
Oh, sure. but that’s not a strike against FRB necessarily.
Its an agreement to possibly defer, thats the option. Defaulting is when the bank cannot pay you back period, which would apply to savings accounts as well.
You trust that the warehouse will honor the receipt and agreement.
I couldn’t agree more.
But this is exactly the crux of his argument, that it is! Talk about radical value theory. So radical, you overflow and find youself back in Statist universe.
Do you even try to make sense?
I haven’t even read one passage of yours where you adequately show comprehension of my argument. Now its somehow statist?
One last attempt:#### Assume free market ##### Why would a claim ticket for ‘1oz of Gold with a clause’ have the same value of a claim ticket for ‘1 oz of Gold, no clause (100% backed by Gold)’ ?
Right. One can misuse subjective value theory and render the concept of fraud meaningless.
The fact that people accept an IOU allegedly proves that the IOU is no different from hard currency. Except that it doesn’t.
I guess madoff was a real capitalist, until it was found out that he actually was a scammer…
As I’ve repeatedly said, individuals trust that the banks can/will redeem it.
Again I ask, why would a claim for 1oz of Gold (100% backed) have the same value as the physical oz of gold?
(The answer is the same)