It’s fraudulent; the debtor must be able to pay back the loan on demand, as the contract establishes.
And being pro-gold isn’t necessarily a bad thing, as long as he understands that fractional resrve banking is necessary.
That said, I think Garrison makes a few fundamental errors in his thinking here. One, he frames the debate into two camps, those that want central authority and fiat currency and those that one decentralized authority and gold currency. I, however, want decentralized authority with fiat currency. So where do I fit in?
Also, he seems to characterize any other side that rejects the gold standard on the basis of liquidity expansion for the reason that we get it wrong in our terms of defining monetary stability. Well, maybe most economists think that constant price level = monetary stability, but I don’t. I think a free market for currency where demand for money adjusts to supply = monetary stability.
To the FDIC comment. No, I wasn’t referring to the FDIC. I was referring to the very concept of deposit insurance.
Imagine a corporation currency where the corporation controls the supply of money for banks as a private lender of last resort. This is a deposit insurance, but it’s also free market.
Perhaps you misunderstand him? I don’t know precisely what you’re referring to, but “fiat”, by definition, requires a central authority supporting and enforcing it.
That’s not what you said even one page back. You gave up on creating bull markets through monetary expansion that quickly?
What is the purpose of this intellectual dishonesty?
Of course, you neglect that monetary fluctuations are the result of changes in the reserve rates banks. When excessively loose reserve policies lead to an increase in reserve levels and a contraction, your “solution” is to use even looser policies to prevent the correction from happening. How is that not Keynesianism?
Give me a break!
This guy doesn’t know what he’s talking about. He claims that Hayek wants “neutral money,” or no deflation/inflation, aka “stabile prices.” I think he’s confusing Hayek with Friedman, and Mises with Fisher. Mises/Hayek don’t care about rising/falling prices, they only want prices to adequately and accurately reflect the current economic condition, so that they act as real-time facts, market signals.
First, I don’t know what you’re talking about as far as being intellectually dishonest. I have maintained the same point and my allusion to the twenty year bull market the world has enjoyed was one showing that monetary policy, though not perfect and not fitting exactly what I describe as ideal, has gotten better and more sophisticated facilitating for quite a sharp period of growth. I’ll take 20 years of prosperity over doing the exact opposite of what Hayek considered to be an ideal policy for dealing with recessions.
Second, no, what you describe is not only not my position, it’s not really Keynesian either, it’s more monetarist than anything.
Third, that isn’t my policy proposal at all. My policy proposal is to let the correction happen - as Hayek understood - naturally and swiftly, but to keep the money supply constantly in toe with the demand for money.
Which doesn’t happen without severe consequences unless the monetary system is in equilibrium.
The “monetary system” is in equilibrium when interest rates are at their natural level, when the actual supply of differed consumption equals demand for investment, or at the rate at which capital goods are exchanged without money (meaning when the government/banks are not printing/deleting money). The economy is in equilibrium only when prices are allowed to reflect the current economic condition; meaning, no intervention/tampering. Re-read Hayek, Mises, and Rothbard. It’s the Chicagoites who believe that the money supply must expand in order to keep price levels the same, or “stabile.”
At first I thought you were just trolling… This might clear it up for you:
“I wish only to remind you of one further reason why it seems that, in the case of money, in contrast to any other good, the question of its value in general is of no consequence. We are interested in the prices of individual goods because these prices show us how far the demand for any particular good can be satisfied. To discover the causes why certain needs, and the needs of certain persons, can be satisfied to a greater degree than others is the ultimate object of economics. There is, however, no need for money in this sense–the absolute amount of money in existence is of no consequence to the well-being of mankind–and there is, therefore, no objective value of money in the sense in which we speak of the objective value of goods. *What we are interested in is only how the relative values of goods as sources of income or as means of satisfaction of wants are affected by money…*The problem is never to explain any “general value” of money but only how and when money influences the relative values of goods and under what conditions it leaves these relative values undisturbed, or, to use a happy phrase of Wicksell, when money remains neutral relatively to goods.” (page 221 Prices and Production)
Again, the way he uses the term “neutral” is completely different than the way you’re using it. He doesn’t mean a stabile price level, he just means one which isn’t disturbed by certain externalities (FRB). Where the value of money is solely determined by marginal utility, and nothing else (the rate of interest/money growth).
No free banker disagrees with this as far as I know.
I don’t care about articles which completely misrepresent Mises’ and Hayek’s positions, read them directly for yourself. Hayek repeatedly trashes the pure mechanical approach to quantity theory, and thoroughly criticizes Fisher in lecture one of Prices and Production.
“The banks could either keep the demand for real capital within the limits set by the supply of savings, or, keep the price level steady; but they cannot perform both functions at once.” (page 218 Prices and production)
So the bankers can either restrict themselves to the supply of savings in order to keep the price of capital accurate, or they can expand the supply of money in order to keep prices the same; but they can’t do both. So what the hell are you talking about again? Do you think you’re an Austrian?
People need to start reading Austrian literature before they come here and start talking nonsense.
Really? So you think if someone promises you that you can withdraw your money at anytime you want to, and then when you go to withdraw it, they do not have it, that that is not fraud? Wow.
How is it necessary? If I want to lend people my money, I do not need a bank to do it…
You should stop trying to equate fractional reserve FRAUD with free banking. It makes as much sense as saying “freedom is slavery”.
In a free market, those banks would be subject to runs, with no central bank to bail them out. I’m not saying every bank would be 100% reserve, just that the closer the reserve is to 100%, the less likely the bank will be driven out of business. The only bank completely immune from insolvency due to a run is one with 100% reserves.
Fiat currency is, by definition, impossible in a free market.
I should have elaborated. It is necessary to keep a modern growing economy modern and growing. If you want to live in an agricultural society where people rarely go more than 10 miles in a week, then I suppose full reserves could work.
OK. This is the last time I’m actually going to respond to you because you’re beginning to annoy me.
I’m not talking about stable prices. I’m talking about supply and demand. Period.
Then why haven’t banks in the Bahamas gone under?
Shouldn’t people who post in this forum have at least a PASSING familiarity with economics ? I know anybody can use a computer to post stuff in a forum, but enough is enough…