Not really, we could have a local or business based fiat currency (I don’t think this is really viable though). For example, Wal Mart could suddenly decide that their stores would print and only accept ‘Waltons’ - and if the exchange rate (at least for what you can buy at Wal Mart) was favorable to that of other free market money then it could be in the interest of some person to accept the completely fiat money.
Fiat means decreed by government, so no, walmart can’t issue fiat money - unless they forced people to use it at the point of a gun like the state does.
You are using “fiat” to mean “fiduciary” and sometimes people do use the word that way, but it’s not totally accurate IMO.
stores often do print ‘vouchers’. but people only accept them as gifts, ive never heard of a ‘trend’ of them being accepted as payment by 3rd parties, traded as currency…
As we are using differing definitions for fiat, I will retract my previous statement.
If you want to live in a society with booms and busts, then by all means, FRB is great. But I am sure you will deny reality. If you haven’t noticed, the U.S. job market has not grown at all in the last ten years, as of today. I do not believe the stock market has grown for the last ten years either, as of today. But you go on and keep on spouting unjustifiable claims.
First, fractional reserve banking is not what causes business cycles. Disequilibrium is what causes business cycles - though I would rather live in today’s world than in 17th century colonial America.
Second, I’d attribute the slowing of private job growth to non-monetary reasons; I don’t know how you can claim investment hasn’t grown though.
Shouldn’t people who post a reply in a forum at least have a PASSING explanation for their responses? I know anybody can use a computer to post stuff, but enough is enough…
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Feel free to read some of the free online books available at mises.org and come back when you have an understanding of economics.
Actually, I think it would be a good idea for some of the people on this board to "re-"read those books - minus the Rothbard ones. To see exactly what the Mises-Hayek theory is and how it relates to banking.
I.E. Not defining inflation as any increase in the supply of money when Mises defined it as an increase in the supply of money past the demand for money.
Take Rothbard out of the equation and “Austrian” economics suddenly looks a whole hell of a lot more like the type of economics George Selgin, Roger Garrison, Lawrence White, and Peter Boettke are doing.
Well, you just assert that no fractional reserve banking means the economy would be reduced to a small-area agricultural market/society. I take it you are exaggerating for effect. Even taking exaggeration into account the claim is beyond silly. And is not proven either - just asserted.
In reality, no FRB means sound money and sound credit - key requirements for any working market. And in the absence of FRB there would be no booms and busts - instead there would be a more orderly and sustained growth.
If you want to know why that is so, you need to study the basics of money and credit. Repeating wrong macroeconomic jargon about “demand for money” and “equilibrium” won’t cut it.
Not according to Hayek or Mises!
Doesn’t sound very sympathetic to bank notes does it ?
Also, wasn’t Mises a “gold bug” … ? Indirect Exchange : The Gold Standard
So when Mises argued against laws banning fractional reserve banking on the basis that it could lead to demand shocks for money, he did so because he thought that banks weren’t ever going to have to increase the supply of money outside of a 100% backing?
I get that Mises thought given the advantages of full reserves and fractional reserves he thought the full reserves had better alternatives, but it seems he wanted the best of both worlds and if he were shown the modern data and was familiar with other historical examples, I think he would probably conclude that prudent banking in a fractional reserve system is a fine idea.
You’re not an Austrian, you don’t know what you’re talking about, and you’re wasting your own time.
How many times do I have to quote from Theory of Money and Credit, and Prices and Production directly before you close your mouth? Maybe I should copy and paste both books entirely?
“It was the aim of the Currency School to prevent the periodical recurrence of general economic crises by setting a maximum limit to the issue of uncovered bank notes (all notes 100% backed by gold). An obvious further step is to close the gap that was not reckoned with in their theory and consequently not provided for in their policy by limiting the issue of fiduciary media in whatever form, not merely that of bank notes. If this were done (eliminating fiduciary media) it would mean it would no longer be possible for the credit-issuing banks to underbid the equilibrium rate (natural rate) of interest and introduce into circulation new quantities of fiduciary media with the immediate consequence of an artificial stimulus to business and the inevitable final consequence of the dreaded crises.” Pg 439, Theory of Money and Credit, Ludwig von Mises
"The doctrine of the elasticity of fiduciary media, or more correctly expressed, of their automatic adjustment at any given time to the demand for money in the broader sense, stands at the very center of modern discussions of banking theory. We have to show that this doctrine does not correspond to the facts, or at least not in the form in which it is generally expounded and understood." Pg 339, Theory of money and Credit, Ludwig von Mises
"If it were not for monetary disturbances, the rate of interest would be determined so as to equalize the demand for and supply of savings. This equilibrium rate, as I prefer to call it, he christens the natural rate of interest. In the money economy, the actual or money rate of interest (“Geldzins”) may differ from the equilibrium or natural rate, because the demand for and the supply of capital do not meet in their natural form but in the form of money, the quantity of which available for capital purposes may be arbitrarily changed by the banks, causing disproportionalities." Pg 215, Lecture 1, Prices and production, F.A von Hayek
*“Now, so long as the money rate of interest coincides with the equilibrium rate, the rate of interest remains “neutral” in its effects on the prices of goods, tending neither to raise nor to lower them. When the banks, however, lower the money rate of interest below the equilibrium rate, which they can do by lending more than has been entrusted by them, i.e., by adding to the circulation, this must tend to raise prices (either absolutely or relatively).” -*Hayek
"Nevertheless, it is perfectly clear that, in order that the supply and demand for real capital should be equalized, the banks must not lend more or less than has been deposited with them as savings. And this means naturally that they must never allow the effective amount of money in circulation to change… The banks can 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 preform both functions at once." Page 218, Lecture 1, Prices and production.
All of Mises’ and Hayek’s works completely refute you; not that it matters though, you’re going to completely ignore this post like you always do.
The world moved on from Mises, Hayek and especially Rothbard.
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Which part of “with no central bank to bail them out” was unclear? The Bahamas has had a central bank since the 70’s.
Neo-Austrians?