Two that I’m familiar with. But I’d have no problem with more, that what contracts are for.
I disagree with the first part and the second, again lets see this contract.
What testimony/concept are you referring to? The option clause? If you are referring to the option clause, it certainly isn’t something I thought up, its part of the contract creating the demand deposit or chequing account.
Evidence that the demand deposit contract explicitly states “warehouse” and not “call loan.”
This is actually a different debate. One was on the theoretical nature, this has turned to whether the banks are stating that they are lending out the reserves. It should be answerable (to some extent at least).
Nahhh uhh…
9. Risk, Uncertainty, and Insurance - Man, Economy and State with Power & Market p552
Entrepreneurship deals with the inevitable uncertainty of the future. Some forms of uncertainty, however, can be converted into actuarial risk. The distinction between “risk” and “uncertainty” has been developed by Professor Knight.39 “Risk” occurs when an event is a member of a class of a large number of homogeneous events and there is fairly certain knowledge of the frequency of occurrence of this class of events. Thus, a firm may produce bolts and know from long experience that a certain almost fixed proportion of these bolts will be defective, say 1 percent. It will not know whether any given bolt will be defective, but it will know the proportion of the total number defective.
This knowledge can convert the percentage of defects into a definite cost of the firm’s operations, especially where enough cases occur within a firm. In other situations, a given loss or hazard may be large and infrequent in relation to a firm’s operations (such as the risk of fire), but over a large number of firms it could be considered as a “measurable” or actuarial risk. In such situations, the firms themselves could pool their risks, or a specialized firm, an “insurance company,” could organize the pooling for them.
The principle of insurance is that firms or individuals are subject to risks which, in the aggregate, form a class of homogeneous cases. Thus, out of a class of a thousand firms, no one firm has any idea whether it will suffer a fire next year or not; but it is fairly well known that ten of them will. In that case, it may be advantageous for each of the firms to “take out insurance,” to pool their risks of loss. Each firm will pay a certain premium, which will go into a pool to compensate those firms which suffer the fires. As a result of competition, the firm organizing the insurance service will tend to obtain the usual interest income on its investment, no more and no less.
The contrast between risk and uncertainty has been brilliantly analyzed by Ludwig von Mises. Mises has shown that they can be subsumed under the more general categories of “class probability” and “case probability.”40 “Class probability” is the only scientific use of the term “probability,” and is the only form of probability subject to numerical expression.41 In the tangled literature on probability, no one has defined class probability as cogently as Ludwig von Mises:
Class probability means: We know or assume to know, with regard to the problem concerned, everything about the behavior of a whole class of events or phenomena; but about the actual singular events or phenomena we know nothing but that they are elements of this class.42
Insurable risk is an example of class probability. The businessmen knew how many bolts would be defective out of a total number of bolts, but had no knowledge as to which particular bolts would be defective. In life insurance the mortality tables reveal the proportion of mortality of each age group in the population, but they tell nothing about the particular life expectancy of any given individual.
Insurance firms have their problems. As soon as something specific is known about individual cases, firms break down the cases into subaggregates in an effort to maintain homogeneity of classes, i.e., the similarity, as far as is known, of all individual members in the class with respect to the attribute in question. Thus, certain subgroups within one age group may have a higher mortality rate because of their occupation; these will be segregated, and different premiums applied to the two cases. If there were knowledge about differences between subgroups, and insurance firms charged the same premium rate to all, then this would mean that the healthy or “less risky” groups would be subsidizing the riskier. Unless they specifically desire to grant such subsidies, this result will never be maintained in the competitive free market. In the free market each homogeneous group will tend to pay premium rates in proportion to its actuarial risk, plus a sum for interest income and for necessary costs for the insurance firms.
Most uncertainties are uninsurable because they are unique, single cases, and not members of a class. They are unique cases facing each individual or business; they may bear resemblances to other cases, but are not homogeneous with them. Individuals or entrepreneurs know something about the outcome of the particular case, but not everything. As Mises defines it: Case probability means: We know, with regard to a particular event, some of the factors which determine its outcome; but there are other determining factors about which we know nothing.43
Estimates of future costs, demands, etc., on the part of entrepreneurs are all unique cases of uncertainty, where methods of specific understanding and individual judgment of the situation must apply, rather than objectively measurable or insurable “risk.”
It is not accurate to apply terms like “gambling” or “betting” to situations either of risk or of uncertainty. These terms have unfavorable emotional implications, and for this reason: they refer to situations where new risks or uncertainties are created for the enjoyment of the uncertainties themselves. Gambling on the throw of the dice and betting on horse races are examples of the deliberate creation by the bettor or gambler of new uncertainties which otherwise would not have existed.44 The entrepreneur, on the other hand, is not creating uncertainties for the fun of it. On the contrary, he tries to reduce them as much as possible. The uncertainties he confronts are already inherent in the market situation, indeed in the nature of human action; someone must deal with them, and he is the most skilled or willing candidate. In the same way, an operator of a gambling establishment or of a race track is not creating new risks; he is an entrepreneur trying to judge the situation on the market, and neither a gambler nor a bettor.
Profit and loss are the results of entrepreneurial uncertainty. Actuarial risk is converted into a cost of business operation and is not responsible for profits or losses except in so far as the actuarial estimates are erroneous.
Okay, I don’t want to ban time deposits either. Also, I’m not comfortable with the claim that “society would do x, if they knew about x.” I know how FRB operates, and I choose to keep my money in banks (though I’m not happy with the artificially depressed rate). Holding onto this logic indirectly support paternalism/etatism in all forms. We must ban x because society is ignorant of x’s effects–progressivism in its purest form.
Point. Match. Game.
It is called game, set, Mats.
Yeah, as if there is any risk of loosing your money under all the government gurarnatees
You’re not comfortable with the claim that if society knew that x was apples, they would treat x as apples and not as oranges?
Seriously, do you just drop all sense of rational thought when only talking about FRB ? Do you all of a sudden deny laws of human action?
This is probably the worst straw man argument, bordering intellectual dishonesty. This debate is never about ignorance. It’s about contractual agreements and property violations.
By the way, are you the same “Ensuric” that called everybody a liar just a few months ago when you were debating this issue but from the other side?
So banks don’t have the contractual obligation to redeem your claim on demand and, of course, people are aware of this fact.
Wow! but I guess this summarizes your argument.
We both know that the government guarantees are meaningless. Either the government and the FDIC will default, or they’ll print the money rendering my savings worthless. In fact, my savings is even more in jeopardy now then it would be under free-banking.
Okay, so get all aggressive/irrational and entirely avoid my point. It’s simply not a breech of contract, nor does it violate property rights. It is how the banking system has emerged through voluntary transactions over time; it’s mutually beneficial for both parties. Rothbard is simply wrong, and this line of defense is entirely absurd. I find the fact that I can earn interest and have my claims redeemable on demand preferable to paying warehouse storage fees. If people are uncomfortable with the potential risks, then they are free to store it in a warehouse, or put it away for some period of time and earn interest, period.
Views change. I still have problems with FRB, but calling it fraud is a joke, not an argument. It’s the banks job to redeem claims on demand; if they can’t, then they fail. They’re going to have to liquidate assets and pay back as many investors as possible. No one here wants to end warehouses; your problem is that you know FRB naturally emerges, and you want to coercively ban it. Those who don’t understand the nature of FRB should learn, and not rely on the government to come and protect us from our ignorance (which is what a 100% rr is).
“we both know”; emphasis on “both”. You and I will have our money out of the bank long before the day of reckoning happens. Most others don’t know and therefore won’t. When they do, it will be too late.
$100 is deposited, 10 tickets for a total of $1000 are issued all claiming f****ull ownership rights over the same $100, emphasis on full ownership. But the worst part of all, they all [magically] have the ability to use the same $100 at the same time effectively multiplying the $100 by 10 for a total of $900 of new additional purchasing power.
And do you deny that these 10 tickets circulate as money substitutes when in fact they are not. Oh wait the “ignorance doesn’t justify a ban” argument. See below comment about 3rd party.
And what about the 3rd party? Oh wait, the “he has no right to the value of his money” argument. Talk about obfuscation.
How about this. A counterfeiter and the receiver of the counterfeit money mutually agree to the terms of exchanging for counterfeit money. According to you, since it is mutually beneficial for both parties, then there should be no problem. Too bad for the other ignorant people who later receive these coins and can’t spot a counterfeit gold coin when they see one. No violation of property rights is taking place. is this correct?
I don’t care about your legal jargon. Stop obfuscating the situation with all sort of irrelevant technicalities.
Are we talking about externalities and market failures now? Should I start a thread about why pollution proves the necessity of regulation and interventionism? Like I said, all those who don’t want to participate shouldn’t. They won’t use those notes, and their money will see no decline in purchasing power (even if they did use the notes, they shouldn’t see a pp decline). They’re free to hold their gold, or store it and pay a fee.
I’m not going to go over this again.
Are you saying that i have no right to defend my property from polluters.
Of course you do. I’m saying that we don’t need the government to intervene with ad hoc regulations, you know, like the Peel’s act. Likewise, if you don’t like FRB, and you feel it may destroy your savings, you’re entirely free to hold money proper, or store in a warehouse for a fee.
but FRB can destroy my savings whether I participate or not.
No. They claim that FRB is responsive to changes in money demand, which will mean that you should see perpetual appreciation in the purchasing power of your money due to productivity gains. Also, I don’t see why increasing the supply of money substitutes should devalue money proper. Gresham’s law would hold even if it did (if there was a fixed ratio). My problem with the free-bankers is over specifics and the fact that they sound like Monetarists who make pretend they hold onto the Wicksellian framework (modified by Mises). I think Rothbardians are biased when it comes to this, and hate FRB because Rothbard said it was evil. But I will never justify state intervention because of certain externalities; the market will deal with it most effectively.
Non-sequitur!
But the “game” is effectively forced on them even if they don’t use the notes. The notes masquerade as 1 to 1 substitutes like the counterfeit [copper] coins masquerades for the Gold coin. Paying a fee for safekeeping the gold doesn’t protect against counterfeiting, now does it?
Let me see if I got this right. You compare the externalities of counterfeiting to pollution?
When did I say this? What I’m saying is that once we get passed all the bs, you essentially want state intervention and regulation over voluntary free market processes.
They have a demand for the Gold (or whatever the money is), the substitutes can hypothetically satisfy this demand only because they masquerade as a 1 to 1 substitute. You can’t escape this and move to another money because they can do it for every type of commodity money that can exist.
The “demand” argument is extremely weak. They will have you believe that it is the notes that are in demand when in fact it is the money that is suppose to back the note. The public will accept the notes only because they are deceived. But of course, “deception” is a Statist term. You’d rather use ignorance. You already justified the counterfeiter.
Why? Do you believe that private property rights can only be enforceable in a statist society?
If not, I don’t expect to hear this accusation ever again! It is making you seem confused.
You sound like a Statist yourself, claiming that a unhampered market would have no regulations of its own. No one to enforce crime.
But they’re not deceived… They know that the notes aren’t money proper, and they know that the banks are lending more than has been entrusted to them. Your argument continuously falls back to “protecting the ignorant,” who, (a) should know how banking works before they use it, the same way that people should understand the stock market before they invest, and (b) the government (or whatever) needs to protect people from themselves.
So, let the stateless society decide for themselves! I object to your claim that it’s fraudulent before the fact, and that something should intervene in a free market. I want details, premises before the conclusion, and I’m not interested in your irrelevant terminology. Mises supported free-banking throughout his life; true, for different reasons, but he would never have supported Peel’s act part two (unless it naturally emerged).