Well, I agree with you that we should let the market decide and not assume one way or the other. I think it’s a point willing to be made that it is possible that many FRBs would go out of business if they didn’t understand proper risk modelling like many of the banks of today have not. That said, I think without the moral hazard of the government bailing out anyone that gets into a problem, banks would be much more wary and anchored. I don’t commonly believe that people will run on the banks absent really bad recessions, since I think panics are a cause of government I’m not as worried about that particular aspect, though I’m more worried about the stability of currency ratios in them.
Personally, I’m more of a risk taker than most - I’ve been described as having a “gambling problem” - so I’d be fine with using an FRB, it doesn’t mean, however, that others couldn’t use full reserve banks. Your point on checking accounts is spot on, though. It is an importanting ploy to getting people to bank with you, but you still need to pay a fee for letting them house your cash/gold/whatever and I think that’s a disincentive to use them enough for me to not want to bank with them.
As for your following question, I think krazy kaju answered pretty well that Japan is a savings economy and this is what makes monetary policy relatively ineffective.
Well, I think wilderness’s point might have been more of transparency of where your investment is going, but I’d argue that it’s not that uncommon for your investments to be opaque for you - either contractually or realistically. All you really care about in this contract, that is, would probably be about a ratio between safety and yield.
well you are wrong seeing as it is illegal to have checking account that is a bailment and not involved in frb. the things you list are exmaples of things that arent checking accounts which are bailments. Yes, you are trivially correct that if people do not want to have anything directly to do with with frb they can go without any kind of checking account, just like in the hypothetical if people wanted to do without being punched in the face they can do without ever going to the movies.
The point is about the possibility of alternatives. There is no legal alternative to the movie theatre. There are tons of legal alternatives to checking accounts. I really honestly think that you guys put too much effort into trying to show why the economy is doomed because it’s not based on 100% gold. Most people just think it’s cooky and they’re less inclined to listen because of it. A better argument, I think, would be that the current system has extreme inefficiencies that cause a great deal of pain and lengthen the reach between consumer and banker.
Except… That wasn’t even what we were talking about. We were talking about checking accounts. I agree that the banking system currently has a monopoly in it that needs to be gotten rid of, I also am not a fan of mandates by law, but that isn’t really relevant here.
OK. You’re misunderstanding again. The mere existence of the central bank does not make the argument for fractional reserve banking or the current way that checking accounts are used invalid. The other two things you point to are irrelevant to the previous conversation. There’s really no arguing with that, so if you continue on that line I don’t really know what to say… You’re just stubbornly biased.
Is there any kind of accounting with a safety deposit box? If I put in $1000 or if I put in $10000 (or even more) who would know how much is in there but me? How do banks insure safety deposit boxes if their contents are not known?
What about convenience? Can I write checks against my deposits in the safety deposit box?
People really need to stop conflating FRB with central banking,
It’s funny that the people who complain about the lack of choice in today’s financial system would outlaw the use of fractional reserves under their “regime”.
Knowing what I know about fractional reserve banking, and more specifically the central reserve strain, I would most likely choose to use a ``warehouse’’ if the fees were reasonable. Remember, without fiat money, we might be using something like silver or gold (or whatever) that actually gets warehoused. Also, with a free-market money, it is less likely that people who have no business investing their money will do so. While the masses might not understand why prices continually rise, they do realize that they can’t get ahead without investing. However, without expansion of credit and money that fiat regimes always use, prices would actually stabilize and might even begin to decline as the purchasing power of the monetary unit increases due to technological advances, improvements in efficiency, etc…
Regarding having a nice safe, I suppose one could argue that it is mostly due to convention and costs that we would store anything in a bank. I imagine that a good safe used to be an extremely expensive device for most people (it still is I imagine). Maybe it was cheaper to build a big safe warehouse and sell space as a service. Even now, if you purchase a good $3000 safe, pay for installation, etc. would it be worth it if the warehouse fee were only $100/yr? Again, the convenience of using a bank/warehouse would likely be significant. How many people will accept my self-issued demand on the gold in my safe at my house? For contracts this might not be such a hurdle, but grocery stores and other similar businesses would be more of a challenge.
By the way, what would be a typical fee for warehousing?
I imagine if banks were allowed to fail, just like any other business, people would educate themselves about fractional reserve banking (at least in the market sense of knowledge).
Are subjects of a king who clips the coins victims? They still get the benefit of using the money and if they don’t know that the coins have been clipped, they continue to receive benefits right? Now, maybe coin clipping and fractional reserve banking are different, but they sure seem very similar to me. Nevertheless, I suspect coin clipping is much easier to detect.
The cost of a safety deposit box is dependent upon size. If you wanted to use it for storing cash, however, you’d probably need more than one which would run up to about $200 a year, plus the $125 or so drilling fee, and then the $25 key. I imagine prices would go up if you lived in Rothbardia where they offered more services - like checking - and use was more widespread. Let’s say a reasonable estimate is at $350 a year.
You could otherwise get a small home safe (fire, flood, and security protected) for about $300 - $600. My father has three safes, two for guns, and one for personal items. All together it cost him about $3,700 which isn’t too bad, actually.
Anyways, you see now why it’s so attractive to just use normal banks when the two options are between one of general insurance that pays you to use it, and a lesser quality insurance that you must pay to use - just so your money doesn’t get lent out to reasonable entrepreneurs who will pay the bank back with little difficulty.
They’re different in this way - the king probably “clips coins” in order to faciliate for needless spending on pet projects and special interests, much like modern central banks.
A decentralized fractional reserve system, however, has an anchor on how much it can inflate currency past the rise in demand for money.
Basically, you have to take two things into account here. Money supply must increase at the rate of increase in money demand so that prices remain stable and unaffected by currency alone. How do you do that without a fractional reserve banking system? Do you really trust mines to be able to increase production at that rate? I don’t.
Also, you need to take into account the amount of investment that is made possible by fractional reserve banking - a great deal of it is. Without that, prices would remain high as fewer innovations are capable of coming to market. Without a wise and rational expansion of credit, that is, much of the price deflation from innovation that we have seen might not exist. Is that a world any of us want to live in?
What’s the point of offering differentiated accounts like a deposit/checking account, a savings account and a money market account if they all do the same thing under the hood? How do I know that the entrepreneurs that they loan the money out to are reasonable?
