100% reserve ratio would make demand deposits not bear interest and would probably make the business of issuing banknotes entirely unprofitable, however, banks and financial institutions could presumably still pay interest on term deposits and charge interest on loans, and could issue other kinds of securities such as unit trusts that paid interest yet were able to be issued and redeemed via cheque.
100% reserve ratio is NOT the same as the gold standard. The gold standard means that gold coin is the standard of legal tender for discharging debts (where no particular form of discharge has been specified in the contract). 100% reserve ratio means the bank holds 100% reserves against demand deposits and banknotes.
This highlights the fraud precisely - for banknotes to operate as money substitutes, the consumer must view them precisely in the way that you describe them - 100% redeemable at par. And yet we know that of of necessity, banknotes based on fractional reserves do not and cannot have such characteristics. They contain an element of risk of irredeemability due to the excess of them issued over specie held by the issuer, the bank. This is why they tend to sell at a discount, and this is why the state invokes legal tender laws.
I think coward and i had fiat paper money in mind in reference to “worthless paper”. However, in a free market, the paper would of necessity need to reflect ownership in present money, i agree. The problem is FR banknotes would not reflect such ownership.
I’m not sure if you do or not, and it is possible i’m out in the weeds, because i haven’t taken the time to re-read our thread to be sure. But my general thinking is this: why do i personally prefer anarchy to the state? It is because i think i know what justice is, i prefer justice, the state is institutionalized injustice, and anarchy is without a state. Justice is more important to me than anarchy. It happens that anarchy is the starting place from which to pursue justice. So to drive this home, most libertarians do not debate about whether private courts should or could decide if states are ok or not, for instance. We already know the answer, they are not, and this is why we propose private courts in the first place. We do not need private courts to determine if murder is aggressive, unjustified, and in contradiction to reason - we already know it is. So we don’t need private courts to tell us what, in principle, is just and what is not, we only need private courts to decide if and how specific practical instances and acts fall into these categories - and to practically enforce justice.
So if the net result of our anarchy is that some private courts could or might decide that murder is ok, i’m in the camp that anarchy is not worth much. My argument is that people must care about justice if they are to implement a worth-while anarchy. If they do not, then why anarchy?
I agree with you 100%. We are engaged in discussing what a more correct view of things is. It’s all we can really do. My point is that we can go a long way theoretically, and in principle, via discussion, before we ever need to say let’s leave it to the courts to decide.
Sure, i think it should be up to the competition of the market place to decide how best to respond to a murder conviction, for instance. Kill him, let the victim’s kin decide, mark him as outside the law, enslave him, perhaps a hundred services could offer a hundred options. But we don’t need a court to decide if murder is to be seen for what it is, the unjustified taking of another’s life resulting in a claim against the life of the murderer. So it is fine to recognize the limits of armchair theorizing, but let’s not stop our theorizing prior to reaching those limits.
We come at it from quite different angles. Here’s how i would put it: shoplifting is already morally outlawed - simply by the facts of justice and reasoning. The question is if the shopkeeper will dedicate the funds towards defending his shop against it, and insuring against it, and prosecuting the shoplifter. The courts and insurance companies don’t decide this; they merely offer services to render just decisions for profit, and probably enforcement of decisions.
So economics will dictate what crimes will be defended against and what may be let go. Here, we are only set with the task to discuss just what, in principle, constitutes crime.
We may be saying the same thing, i’m not sure. If i say a society is just, it is identical to saying it has a free market. To the extent that justice reigns supreme, a free market is in place. To the extent that there is injustice, the market is also not free. That the principle of homesteading, and voluntary exchange is respected, and the institution of private property is upheld, we have both justice and a free market, by definition. However, if we have private courts that do not understand the economics and ethics of money well enough to know that a “money” based on fractional reserve banknotes is fraudulent, then it is incapable of rendering justice in that sphere of the market, and to that extent, the market also, cannot be free.
Nope. There are two distinct types of banking, deposit banking and time banking.
The former is where you wish to keep your gold money safe and have banking services so that you can make money transactions easily in paper, with “your” money. You do not lose control over that money, or since it is fungible, you at least don’t lose control over the value of that money becaust it isn’t going anywhere until you direct it there. It is yours alone to control exclusively, although it is in the bank’s vaults. The banks will likely provide clearing services which will make cash transactions more efficient. But this will all cost the client something though, in service fees.
Then there is time or loan banking. This is where the owner of the money explicitly gives up control of his money to the bank. CDs are a good example of this. Ownership of the money transfers to the bank, and so it is able and entitled to now lend out that money, which is now its own and shows up on the liabilities page of its books. In return, the client gets an IOU, which states he will get his money back when the time expires, with interest. For the duration, the client loses all ownership and control over that money. It is a loan to the bank.
So interest remains alive and well in 100% reserve banking. Reserves refer to cash money that the clients hold in cash accounts like checking accounts.
If consumers want to view financial instruments as a substitute for metal who are you to complain about it? A promissory note is just a financial instrument, a debt security issued by a bank. The principles of valuation of financial instruments includes that if the instrument is redeemable on demand at par value than it will be valued at par, so long as redemption isn’t suspended and the issuer isn’t in financial difficulty. It seems you want to re-write the principles of financial instruments just because you don’t like the idea of agents substituting financial securities for metal. The claim of fraud isn’t substantiated, because the instruments purport to be promissory notes, not metal or warehouse receipts.
Non-redeemable securities don’t have a zero value just because they aren’t redeemable. Thus even modern fiat paper currency has a market value more than zero, and many times more than the value of the metal held by the issuer.
Promissory notes do not reflect ownership claims on non-financial assets, instead they are a claim on the maker (issuer) for payment of the amount stated. Banknotes are typically also unsecured claims on the issuer, and therefore have no connection with any particular assets of the issuer, only a bare claim on the issuer.
My approach, on the other hand, is that the benefits of private systems include the option to shop among court systems offering different rules. I hold that this, too, is an individual choice. Just as you might be more comfortable living in a place where smoking is or is not allowed, so too you might feel, for instance, that attempts to outlaw murder involve too much intrusion. Not that this is likely to be a popular position, but I can see someone choosing it. See Block’s Murder Park, for example.
Now, I don’t include fractional reserves in the same category as Murder Park. In the case of fractional reserves, I myself would indeed rather affiliate with a system which permitted fractional reserve banking, because of my understanding of economics. But I see no harm in you affiliating with a system which outlaws such things.
I don’t view it that i am complaining about the possibility that people may view an instrument of debt as a money substitute. I am merely observing that they will not and cannot, without force or fraud. I’m saying that the nature of action and money makes such a condition impossible under a free market.
A fractional reserve banknote cannot be guaranteed to be redeemable on demand, potential suspension of redemption is essential to it - the issuers of this paper are always “borrowed short, and loaned long” as it were, when it comes to their FR banknotes.
Promissory notes are fine. It is when they promenade as money substitutes that they become necessarily fraudulent.
Only because of the force and fraud conducted by the central banks and the states that enforce their existence.
Whether or not you, or a community of you, wish to be protected from being murdered, it still remains the case that murder is an unjustified, aggressive act. We cannot avoid this logical conclusion. You can abstain from participating in a court system, you can be a complete pacifist, but you can’t avoid that fact that murder is unjust. So courts, to be true courts of law, must acknowledge reason and justice, or they simply are not courts. They would more likely be states. Block’s Murder Park, if it is voluntary, is not Murder Park, but rather Death Park. Murder involves a victim.
Not as profitable as issuing fraudulent warehouse receipts but they could still turn a profit.
All they have to do is charge a ‘warehouse fee’ and be done with it. A certain percentage to reflect the cost of ensuring the safety of the gold with a little overhead for management, that’s how it was traditionally done until the managers starting calculating what percentage of the gold was a ‘sure bet’ not to be reclaimed at any one time and started the systematic defrauding of the general public.
Er… That’s not really the point of reserve ratios. Most people DON’T like the idea that their money is being fiddled around with - which is why so few know it.
They want THEIR money to be THEIR money. They don’t put it in the bank for the bank to play with, they put it in the bank because they believe that will make it safe.
Ummm not really. People put their money in banks to gain interest on it. If they wanted their money to be safe, they would put it in a safe in a warehouse.