I’m not sure if I’m following you here. Why does such a claim have to be fraudulent?
It’s true: if all depositors make the claim at the same time, there is a chance that the bank goes bankrupt. But why does this make the claim fraudulent?
If I write a note saying: DD5 can come by at any random moment in time and have a beer, is this fraudulent?
What if I write 70 of them, knowing I only have 24 beers?
I don’t think there is fraud at writing them. There is only fraud when 25 or more people effectively show up at the same time to claim their beer. Because they are entitled to it and I didn’t manage to deliver.
You shouldn’t. You should go use pay a full reserve bank interest in order to have them “store” your money.
But everyone else should be free to transfer their actual money to a fractional reserve bank, something Rothbardians claim should be banned.
It’s not confusing, if the note contains the warning that this is the case. You give them an ounce of gold, and they give you a note saying you can redeem it for an ounce of gold at any time you like, but pointing out that they keep 10% of their deposits in reserve, so it’s all pending demand levels.
No confusion.
They’re not. they’re being paid for it. You can choose to pay monthly interest for a full reserve bank to hold your gold, and pay an additional fee for the power to make your gold teleport from one bank to the next via ATM, debit card, et cetera…and the people depositing in fractional reserve banks will get all of that stuff “free of charge”, which means they’re being paid through the provision of those services.
Meanwhile, in real life they have 100% perfect access to the deposited money, any time they wish.
Payable to the holder, at its price in gold, pending supply:
We keep 10% of our notes’ total values in reserve at all times.
What’s the problem with that? The buyer of the note KNOWS the way the system works. How could that possibly be fraud? You can’t have the note in your hand and reasonably claim ignorance of the system.
Meanwhile, as I already pointed out, dialup Internet providers sell “24/7 access”, but almost always have phone lines tallying 8% or less of their total customers. They, like banks, are making the perfectly rational decision that their service will never be used by 100% at once.
Likewise, a YMCA does not worry about whether all of its members would be able to fit in the pool at the same time, even if access to the pool is the selling point of the membership.
There is really no argument over this. It is a misfortune that most free bankers can’t seem to let go of the strawman fallacy when arguing against full reserve advocates.
There is a difference between a legal claim for something “at any given time” and for “any time there is a table available”. Let’s not have figurative speech get in the way of establishing what is logically possible and not possible.
You do realize that historically and at this very moment there were time frames, right? (I’ve checked my contract with the bank and it does have a provision for if there is no money available. I would be surprised if your bank didn’t had the same proviso.)
In any case; let’s say the note doesn’t stipulate any time frame, but just ‘at any given time’. You are saying this is fraud per se, if I’m not mistaken?
I do feel I’ve answered your remark before, in the part you didn’t quote: “I don’t think there is fraud at writing them. There is only fraud when 25 or more people effectively show up at the same time to claim their beer. Because they are entitled to it and I didn’t manage to deliver.”
I don’t follow the logic of this response. It is fraud only if you are eventually caught? Is this what you’re basically saying?
You do realize that these “time frames” have nothing to do with fractional reserves per se, but with other alleged technical problems (most cash is not stored on site) and “now” is irrelevant due to how this government system works. And referring to historical data cannot possibly provide any sort of argument against what I’m saying and you are perfectly aware of this, so what gives?
Not really. It’s fraud when you can’t deliver what you contracted for at the moment stipulated in the contract (‘at any given time the person shows up at the bank demanding’). I don’t see any reason to call it an a priori fraud just because there is the possibility that one might not deliver?
I know the argument goes along the line of ‘well, but all the contracts can’t be headed at the same time, and therefore it’s fraud!’ but I don’t really see a reason to say so. As long as everyone shows up with his contract and all the contracts are headed… Why do we need an exception, just because there might be a possibility they are not all heated?
When you have a contract with someone, it’s not fraud until he doesn’t deliver at the time stipulated, right? The time stipulated is the moment when you show up. Not when it’s ‘theoretically’ possible that it might go wrong.
Where? I just looked and don’t see it. You said, essentially, that they do not. But this would just mean that committing actual fraud is fraud, not that fractional reserve banking is.
I keep saying “what if they did say it”, to which the answer appears to be “then fractional reserve banking would be entirely legit”.
How is it fraud when 25 people show up, but not for 24 people? Is there a legal claim to the property when 25 (and above) people show up or not?
And if the answer is yes, which it must be for your own fraud accusation for the case of 25 people to stick, then do I really need to show you the blatant logical errors that you are now beginning to make?
If you contract to come over and sing “Born Free” whenever the buyer asks, then you have laryngitis when the time comes, that’s not fraud. Not even if you have been choosing to engage in activities that bring a direct risk of laryngitis.
“Failure to fulfill a contract” is not the same as “fraud”.
“Engaging in behavior that risks his ability to fulfill my contract” is also not fraud.
In fact, unless you actually DECEIVE the person, fraud never enters into it. If you promise NOT to french kiss random hospital patients, and promise NOT to keep less than 100% reserves on hand, and then do those things, that’s actually fraud.
The claim that a debt to behave a certain way is created implicitly is another standard socialist argument, not a free market one. Whatever the contract proclaims is the only commitment.
You are engaging in a popular strawman fallacy, unless you can substantiate your claim regarding Rothbard.
Your above scheme (with the clauses) is not fractional reserve banking. It’s a lottery of some sort. Your argument is based on an equivocation, which is a logical fallacy.
The answer is that it’s never fraud, either way, because no deception occurred.
One is failure to fulfill a contract. The other is the fulfillment of that contract.
Your version would have it that if you contract a guy to work on your house, then if he never showed up to do so it’s fraud, ergo even if he DID show up and do so, it’s fraud.
I have more posts to respond to in this thread (which I’ll do soon), but I’d like to respond to this right now:
Aren’t those forms of negligence?
Wait a minute… failure to fulfill a contract is fraud if it’s willful. Engaging in behavior that risks the ability to fulfill a contract could be negligence, depending on the circumstances.
Well, of course there is a legal claim to something that was my property, until they arrived with the claim, upon which I’m contractually obliged to transfer it to them. And it’s fraud, because in the case 25 people arrive, I can’t deliver what I contractually obliged to deliver. But when only 24 arrive, I am, in fact, able to make good on my contract. I’m able to deliver the goods that we contracted upon. And the other people, obviously, do not want me to deliver yet, because they didn’t show up, so I’m not braking my contract with them. Because the moment stipulated in the contract - ‘when they want’ - didn’t arrive yet. So I’m not defrauding anyone.
Look at the banknote as an open ended contract, of which one of the two parties gets to decide when the property transfer is due. It’s not until this moment that it should be decided whether or not I should be able to pay up. And i can’t, than it’s, obviously, fraud. No sooner, no later.
Feel free to illustrate the ‘blatant logical error’ that I’m making.
Right, but while you have identified the logical fallacy in this particular response of his, Adrian on the other hand, seems to understand the logical impossibility of “claim at any time” and maintaining only fractional reserves. It’s just that he has in my opinion terribly blundered on his attempt to overcome this “minor” inconvenience. This happens sometimes when you go back an fourth and attempt to respond too quickly.
It’s not logically impossible. It’s only impossible to maintain if and only if more people show up than you have reserves. That’s the risk you take upon yourself when doing such a thing. I don’t see any fraud as long as every single contract is respected. (But I’ve explained this at length before.)
