Yes, I’m wondering how you can be obligated to redeem a claim when no claim is brought forward. That’s exactly what the FullRB are demanding, as far as I can see.
Why is the ‘contractual term itself self-contradictory’?
And I agree with your sentiment. A contract is either legitimate or not. But when it’s not logically impossible to respect the specified terms - ‘paying back on demand’ - there is no reason to say that it’s invalid a priori. It’s not that I’m contracting to be in New York and in Washington on the same time. We know, a priori, for a fact, that this cannot be respected. However, this is not the case with a FRB-contract. It’s not logically necessary that it goes wrong; it all depends on how the bank manages to arrange their business. It might go wrong - just as any business venture - but it’s not necessary.
Just as when I contract with you to pay me 700 dollar for a laptop tomorrow is a valid contract. It’s not until you don’t manage to pay up, or I don’t manage to give you the laptop, someone is in the wrong (‘negligence’ or ‘fraud’).
Wether or not ponzi-schemes are fraudulent; I do not know. I’ve no knowledge of this. But it appears to be so, and it’s still different than a FRB.
“As far as I can tell, they failed to uphold their sides of the contracts. Whether they estimate consumer preferences correctly is therefore irrelevant to me.”
Why? What part of ‘their side of the contract’ didn’t they failed to uphold, if the only thing they are promising is ‘when you show up, we will be able to pay’ and that’s exactly what they are doing? What part of this is ‘not upholding their side of the contract’? What are they promising that they aren’t fulfilling?
So for 25 years Bernie Madoff did not perform fraud? He only performed fraud on the day when he couldn’t pay up?
Z.
I have no idea what Bernie Madoff did or did not do, nor do I know what he did or did not promise contractually, so I’ve no idea whether or not he did or did not commit fraud.
This logically impossible obligation is something you just invented out of thin air.
Right now, you are making the argument: All cats are black until you turn the light on.
"This logically impossible obligation is something you just invented out of thin air. "
<= Could you substantiate this?
"Right now, you are making the argument: All cats are black until you turn the light on."
<= And this.
substantiate what? That it is an impossible obligation or that you just invented it?
All promises are good until they are redeemed.
Likewise, all cats are black in the dark. When you turn the light on, you may discover otherwise. A white cat may suddenly appear. But it was black just a moment ago.
"All promises are good until they are redeemed.
Likewise, all cats are black in the dark. When you turn the light on, you may discover otherwise. A white cat may suddenly appear. But it was black just a moment ago."
<= I really don’t see the relevance of this analogy. The colour of the cat is something regardless of your observation. Wether or not someone keeps his promise can not be known until the point he actually has to keep the promise. And that the promise can, in fact, be kept, has been argued at length.
But Rothbard, and especially the Rothbardians, claim that fractional reserve banking should be banned, and justify this socialist prohibition by claiming it’s inherently fraudulent. This is how they pretend to still be anarcho-capitalists, not conditional socialists like Georgists.
It would take too long to cover all possible scenarios, but I am positing one most likely to be popular. There is no advantage, to the bank, of charging a flat fee, because larger deposits cost the bank more, and gain the bank nothing. They’re not better off encouraging wealthy clients, unless those clients actually make the bank larger profits…and the bank’s profits will come entirely from fees, or else from unrelated activities like loaning those profits out, using the profits to buy merchandise to sell, or whatever.
I did, right above that…you quoted it. “If more gold gets withdrawn than a given branch’s reserve has stored, they cover it by borrowing from a Lender of Last Resort, in effect they have a private FDIC/Fed company to whom they subscribe. Therefore nobody ever actually runs out of gold.”
Worrying about a bank bank run, if the frb is backed by a private deposite insurer and lender of last resort, is like worrying that Microsoft might stop supporting Windows, tomorrow.
It’s possible, but only to be argued either irrationally, or out of intellectually dishonest defense of a position that can’t be defended otherwise.
The very presence of a lender whose assets are large enough to cover any one bank run will effectively render bank runs needless. If the bank is not going out of business for unrelated reasons (the way any company could do), there’d never be any reason for everyone to suddenly withdraw their money at the same moment, any more than for everyone to suddenly stop driving their Chevy, tomorrow.
Saying “argumentum ad hominem” is no reasoning whatsoever. It is something in place of reasoning: It is shorthand that one expects any relatively informed person to be able to parse and understand.
If, in this, case, you don’t understand the implied difference beween the 21st century and the 19th century, that’s pretty unfortunate, and I urge you to expand your reading beyond Rothbard, who really seemed to think even the 20th century was the 15th, with regard to banking.
Is there any danger that anyone here actually thinks fraud is something other than the conscious choice to cause another entity to believe something that is untrue, and (for legal purposes) therefore causes a difference in property management that the owner regards as injury?
What examples of Free Banking exist that aren’t, in reality, examples of lending?
This is untrue, and approaches the ridiculous nature of the “frb is fraud” claim from a different perspective:
Obviously, you don’t have to provide the service “at all times”.
For example, if the bank kept “banker’s hours”, you could not redeem the note in specie, as much as 75% of the time (some banks used to be open 9-3), because the bank would be closed.
True, but this would easily be financed by the massive profits that are made from the investment of the money deposited.
That is sheer nonsense. The technique of a lender of last resort was used, by private enterprise alone, in both 1896 and 1907. Obviously, it would require only a single storehouse of gold in town large enough to cover any one bank’s “run”, in order to render runs needless in the first place.
How it is currently implemented, or how it was implemented before 1933, or before 1913?
As it is implemented today, it’s obviously not fraud at all, because there is no claim of gold deposit, AND there is absolute certainty that the socialized lender of last resort can cover all funds, if it so chooses. So your deposit of non-commodity currency is in no danger at all.
Why, precisely, would full reserve banks even survive beyond niche market status, going by your scenarios?
The fractional reserve bank would rake in interest every year, with no effective cost to its customers, while the full reserve bank would get only the fee its customers are able to fork over.
Really, I don’t see anyone beyond Rothbardians and survivalists even bothering with the full reserve banks in your scenario.
Thank you very much. This is progress.
The same applies for the color of the cat. The color cannot be known until the point when you actually turn on the light. Likewise, you need to actually redeem your claim to find out if it is fraudulent.
What is the promise? Are you finally ready to define your terms?
Is the promise to redeem “at any time” dependent on the number of people who show up? Is the promise different for 24 vs 25 people (your former example)? yes or no? This is not a trick question. (for example, Kaz has already decided that there can be an FRB system where the answer is yes).
No, the above description is more a fraud perpetrated by Rothbard than one by a bank…you don’t describe what happens now, nor in the 19th century, but what happened 500 years ago.
In a free market, a fractional reserve commodity-based bank will accept your (gold), and give you a note that can be redeemed for the same amount of gold. Nobody really thinks they put your gold in a vault, but the note can easily specify that it’s just ANY equal amount of same-quality gold. As someone pointed out, what you really now own is a claim note FOR a dollar’s worth of gold. The gold is now owned by the bank, which lends it out.
So the bank is lending out its OWN money.
But even if the original depositor still owned the money, it would not be fraud, because the bank would be acting as its agent, exactly like a mutual fund. The money you give a mutual fund is lent out (invested), yet it’s not fraud, because you know it’s happening. The investee isn’t magically defrauded, either.
And just as McDonald’s doesn’t have to keep a dollar’s worth of food on hold for every dollar’s worth of gift card outstanding, so the bank doesn’t need to keep a dollar’s worth of gold for every dollar of certificate outstanding.
And, just to be clear, it can state this on the note.
Or, to move back to the 21st century, on your deposit slip, since what you’ll actually do is deposit a check, and pay people with debit cards, and may never hold a gold coin in your life, except for novelty or paying the full-service masseuse who wants cash under the table.
You are absolutely correct.
I asked you to substantiate your claims regarding where Rothbard wishes to ban claims to any property pending some availability. You have not done so. Thus far, your argument just sounds like childish whining.
I’d say a contract that promises completely on-demand redemption of bank notes is a priori invalid if 1) the bank stipulates in the contract that only fractional reserves are held, or 2) the bank has planned to keep, and started keeping, fractional reserves on or before the drafting and signing of said contract.
A separate issue from whether the contract is a priori invalid is whether the bank upholds its side of said contract by keeping fractional reserves. I’m sorry if I didn’t keep these two issues clearly separate. My position on this second issue is that the bank does not uphold its side in that case.
But some people do profit from Ponzi schemes as advertised. By your reasoning, no fraud occurred for them.
I’ve answered this question before. Do you still not understand my answer?
If a bank keeps fractional reserves, it is necessarily and intentionally foregoing the ability to uphold all contracts outstanding for their durations. The duration is key here, not merely the endpoint.
How about a little thought experiment? Let’s say there’s a bank called Pyrites which operates much like you describe. Pyrites takes ownership of the gold its customers deposit and, in exchange, gives its customers bank notes which it is contractually obligated to redeem at any time/on demand. However, Pyrites immediately takes all of the deposited gold and uses it to buy cars, boats, and other luxury items for its employees. Would you say that Pyrites Bank’s operations are fraudulent before any customer arrives to redeem his Pyrites bank notes?
Yes, I agree.
Most likely people would use full reserve banks for small deposits and would never use fractional reserve banks. Anyone using a fractional reserve bank would be a complete idiot. Because NO ONE would accept their currency. Let’s see how this works. You offer to pay me with $100,000 from a bank that will only give me $10,000 in gold. Or you pay me with $100,000 from a bank that will give me $100,000 in gold. Which one would you do business with? So no, no one would be fooled into lame ass promises by a bank to pay interest because that lame ass bank won’t be able to make any loans. Duh. Instead, they would use investment businesses to invest their excess savings.
I think it can safely be assumed that intentionally poisoned food no longer qualifies as actually being food at all, any more than a 50/50 mix of gasoline and water counts as gas. On the other hand, if the restaurant makes no claims regarding the degree of food safety in which it engages, you have no right to damages if the chef didn’t wash his hands and you get food poisoning.
Of course the vast majority of people, in such an actual free market, would frequent only restaurants that voluntarily made various guarantees, probably most simply by advertising that they comply with specific, pre-defined standards, or are certified by voluntary standards entities.
A person choking could be considered incompetent to communicate whether to be saved, unless he actually manages to communicate that he wants to die, in which case that’s his right, and if you intentinoally ignore him you SHOULD pay damages.
Incidentally, I consider bankruptcy a socialist concept. I don’t see how it could be implemented in a free market. This wouldn’t be much of a loss, since anyone going bankrupt buys their own peace of mind only at the expense of all of the people they cease to pay, and that has a cascade effect much more real than the imaginary expansion of money by a fractional reserve bank.
Rothbard’s use of a 15th century scenario that is effectively unrelated to the way banks have ever worked in the history of the United States was an unforgivable fallacy, that I believe conscious, because he certainly claimed to have enough knowledge of monetary and banking history to know better.
And wouldn’t “mollify” mean the opposite of what you just seemed to imply? Maybe you meant intimidate?
I don’t think any Rothbardians would be mollified by an attack on Rothbard, any more than an Objectivist would be mollified by my pointing out that Rand’s epistemology was circular reasoning.
What happens if Microsoft runs out of ability to support Windows? Is the selling of any operating system therefore fraud, because I can come up with a scenario where it would become useless?
The LLR would have some sort of widely-accessible standard for its own resources, presumably enough to easily cover the entire customer base of any subscriber bank in town.
Because Rothbard and his followers use this ridiculous, dark ages definition of “banking” as the foundation for their fraud claim of the modern, or even future, banking system. The fractional reserve banks of the 19th century are called fraudulent because goldsmiths from centuries, or millenia, earlier secretly lent out money that was intended just to sit in a vault.
Then there is nothing wrong with stipulating that it’s “on demand, pending supply”, either. Especially with the conditions maintained being explicitly stated.
Therefore it’s not fraud.
"on demand, pending supply" - It’s a self-contradictory statement, but let’s brush that aside for a moment to avoid another war on terminology. What is the purpose for the insertion of the "on demand" ? You can have a table “on demand” in our Dinner only if there is one available. So the customer will not be made to wait in the lobby on sheer principle or something?
When it is made known that the redemption of the ticket claim is “pending supply”, this ticket is obviously not fraudulent in any way. But these tickets aren’t bank notes either.