Actually the original poster was given the correct explanation (as opposed to your lies) and said he would think about it. You didn’t manage to sell him any ‘toxic asset’ yet.
Let me repeat this. Criticism of fraudulent banking practices and fiat money is way older than the austrian school. If you knew the basic history of libertarianism you’d be aware of that fact. Saying that hard money is an ‘artificial construct’ created by the austrians clearly shows you’re cluess. You should be working at goldman sachs/the fed - that’s where you belong.
Yes, we know as long as the original poster drinks the Austrian Kool-Aid everything will be fine. Nevermind that it is a position that can’t be reconciled with reality and you are unable to substantiate that what is happening is in fact fraud.
I don’t think this is so black and white, or that you even understand his argument. How is it fraud to offer to pay someone with a time a deposit, so long as you do not claim it is a demand deposit? How is the bank perpetrating fraud? It has a clear plan on how to acquire the gold it will require for that date to pay off the time deposit. It simply matches its assets and liabilities by maturity date. How does it follow that even if the recipient recognizes the risk and requires a premium, this is not an expansion of the money supply?
Rothbard included time deposits in his definition of the money supply during the 20’s in America’s Great Depression. Why? Because banks regularly paid off time deposits early without penalty (or converted them to demand deposits) and their common use was nearly identical to our use of savings deposits today, which Rothbard also places in his definition of money supply.
And ultimately, it does not matter if gold or debt or cotton backs the system. If an increase in money occurs through or relatively close to the banking sector, suppressing interest rates before driving price inflation, it will cause a business cycle. The strength of commodity money is its homogeneity and resulting ability to provide a stable, standard unit of account. A gold standard resists business cycles because its total stock is significantly resistant to swift changes, not because it is a commodity or because it does not represent a debt.
Max, why are you still around here? I don’t get it.
In any case, much of what you say isn’t contradictory to Austrian theory, although it may conflict with certain conceptions of it.
Fractional Reserve Banking still exists today because government has socialized the negative effects of bank runs for depositors. Imagine if the government made whole everyone who invested in Ponzi schemes and lost their money. Of course, everyone would invest in Ponzi schemes, as risk-reward is ultimately skewed by a form of coercion - theft via taxation.
This is a common theme. Government has continuously sought to subsidize bank money relative to commodity money, commonly by making it legal tender for taxes.
Argument ?? I don’t think you read the whole tread ? I was addressing his claim that since fake gold certificates are accepted at face value for a while then there is no fraud. But that’s indeed included in the definition of fraud.
Are you talking to me ? I’m not sure what’s your point.
Really ? So gold is the same thing as debt ? … That’s news …
I’ve noticed that in some other of your posts you seemed to suggest that any increase in the money supply be it fiat money or commodity money will cause a business cycle. You are, of course, totally wrong.
Vague and misleading. What do you mean by homogeneity anyway ?
There is nothing fraudulent about this! That was never the point. The point was that if time deposits, as understood as saving in the true sense, are exchanged against goods, this is not inflationary.
For one thing, this almost never happens in reality (if you wanna talk about reality). Nobody brings bonds to the store to purchase goods; they’re not considered a generally accepted medium of exchange, i.e., money. People exchange these assets against money first, then purchase goods.
If there is an instance where an asset, like a bond, is exchanged directly against a good this does not mean the asset has become money! If you barter with someone, say an apple for an orange, that does not suddenly mean one of the two has become money! It is simply an isolated case of exchange where two real things changed hands because of reverse evaluations. This applies to the case in which someone exchanges a security or bond with someone for some other good. It is an isolated case of barter The bond has not suddenly become money. Prices are not quoted in terms of bonds or stocks, as they should be if they were money. Nor are they perfect substitutes for money.
But this is the whole point! You clearly don’t understand what’s being argued nor what Rothbard’s reasoning was. The reason Rothbard, Huerta de Sotoa, etc. regard savings or time deposits as part of money supply is because they are immediately redeemable in the modern banking system. Thus, they function as perfect money substitutes.
A time deposit, as we had defined it on this thread, was consistent with true saving, that is, a person gives a certain amount of money for a stipulated amount of time, and in return they get a claim to future money at that time. The claim is like an asset or a good, not money. It is not a general medium of exchange, nor payment, etc. You will run into insoluble circles if you try to call that asset ‘money’, because then you could just as well call the other good it is exchanged for money. If I exchange an apple for an orange, which do I call money? You would then be forced to redefine money as simply constituting the good in any exchange which was more marketable than the other. But this is remarkably hard to to determine objectively, and there are innumerable problems with it. It also forces you to drop the very significant fact that a general medium of exchange, of which all prices are denominated, exists; and that its existence possesses a special economic significance.
I am tired of this argument. I agree that some of these things can be difficult to think through. It takes time to reason through why X is X. But just because you’re not comprehending something, or that you aren’t able to see it clearly, doesn’t mean those of us who can are drinking Kool-Aid.
If we refer to money as a medium of indirect exchange and inflation as an increase in the money supply, then if time deposits are used as money, they must be covered by full reserves so as to be not inflationary - equal money in and out of circulation. From my understanding, we all agree time deposits are not 100% reserve, the whole point being to lend out the deposit. This must be inflationary, if it is spent before the bank recovers and possesses its repayment (w/ int).
I agree. Which means that it is not inflationary, because they are not being used as a general medium of exchange, but simply an indirect good. Like stocks as well. Antiques. Precious metals.
Again, I agree - and without a fee to do so. And they can all be spent in a relatively short amount of time, without anyone depending upon anyone to do any actual work, and its all insured by the people who control the printing press and regulate the banks.
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I understand the argument. My whole point was that Juan misrepresented scineram’s argument as though time deposits must be presented as demand deposits when used as payment. People could willingly accept time deposits as payment without it being fraud, knowing that they cannot redeem the deposit until the maturity date.
If the bank policy is to instantly redeem them for demand deposits, however, then they are not really time deposits at all. I think the bank would be fraudulent. I am not sure about someone using them as payment in this case. I guess they are unintentionally, or perhaps on purpose…
And I agree with Juan’s argument that if an increase in time deposits could not lead to an increase in present money (notes, demand deposits) which was the primary form of exchange, there would be no effect on the price and capital structure that would cause a business cycle. If it could and did, like in the 20’s, then it would cause one.
Ah wait, my mistake. Yes, in this case scineram was advancing the nonsensical proposition that CDs can be used as money. So, I mistook nonsense #1 for nonsense #2. Well, the idea that CDs can be used as if they were money was already refuted in just another endless thread a couple of days ago…
Yes, you make the distinction that if I buy a car with a CD that has a maturation in 30 minutes it is completely different than if I use a bank note that will take me 30 minutes to exchange for gold at the bank. What you don’t understand is that all paper substitutes for a commodity like gold carry some risk of default. Even 100% commodity reserve notes have some risk of default. So any piece of paper that represents possible redemption in for example gold can be used to purchase things and carries some risk of not being able to redeem the gold.
In a free society there is no requirement that you accept the bank note or the cd whatever it is backed by or whatever it’s terms are. My objection to the Austrians on this issue is that you want to prohibit me from accepting what I choose to accept as payment. Transacations in the marketplace should not be restricted because of your definition of money. You can not demonstrate after repeated requests to do so how it is fraud and I can demonstrate and have that it is not fraud.
Yes, I understand this is just supposed to be an Austrian love fest but somebody should stand up for freedom.
I never discuss the government, my only focus is on the prohibitions in a free society. When the Austrians say they are going to enforce with violence the prohibition of some activity it is good that we make sure that the activity is in fact a violation of some right. Where it can not be shown that someone’s rights are being violated then it is the Austrians we should be protecting ourselves from.
The Austrian position as espoused on this forum states that certain activity is inherently fraud. They are unable to identify the victims in these cases and ususally there theory has no relation to what is actually occurring under the scenarios described or it only pertains to government enforcement which is irrelevant in a discussion of banking in a non government society.
Now then, please tell me how it is not a breach of confidence when the depositary has agreed to maintain availability of the liquid assets fails to do so? If, I sign a contract negotiating my right to a certain amount of liquid cash the bank has the converse duty to maintain the possibility of me withdrawing the amount of money I wish to at any time. If the bank purposefully acts so as to bring about a state of affairs in which they are unable to honour their obligations, it is a breach of confidence, or fraud. It is implicit theft, since they have not provided the good that I am paying for when I sign the contract, immediate availability of the money.
Maxliberty:
For example if your 100% redeemable reserve bank was robbed of its reserves by armed bandits this would not make the bank guilty of fraud to it’s depositors.
This is outside of their control, surely, slipping loans to people with money that they do not own by the very nature of a deposit contract is not out of their control?
I will answer it here. If you sign a contract with the bank that says the bank agrees to keep your gold on hand and not loan it out and the bank gives you a note with these terms then the bank is required to do so. You can then exchange that note for whatever you are able to, there is no requirement that anyone accept it, or accept it at face value.
If you sign a contract with the bank that says the bank agrees that they may loan out some of your gold and may delay redemption and the bank gives you a note with these terms then the bank is allowed to follow the terms of the contract. You can then exchange that note for whatever you are able to, there is no requirement that anyone accept it, or accept it at face value. This is what you wish to prohibit in your free society. This is not fraud and should not be prohibited. Note, nowhere have I bothered with what the definition of money is, it doesn’t matter what I think money is, it doesnt matter what the definition of a demand deposit or a time deposit is, it only matters whether people are in fact committing fraud.
No requirement other than self interest, that is, after all, the entire point of money. You’ve just granted that FRB is fraud and recanted all of your earlier posts in which you said the bank has no obligation to honour its obligations. So you just admitted you’re wrong, thank you.
Yes, but that’s not a demand deposit, so why are you pretending it is?
you always qualify what you are saying to the point that although we started out discussing real business practices that happen now. and have definite names. you are discussion hypothetical bank practices that might exist some other time, and you find that by going on about these at length you are accurately drawing criticism on the aforemention ‘real bank practices’. this seems odd.
also this here is purely silly loose talk. if we arent concerned with understanding the terms in which contracts are written how could we confidently pronounce whether the contracts were valid or not?
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