would they ensure responsible withdrawal of ones deposits?
Wait a minute, if banks that practice FRB don’t go bust, then how is a business cycle possible?
You’re assuming that bank failures are necessary for a business and that FRB banking causes the business cycle. I don’t think either of those assumptions are warranted.
As I said, they may well suspend the redemption of notes. But other than that I’m not sure what you mean “responsible withdrawal”.
so Giles, you can choose
door number one in which you earn interests on your deposits but maybe it all goes away, no comebacks, no returns, no complaints
or
door number two where you pay us the market rate to protect your gold
im sure it still seems to you that ceteris parabis depositors would find it beneficial to receive interest on their deposits as opposed to paying for them. but does offering such a choice not illustrate that the ceteris parabis assumption is unwarranted?
frb is a sufficient cause of the business cycle,
Etica & Politica / Ethics & Politics, XI, 2009, 1, pp. 455-469 Crash and Carry: Financial Intermediaries, the Intertemporal-Carry Trade, and Austrian Business Cycles1
So you’re rejecting the austrian business cycle theory?
Oh, well, now you’ve cited Block I certainly agree with you! Why didn’t you do that earlier and save us all a great deal of hassle.
And ultimately this choice is up to the consumer, unless of course you wish to deny them of that choice. Although, please note that historically consumers have taken the first option. Also, the fact that you mentioned such cases proves your lack of knowledge concerning free banking. There are a number of mechanisms whereby banks can create the correct incentives to discourage bank runs. For example, in Scotland a number of notes carried the warning that the bank has the right to suspend redemption however must pay interest if this occurs. Another possibility is that the bank needn’t say redeem notes on a first-come-first-served basis in the case of a bank run. Rather, they may well distribute the remaining reserves in other ways that would make a bank run irrational from the point of the view of the customer.
The bigger point is simply that if you’re so sure consumers would prefer 100% reserves. Let them choose.
No, I’m saying that fractional reserves don’t push the market rate below the natural rate. Full reserves would actually push the market rate above the natural rate (with an artificially short structure of production resulting) which would be made worse by all the other relative price distortions caused by wage and price rigidities.
Historically, they’ve chosen the latter. It’s only when fiat currency, frac-reserve, and legal tender laws come in to play that we see consumers stripped of their real choices.
And I’m wondering if you could be bothered to address the points made by Block in the citation. You know: at least there was a citation, and not just an implied attempt at poisoning the well (which you were on your way to committing).
AEN: You have been critical of White’s book on free banking.
MNR: The White book says the Scottish banking system was more successful than the English system. But he doesn’t say one word about prices, inflation, or business cycles. His only statistic is that were fewer bank failures in Scotland than Britain. But what’s so great about not having failures? An industry that doesn’t have failures might be doing poorly. What if we applied this test to the Soviet Union, where no industries fail?
When you say one banking system is more successful than another, it seems the test should be less inflation and fewer business cycles. Yet this is never mentioned.
Except, this just isn’t so, and if it is I’d like to see something more than an unsupported assertion in favour of it. Kevin Down compiled a whole book based on the experiences of free banking in places like Canada, Scotland and Switzerland. Now, I’ve not read the book but I do know from the work of Lawrence White that in Scotland, which is the closest the world has come to free banking, people chose fractional reserve banks over full reserves. As I’ve said, if you believe that fractional reserve is not a viable business model, go ahead and let it go head to head with full reserves. We’ll see which one will win, you can’t proclaim that a priori people will prefer one because it depends on consumer preferences. Namely, whether the interest is enough to compensate from the extra risk they expose themselves too.
As for Block, I’m sure if I were to post numerous papers such as those by White, Selgin and Bagus (I think that’s his name) people wouldn’t attempt a refutation. What I will say is that Block’s view is a minority opinion within the Austrian school itself.
It is so, and I’d like to see something more than your unsupported assertion that they chose the former. ,
Lovely fallacy and evasion. Now try again.
That’s just nonsense. The definition of the natural rate is the rate where capital saved corresponds to capital lent out. Fractional reserves by definition lend out more capital than has been saved.
If you don’t think fractional reserves cause business cycles, then you need to find us another explanation why business cycles happen.
Cool.
I actually kind of like Wittgenstein from what I have read of his stuff, but that isn’t to say I have read much. [:P]
I also enjoy what I have read of Kant, Aristotle, and such. Have been wanting to read more of Frege (and some of the other analytics) but already have a huge reading list as it is.
David Bohm is also a favorite of mine, but he is primarily a physicist. I think he has some interesting insights into the nature of reality.
OK, well, fortunately Lawrence White wrote a whole book on the subject, see here.
There is no evasion, I’m just not going to spend some time critiquing Block’s work because if I did that with all his work I’d never get around to reading any good economics. OTOH, few here have so much as read a single piece that advocated fractional reserves in banking.
No, the natural rate refers to the price margins between the different stages of production, the market rate is only secondary. In any case, it’s simply not as evident as you believe it to be that fractional reserves lead to more capital being lent out than is saved. The point is that when an individual holds money they’re saving, and whilst it is possible that prices may adjust in the long run to reflect an increased demand for money, in the short run the interest rate and relative price structure are liable to change because of changes in MV. IOW, FRB seeks to make money as neutral as possible.
I have an explanation of what causes business cycles. Central banks, financial regulations, FDIC, etc…
Frege is also good. I forgot to mention David Oderberg, he’s very good too (if you can ignore the religious undercurrent in some of his works.)
Have you read any of Saul Kripke’s work? If so, what did you think?
I don’t mind religious undercurrent, tbh, because I’m not really anti-religious.
Damn, another one I forgot. [:P] I haven’t read much, just a couple of articles, but he at least writes perspicaciously.
Lol sounds like you are a fan of the analytics (sans Wittgenstein).