Preponomics

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  1. Foreign Exchange

    Hello ruveyn If find Keynes a polished charimatic fellow who empowered much socialism with an elite class. I should think that Hayek, Hazlitt and Mises suffered greatly with his charisma amoung the elites in power. Hayek had the influence to challenge Keynesian fallacy but was too busy writing about roads. However should Hayek do more damage to despotism with a single book than he could to quarrel with the polished Keynes. Shall then Rothbard defend the Austrian tradition a little later where he systematically began to shred the socialistic premise offered by the inflationists, monetorists, friedmanites and the keynesians.
  2. Confusion about fractional reserve banking

    ruveyn – quoted – “In some types of bank, the bankers also invest the money of the customers who bank with them and with the permission of the customers. The permission may be implicit following from the fact that they are customers. The bankers also spilt the profits from the investment and interest collected with their customer. It is this split that is the inducement for the customers to bank with that banker. If the interventionist were not able to manipulate the economy, also where blissful Laissez Faire is exercised freely with all liberation, then will real world examples be exercised to certain measurable outcomes? Can we all agree that economic intervention serves as the thick fog; we all look through to assess the mechanical outcomes of economics in history? I contend that in a world where banks and individuals were left alone at the local level, then banks would indeed get highly creative with the flow of real money, and become strategic for how more money can be made through the divisions of gold, with thousands of new contractual possibilities. However, I will imagine for the next several hundred years or longer, (providing free market economics can manifest) it will challenge society, to exercise these possibilities by trial, and error, to separate unto what is honestly successful from that which is deceptively compulsory. I foresee that new strategies more complex than Fractional Reserve Banking will be implemented, and will mature before society understands the repercussions. However with each generation shall people become wiser, or that is at least our hope.
  3. Confusion about fractional reserve banking

    Preponomics – quote – “I believe in credit of all kinds that are “backed by one hundred percent gold reserves”. A bank may operate with all of the same advantages of capitalism as the individual, or any other business, which is to strategically invest money anyway they see fit, but unto honest standards void of deception. Capitalism Forever – quote – “So you're saying that a banker may invest his own money, but not act as an intermediary for investing other people's money? On the contrary “Capitalism Forever”, shall I bring more clarity to my position with further extrapolation, regarding contracts in a true non-interventionist market, where I differentiate contrast between a deceptive contract, one that is honest, and from one that is disallowed? Disallowed Contracts is Interventionism To say that a “banker may not act as an intermediary for investing other people’s money” as you suggest would mean that society must require the interventionist to arbitrate contractual allowance, defining when or if it’s fair/good/safe for society to have one. I would suggest that such an interventionist in this position would upon maturity, construct a quagmire of legal plunders. So to give proper context, can we agree that such a person should not be in the picture, regarding the blissful market place of non-intervention we all hope for? Honest Contracts in a Non-Interventionist Economy Then unto banks, individuals, or any business for that matter, what should be a precedent for how a contract is written and exercised? I boast to say with clarity, and honesty should each person deal and exchange contractually. For if deceit or a convoluted scheme is used, then shall an immoral indirect force manifest upon those contractually trapped with its trickery. Thus honest contracts, absent of deceit, and then delivered clearly, is truly the best policy. I also contend that if a bank, individual, or business of any kind were to lend money backed by one hundred percent of their own gold money, that this would be a very clear, very honest, and reputable loan. As the banker will simply put his/her own money at risk and avoid the unclear scrupulous backing of society’s property to be the risk, as the fiduciary paper propagates in circulation unto inflation. I would think that no-risk-banking is the best banking for the banker, but I contend that society will take a serious tumble unto poverty in the end, or be saved by a lawful despot. Deceptive Contracts in a Non-Interventionist Economy Now if a banker, an individual, or a business of any kind were to say to another, “We would like to invest your money as an intermediary unto much gain, are you interested contractually?” is not both parties free to make a contract? Unto losses, or gains will contracts go, but unto an honest start it should have. Yet if they offer up Fractional Reserve Banking, I contend it is not clearly exercised or understood most of the time, and matures unto theft for society. If the individual is contractually persuaded into giving away their property, not knowing the outcome, then I see this a poor choice by the individual, who may be unknowledgeable about such a deal, which causes them a certain risk unto loss. Then shall the banker with this unclear contract be the most certain deceptive winner as they transform a person’s property as their own (bailments), and then rob society’s property, with inflation when the system matures.
  4. Confusion about fractional reserve banking

    Ewv – quoted – “Honesty is not defined in terms of 'making money'. The wisdom of your statement will hopefully permeate every recess of society, and even cause the socialist to ponder their foundation. How is it, that the socialist can’t differentiate that which is rich from that which is dishonest? Two entirely different things, yet many, but not all, who cleave to fairness, blur the two unto a wicked resolve. I could not agree more my friend
  5. Confusion about fractional reserve banking

    Preponomics – quote – “No sir, I think there are and will be many honest bankers. Capitalism Forever – quote – “How would you define an honest banker? Someone who makes money by charging people for safekeeping their gold, and that's it? I must say this judiciously in order that my meaning not be contrived accidently unto anything remotely contrary to honest prosperity, as I regard capitalism the life blood of individual economic independence, and banking a very necessary part of its operation. I am too, a proponent in common, that capitalism should be infinite through time as your screen name advocates. Upon it will be the sustainable wealth that leads to bliss with variance. I believe in credit of all kinds that are “backed by one hundred percent gold reserves”. A bank may operate with all of the same advantages of capitalism as the individual, or any other business, which is to strategically invest money anyway they see fit, but unto honest standards void of deception. Is not credit used in a thousand ways unto profit? One hundred percent backed gold reserves forces a bank to make money with the same honest rules of capitalism that the individual must also operate by to make a profit void of deceit. I am for banks making millions, billions, and would advocate, even trillions of dollars, but not one dollar or (hopefully in the future not one gram) by using a deceptive, or an unclear compulsory strategy against society to bind them to promised money. This only removes the individual’s property unaware, which also results unto wealth-stealing inflation, and even possibly gains an interventionist unto lawful economic despotism. I also do think a bank could make great money also as a warehouse specialist providing security services of “trillions of incremental amounts” of gold bailment’s. Gold is highly divisible and to warehouse it would be a strategic service if were a standard.
  6. Confusion about fractional reserve banking

    ruveyn ben yosef – quoted – “Are you convinced that bankers will always become thieves. If so, what would you suggest that would keep the honest, short of have GORT visit the banker and reducing him to a burned out cinder. No sir, I think there are and will be many honest bankers. However it is my deduction that history gives us a very familiar pattern of how the despot will consistently engage society. The despot is addicted to positions of control, and will gravitate to it the same way a fly is drawn to a light, as history has given us the despots demonstration unto uncountable innocent millions dead. The despot is patient and seeks a position of power in any kind of institution that will afford him control. Government of course is the Holy Grail as the law can route all money, which is power unto his hands. However is not a bank also a haven for despotic activity in history? After all money is power and if one can control the money of others then they control the individual as well. We hear little of the good bankers that have gone before who achieved honest profit, which is a shame, but upon death and destruction are more people mesmerized with a fascination. This is my contention that if there are no economic interventionists, then a bank could do whatever they wish, however local society will become more prudent in time about the principles of individual economic independence, and the existence of a grifter of any kind that would pulverize it. I would predict and hope that local society to have proper laws locally to deal with theft, and fraud as they interpret lawful reaction upon trespass. To some will there be an arrest and to others an embrace, with wisdom separating the two. In the confines of humor - If GORT shows up in my non-interventionist free market economy, I will dodge his weapon system, dismantle him, and spray paint “Hobbs is dead” on its forehead, or die trying.
  7. Confusion about fractional reserve banking

    Preponomics - quote - Therefore even in a non-interventionist economy, will there be eventually a subtraction of property, and inflation, the moment any bank under performs, unless it is bailed out by selling its own assets, or getting into even more debt. This of course is not what banks in this situation have done historically. They will instead often print more fiduciary notes and steal the individual’s investment property unto unlimited printing, and cause societies money to be devalued. Non-intrinsic investments will be devalued without the individuals permission and goods to be purchased of intrinsic value will skyrocket with price inflation due to the increase of the money supply. This is indirect force using deception. It is to me a fine line somewhere between trickery, and fraud, and is absolutely in direct contradiction of honest principles. I have one word incorrect in this paragraph Non-intrinsic should be Intrinsic here is the proper paragraph below ------ Preponomics - quote - Therefore even in a non-interventionist economy, will there be eventually a subtraction of property, and inflation, the moment any bank under performs, unless it is bailed out by selling its own assets, or getting into even more debt. This of course is not what banks in this situation have done historically. They will instead often print more fiduciary notes and steal the individual’s investment property unto unlimited printing, and cause societies money to be devalued. Intrinsic investments will be devalued without the individuals permission and goods to be purchased of intrinsic value will skyrocket with price inflation due to the increase of the money supply. This is indirect force using deception. It is to me a fine line somewhere between trickery, and fraud, and is absolutely in direct contradiction of honest principles. ------ my apollogies
  8. Confusion about fractional reserve banking

    Let me say with prudence that my claims are indeed aimed at Salsman's views and not his person. Betsy Speicher – quote – “Why do Salsman's views contradict the principle of property rights? As mentioned above in the previous threads, supporting that a bank can lawfully take a person’s property (bailment) and without consent transform it into a loan lawfully without permission is a violation on individual property rights.(this of course is true in a our existing economy). This is theft because the individual shall not use any other competing currency or competing banking structure. It is a use of lawful force and securing individual submission unto legal plunder. However, if a true separation of economics and state environment existed then it would not be immoral direct theft, but a poor decision for the individual contractually, as this measure of deceit uses indirect force instead of lawful direct force against property. Betsy Speicher – quote – “Why is Salsman, in advocating fractional reserve banking for the reasons he does, dishonest? Why would fractional reserve banking under a gold standard and without fiat money cause inflation? Upon mutual agreement of the individual and the bank, in a non-interventionist economy, it is merely a deceitful attempt to route individual property with a scrupulous tactic. It is an “unclear” contractual handshake to take people’s property, and use it as their own. It is a tactic that blurs the lines of property and an appropriated loan that is then loaned again to others with no current tangible intrinsic money to back it. Thus it is all about promises with debt. I am for any business to make money with no limits, but not using deceit. The common citizen does not grasp the difference in a bailment and a loan, and many times does not understand that they risk their property to a scrupulous tactic. I do feel that as society becomes more educated that people will defy it more, and more. Therefore even in a non-interventionist economy, will there be eventually a subtraction of property, and inflation, the moment any bank under performs, unless it is bailed out by selling its own assets, or getting into even more debt. This of course is not what banks in this situation have done historically. They will instead often print more fiduciary notes and steal the individual’s investment property unto unlimited printing, and cause societies money to be devalued. Non-intrinsic investments will be devalued without the individuals permission and goods to be purchased of intrinsic value will skyrocket with price inflation due to the increase of the money supply. This is indirect force using deception. It is to me a fine line somewhere between trickery, and fraud, and is absolutely in direct contradiction of honest principles. Betsy Speicher – quote – “Why aren't the historical examples Salsman cites of fractional reserve banking under a gold standard valid? They ended up bankrupt or successful in transferring societies money to a few using deceit. Please can you site me historic examples where Fractional Reserve Banking, without interventionism of any kind involved, did not provide economic advantage for the bank or set of banks? Where it was not a scheme, for causing the wealth to leave the many going to the few strategically? Or do you believe that capitalistic strategy that deceives the many is ok from a perspective of honesty?
  9. Confusion about fractional reserve banking

    Betsy Speicher – quote – “Economist Richard Salsman, staunch advocate of the gold standard, author of "Gold and Liberty," crusader for the total separation of state and economics, frequent speaker at Objectivist conferences, contributor to many Objectivist publications, and columnist for Forbes . regards fractional reserve banking as a normal and proper result of true laissez faire capitalism. In a post on THE FORUM he explained how fractional reserve banking evolved historically under the gold standard. I think he teaches a lot of good things but have a few objections to some of his principles. Forgive me for being so blatantly honest. My humility is present, I promise, but I find that my answers can be too forward sometimes.I find it highly enjoyable talking with people who know economics I contend that Salsman is in contradiction to the pure principles of individual property rights I contend that Salsman is in contradiction to Rand’s formidable stance for honesty as he advocates a fractionalist.view I contend that inflation is an indirect use of force as Fractional Reserve Banking eventually causes inflation. I contend that he supports a quasi gold standard as fractionalist principles are not based on a pure gold standard. How do you feel about George Reisman? or are there other economist that are not fractionalist that you hold in high regard?
  10. Confusion about fractional reserve banking

    Preponomics – quote – “Now John-Banker gains a new customer named Fred-Barrower, who wants a new loan, and he loans the new printed notes to Fred-Barrower, who can now officially lay claim to Sally-Gold Owner’s gold as well. (thus the fraction occurs, as now there are more notes in play than there is gold). If Fred-Barrower and Sally-Gold Owner run to the bank at the same time with their issued notes then there will not be enough gold for them both, which means that the bank is insolvent.” Betsy Speicher – quote – “No, it doesn't. The bank can obtain the money needed to pay the depositors from other assets besides the gold on deposit in the same way that any business gets money to pay its debts when due. This includes selling assets it owns (like buildings, furniture, or mortgage loans on the books), dipping into the owner's personal assets, using funds loaned to the business by bondholders, taking out short-term loans on future receivables, etc. A formidable point, which causes me pause, yet will I argue: the context of my quotes and the virtue of the position you communicated. Let’s first examine the context of my two scenarios, one unto intervention and the other absent of intervention. You quote my scenario where I assign that the interventionist rules the day, authorizing what banks can do to the individual against their will, and not what they should do in a free market. I contend that all bankers are not bad but many fall to temptation and if the law allows for temptation then they often will, as history has indicated. Can we separate what is moral in this context based on lawful force vs. voluntary contractual action? Can we acknowledge that the interventionist will favor bankers over the individual for purpose of his own gains? The individual will surely be plundered beyond recognition against their will, providing that the banker is lawfully empowered to do so. An act of force, one that declares the banker empowered, to force the depositor to make their property to become a loan, instead of the individual agreeing for them to use it. History is full of economic circumstance where the bank could choose to do what is honorable by using their own assets, but I contend with an economic interventionist at the helm, and bankers blurring the lines of property, a plunder of mass operation will be forced unto the destruction of individual liberty every time. To your point of what banks “can do” in a non-interventionist economy. In a true Laissez Faire, (Separation of Economics and State Economy), I agree with you that a bank could leverage their own assets, instead of seizing Sally-Gold Owner’s bailment, or using her loan, but unto the blur of promises it will go. Not a clear honest policy of virtue, but unto unclear, and scrupulous strategy where money is created from “possible” paid debt. What of this debt in a free market? Is it a guarantee? Is it intrinsic, can a bank guarantee redemption of all deposits, or is it indeed a risk for the depositor. Not only to the depositor but to all who deal with the fiduciary media created. Is this not where the scheme becomes dishonest, as a bank will only tell the common customer this very critical information in the SMALL PRINT, and to conduct business upon arduous convolution, as all of society now exchanges with notes that “may be good”. Not intrinsic property ireserved, but promises of bank performance. A perversion of clarity, as there is no guarantee that enough things intrinsic are going back to the depositor, as paid debt is not always certain. It’s just a matter of time before insolvency plagues the system upon poor decision. Upon the insolvency what is the solution? I declare there is only two choices, bank failure mixed with individual money lost, or a savior of economic intervention arrives on a tall white horse, pulling a shiny printing press with an endless supply of ink. Upon printing will there be inflation and upon intervention will there be slavery. Inflation is indirect force, and economic slavery is direct force. As a true non-interventionist, I would agree that the grifter should be left alone to persuade the bystander on the sidewalk to put their twenty dollars on the table, where he makes it disappear with trickery, yet can we call grifting a vehicle of honesty and the money invested naive? If not honest then is it virtuous? Is it not a blur between fraud and trickery unto an individual’s risk, especially if the unwary customer can barely grasp the outcome? If we argue the grifter is legitimate by lifting a sign in advance that says, “You will lose your money to me upon my trickery” then can we also deem Fraction Reserve Banking an honest business in a non-interventionist economy if they clarify everyone’s risk/ loss up front. Yet ultimately your point taken – A bank can operate upon a fraction in a free market economy if they contractually guarantee honestly that the deposit is one hundred percent backed with some kind of asset. I just argue it is scrupulous and deceptive, and empowers a few over the many. Is it not a ploy for a bankers gain, left unclear, that the customer is risking their money, and economy hidden within a common service of depositing money? Betsy Speicher – quote – “In this way, a bank is no different than a business that makes shoes or someone paying their household bills. If he has the money (or gold) to pay his creditors, he does. If he doesn't, he sells stuff that he owns or takes out a loan from someone willing to lend him money. If he has no assets and can't get a loan because he doesn't repay them, then he is insolvent and will default and that's a bad thing, but that's not a situation unique to banking or to fractional reserve banking. I agree completely However if there is a bank that contractually operates with bailment’s and simply charges me a fee to operate as a warehouse for my gold (bailment/ property), and then upon their “own” physical reserves in gold, they loan out issued notes one hundred percent backed in their own gold, then that will be the bank I seek to do business with. As my property will contractually remain my property and not become a promise that upon good performance will pay me back. Betsy Speicher – quote – “Thus to claim that fractional reserve banking is immoral because the bank can default is no different than saying that borrowing money or buying with a credit card is immoral because the borrower may not repay what he owes when it is due. Again keep in mind that my assignment to what is “immoral” is when the economic interventionist forces a “lawful rule” that Sally-Gold Owner’s property (bailment) must (or can) become a loan upon John-Bankers choice, (against Sally-Gold Owner’s will), also where the money is a monopoly, preventing sound money from competing with the new bank notes deemed as the official money. Fractional Reserve Banking under law affects a risk to an entire society without permission and upon decisions in the dark; they transfer wealth and punish society unto poverty while doing it. A monopoly of force, that causes every individual to surrender their property at the end of a gun. In a true free market economy where we have no interventionism, then it’s not immoral (unless local society deems it fraudulent), but instead to my claim, a poor decision for the individual to engage in Fractional Reserve Banking. However to add, if the charge of counterfeiting money or fraud were to manifest in court, can we also agree that the depositor is now a party to the fraud? May I ask a question? Do you feel that a fractional reserve bank would have a hard time, competing with other banks that do not use any fractional reserves, but are one hundred percent backed in gold reserves? Keep in mind that because this is a “non-interventionist free market economy” other banks could become insolvent with their fractional reserve temptations to print fiat notes. So also imagine that fractional reserve banks would start to incur a reputation for insolvency to some degree.
  11. GORT and the government...

    I would claim that Hobbs would love such a robot, but I would apire to figure out a way to dismantle it You however came up with an interesting point, can proper law be managed with artificial intelligence? (supposing that society could agree on what proper law is?)
  12. Confusion about fractional reserve banking

    Betsy Speicher – quote – “I see a lot of negative characterizations of fractional reserve banking, but no reasons why it is wrong or evil. If it is simply a loan to the bank that both parties freely contract for, how does that cause a situation Preponomics quote - "where the bank does indeed claim the deposited money as belonging to their own asset sheets in the form of a loan, and then upon perversion invest it without permission. It violates what constitutes individual property, and is one of the modern lawful plunders of the ages?" Betsy Speicher – quote – “What are you saying here? That it is not a loan -- even though both the borrower and lender agree that it is a loan -- or that all loans are perverse and violate property rights? Let me first say, that I want to commend SoftwareGuru for being astute, perspicacious and completely acute in the defense of Fractional Reserve Banking, as he does indeed provide for a formidable defense regarding strategy. However it is correct that I must gather with all motivation a foundation of persuasion in regard to the negative impacts of Fractional Reserve Banking, especially when a lawful interventionist will force a monopoly on “what is money”. There are two different outcomes in this discussion from my perspective, one unto immorality and the other unto poor decision. One being under an interventionist lawful system that forces the immoral theft, and second if it is indeed the practice of two free individuals, who both agree to it contractually in a separation-of-economics-and-state economy, becomes a very poor choice for the individual. However with or without consent it perverts individual private property. I have taken the time to break down a proposed fictional set of events to illustrate both scenarios. SCENARIO - LAWFUL INTERVENTION ISM John-Banker says to Sally-Gold Owner, “I will gladly store your thousand dollars of gold in my bank and will charge you a small fee to safely store “your property (a bailment)”. I will also issue you notes that reflect your gold amount exactly, that businesses here in town locally, will gladly accept because they trust that my bank indeed keeps the gold secure, if they choose to redeem the issued notes here. Sally-Gold Owner agrees, and is excited to handle the manageable notes instead of the heavy bullion. However, then a law is passed that says, that the safekeeping of bailment’s (gold property) in banks are now in fact able to be “loans” to the bank and not Sally-Gold Owners property. The law then says further that John-Banker if he chooses may lend out to someone else more new issued notes that can lay claim to the same gold that is owned by Sally Gold Owner. This of course issues two sets of notes claiming the same gold. Now John-Banker gains a new customer named Fred-Barrower, who wants a new loan, and he loans the new printed notes to Fred-Barrower, who can now officially lay claim to Sally-Gold Owner’s gold as well. (thus the fraction occurs, as now there are more notes in play than there is gold). If Fred-Barrower and Sally-Gold Owner run to the bank at the same time with their issued notes then there will not be enough gold for them both, which means that the bank is insolvent. Therefore the banker will need the support of an economic interventionist with the law to declare that either they can’t claim the gold, make gold illegal, or that the new printed money instead of gold must satisfy both parties. Thus banking and government are tied at the hip in history. Then indeed another law is passed that says, all of the new issued notes, which are in larger supply, than the gold reserves, is now deemed the “ new official money” and the old real money, which was gold, is no longer allowed to be money. People now must use the new official money which is printed paper back with little gold or no gold at all. Gold can be sold for notes if owned outside the bank, but it can’t be used as money lawfully, and old official gold money will either be illegalized, confiscated, or its value will force it out of circulation (Gresham’s Law). Then due to insolvency issues with many banks, another law is passed, that a central bank is needed for keeping these new notes “stable”, by manipulating interest rates, and increasing the money supply at will, so that insolvency won’t occur with the poor performing, and now propped up banks. Sally-New Paper Owner (use to be gold owner) protests, and says to John-Banker, “This is not how I want my real money or property, as I wish to keep my gold property (a bailment).” Then John-Banker says, “I am sorry but all people who store bailments are now contributors by law to loan me money that I can print extra notes off of, for new loans that will benefit only me. I shall use your loan (what was your property) for my benefit in interest, and it is no longer your choice to disallow me to make money off your property. I also now am the gatekeeper of money, you shall not exchange without my notes, and all money creation comes through me. A monopoly that is sublime for me the banker. Sally-New Paper Owner weeps that her property has been manipulated from her, and that John-Banker can print against her taken property lawfully without her permission. Also that she is no longer able to trade real money in a free market economy, and that John-Banker controls her financial life in various ways. Sally-New Paper owner then goes into town to also discover that eggs are ten times higher because the money supply has been increased unto perverted levels. She then also discovers that her 401K, and financial investments are all being devalued against her permission, with the ever increasing money supply. Then Sally New-Paper Owner writes a book on the perversions of Fractional Reserve Banking at the hands of despots. -------------------------------------- Though lawful intervention is unique in each financial controlled society this strategy of Fractional Reserve Banking ends up consistently destroying liberty. Many nations have fallen and the individual has suffered immeasurable harm due to printed paper and calling it money lawfully. In my next update will I give historical accounts of these perversions if desired? SEPARATION OF ECONOMICS AND STATE SCENARIO – (true free market economy) John-Banker says to Sally-Gold Owner, “I will gladly store your thousand dollars of gold in my bank and will charge you a small fee to safely store “your property (a bailment)”. I will also issue you notes that reflect your gold amount exactly, that businesses here in town locally, will gladly accept because they trust that my bank indeed keeps the gold secure, if they choose to redeem the issued notes here. Sally-Gold Owner agrees, and is excited to handle the manageable notes instead of the heavy bullion. Then John-Banker says to Sally-Gold Owner, “May I call your deposit a “loan”? Sally says why do you want a loan? John says, I have a client named Fred-Barrower, who wants a loan and I would like to loan him the money. Sally says, “How much will I be appreciated in the interest of this loan? John says, “Nothing, however I have an ingenious plan. The notes that I have issued to you, will still be yours to spend; however I will print a second set of notes the same as yours and loan those to Fred instead of the gold. Sally replies, “That doesn’t sound right, will not Fred and I both spend these notes in town and upon them all coming back here to your bank, will there not be a deficit in gold? John says, “I do this so much that I think we can get away with it.” -------------------------------------- Upon this strategy in a true Laissez Faire economy, the businesses in town will soon lose faith in the bank who prints too many notes and will reject them as soon as its common knowledge that it’s a scam. Thus Fractional Reserve Banking will fail in a true Free Market Economy but in an interventionist market like we have today; banking strategy can work efficiently for “bankers” for long periods of time as it transfers wealth slowly, will devalue the individual’s investments, decrease purchase power, and will also prevent society from having a sound competing currency lawfully. Here is my reason, its forced theft in a lawful interventionist economy, and is a poor decision for an individual in a true free market economy where sound money is practiced.
  13. Confusion about fractional reserve banking

    ruveyn - quotes - "The trade value of gold, silver or other precious metals has little to do with their physical utility. Consider gold. Aside from jewlery, dentures, plating for electrical switches and a decorative shiny covering for domes and walls, what -use- does gold have. Its main use is as an exchange medium. It is accepted not because of any inherent value, but because it is durable, divisible, and relatively scarce. Use of gold for exchange is a convention and a protocol. It is handy since any commodity can be traded for gold and gold for any commodity. Hence the arithmetic complexity of strict bartering of useful goods and services is rendered simple. N commodities trading for M commodities would result in N*M types of transactions. Making gold (or some other metal) a universally accept trade medium reduces the combinatorial complexity to N + M types of transactions." I agree that you allocate gold as a low-monetized metal, which cannot be compared to silver or copper which is highly monetized in a myriad of industries. However would you agree that a medium of exchange is simply that, “a medium of exchange”. If the shoemaker sells shoes, and the coat maker sells coats, then if gold or anything else is exchanged it works no different than a fiat currency as a median for the simple exchange? Your point to be taken with wisdom, it’s but a protocol that people believe in. Can we also agree that gold has a six thousand year legacy of being trusted, even to this day in every nation on earth? I also do agree it is “rendered simple” as well. ruveyn - quotes - "The problem with fiat currency is that it is succeptable to fiddling by bankers and politicians. Whereas gold, being a natural element cannot be expanded in quantity except by mining or extracting more of it from the earth and sea. Score one for gold (or silver or other scarce metal), its quantity is controlled mostly by nature and partially by mining and extracting technology. Whereas fiat currency can be gamed, fiddled and printed with virtually no transaction cost. Even more so with fiat currency in the form of credit markers stored in a computer file Not that you asked for my approval, but I find this statement profoundly wise. I too agree that fiat currencies are highly addictive to be “fiddled with”. ruveyn - quotes - "For capital to be readily available to fuel new technologies and other innovations some kind of man-made "future money" has to be available. That is where credit comes in. Creating instruments of trade that are universally acceptable for people who will make the credit good by producing the goods that the credit capitalizes is how we can expand the economy safely. Later on the gold and the prices can be re-adjusted by the market to give metallic backing to the instruments of credit. To put a point on it, we need an expanding money supply to buy and sell an expanding inventory of goods and services. As long as the money supply does not outrun (in the steady state) the goods and services produces we have price stability and sound trade currency. I do think in a true Separation of Economics and State economy, that individuals will contractually do what they wish with each other, and to become creative with credit and contracts would happen on every side. However each individual would be inclined in such a market to become very contractual in protecting themselves with inventive financial strategy. I agree that gold backed instuments would expand naturally. I even think that in a Separation of Economics and State economy that fiat strategies would also try to start in many different ways as well but would go out of business unable to compete with other strategies like you suggest where there is one hundred percent backing. Now I will predict wildly and dream upon what might be! I also would suggest that society has been addicted to the current styled “banking model” we have now, that has inundated our societies now for hundreds of years. I believe it possible with true Laissez Faire that individuals would naturally become the primary competitors of banks. Individuals will have no restraints on lending to anyone, anytime they wish, and will come together with lending strategies that would rival banks. Imagine ten people shaking hands in concert to finance something in society, where they are not punished to loan and prosper, even if its not their primary business? I would also hope the future medium of exchange will be connected to gold but upon incremental creativity by weight. Instead of calling something a “dollar” or a “quarter”, it would be named by weight. I find the wisdom of Jean-Baptiste Say profound in this regard.
  14. Confusion about fractional reserve banking

    Preponomics – quote – “Shall the barrower and the depositor own the same real money (property)?” SoftwareGuru – quote – “The banker and depositor do not own the same real property. The money deposited in the bank is a loan to the bank -- that is not some fraud or sleight-of-hand, but the standard accounting treatment. Sir, I must stand firmly in disagreement and declare that Fractional Reserve Banking most certainly causes the depositor and barrower to both share ownership of the same deposited money, where the bank does indeed claim the deposited money as belonging to their own asset sheets in the form of a loan, and then upon perversion invest it without permission. It violates what constitutes individual property, and is one of the modern lawful plunders of the ages. I agree it is a standard for many nations in this modern era, in their ingenious plot to remove that which is property, and money from the individual’s hand. An excellent standard for wolves, who consistently embark on a lawful hunt with an exposed prey in the open. How diabolical it is for a lawful despot to have an advantage, and for the economic interventionist to say to the individual, “You shall not call your property your own, but it is mine to invest, to loan, and to manipulate unto my control without your permission.” I contend that fractional reserve banking violates the foundational principles of what is individual property in the Lockean tradition, and will swindle that property into routed economic advantageous gain for some at first, and the economic interventionist control over the economy second. A strangle hold will mature over society by a few and mass robbery manifest. I contend that my argument is not about advantages or disadvantages of banking strategy; it’s about private property ownership and that fractional reserve banking indeed perverts “what is individual property”. SoftwareGuru – quote – “You should think of a fractional-reserve banks as being closer to a mutual fund. The key difference is that the owners of the fund with a multi-layered capital structure: the bank owners put in reserves that take the first risk, traditionally bank owner's personal capital was a second layer, then come buyers of bank bonds, and finally those who have lent the bank money by making deposits. This is the traditional structure -- a free-market may see a more varied structure evolve. A fractional reserve bank means the amount owed to depositor is not backed by 100% gold etc. However, they may still be backed more than 100% by real assets. Depositors pool their gold, and a large chunk of it is lent out to people who want to buy (say) homes. Those people borrow, and the banks gets a mortgage on the house. In terms of real goods, the house now backs a part of the deposits. Legally, it should not be much different from a depositor making a loan to someone who wants to buy a house. Of course, it is not practical for a depositor to do this himself. Pooling money via a bank facilitates the process, and this allows a depositor to earn interest on his funds instead of simply keeping them as a sterile store of value. Through a chain, the house actually becomes a store of value for the depositor.” I concede that the strategy of fractional reserve banking can be advantageous capitalistically, or that it can be backed by assets (immorally obtained), however I still stand firm that its immoral theft from the individual to do it. A perversion of what is property. It would be foolish of me to say that the lion is not efficient when it severs the jugular of its prey, when the weaker animal is held still by the lion’s powerful claws, but I will quickly warn the prey that the lion approaches, as I have been warned in the same way by the prudent Austrian economist. Is it not plain to see in history the demise and calamity that strikes the soul of individual liberty, which manifest from the strategies of printed paper? I find your argument steeped in the precision of banking possibilities, a strong premise for possible good outcomes, but I wish to appeal to your prudence regarding consistent inclinations of despotic power, that moves across a nation swiftly with such a strategy. Can fractional reserve banking work? I will concede to you now, you win sir regarding its capability as a formidable strategy unto increase, but with a disclaimer it should be known, that the balance of power in society is tipped to a few, as the individual has no claim over their own property in its fullness upon this immoral printing. A very familiar historic reoccurrence will be evident, where the individual will once again be plundered by those who wield economic law to their favor. SoftwareGuru – quote – “However, the depositor's relationship is as a creditor. The bank owes him money and the mortgagee owes money to the bank. As part of its normal functioning, the bank keeps a certain amount of funds on hand, to pay out depositors who want their money. If the bank claims to keep 100% on hand, and do not, this is fraud. If they claim to keep at least 20%, and do so, there is no fraud. However, the terms of their agreement with their depositors ought to foresee a condition where the withdrawals exceed this reserve, and ought to specify how such a situation will be handled. This does not preclude 100%-reserve banks. There will also be a need for pure bailment, particularly for large-value accounts.” Also will I concede that Fractional Reserve Banking can bring the individual benefit, but must we also understand with vigilance that it’s a value which is delivered from upon high from an economic interventionist looking down, when a law or standards are enforced. Like a dictator will promise the poor a promising rescue and sublime fairness unto destruction, will banks also offer value to society with a deadly cost. But upon this expansion of credit, that is not their own, will prosperity move the needle of power from the individual to bankers, and the economic interventionist. I believe in true separation of Economics and State, and with this premise there is no place for an economic interventionist to set any rules for how such a system is to work. Therefore in my proposed economy will the Fractional Reserve Banker simply make a deal with a willing soul to give the bank control of their property contractually one at a time, and all who trade the notes printed will be swindled their property value. However the competing medium of exchange, which would probably be metals, would simply outlast the unsustainable swindles of printed money. SoftwareGuru – quote – “A good book on early English banking is Walter Bagehot's "Lombard Street" I find Bagehots contribution a testament to the persuasions of State sovereignty and one of the founding fathers of bail-out banking. He provides a foundation for the Keynesian principles to rest firmly in place to transfer a society’s wealth unto mass plunder. I suggest the economics of Rand, Rothbard, Hazlit, or Mises, who all will regard economics to support the individual first, and foremost using the principles of sound money.
  15. Confusion about fractional reserve banking

    I contend that free-market-money, in a free-market-economy, that is backed upon a solid commodity, wil empower prosperity much quicker, and unsustainable insolvent systems based on fiat currencies that plunder will no longer be present with any kind of economic momentum. I dont argue that Keynesian principle doest have certain resolves, just that it ends in plunder and collapse upon maturity. Also it does violate private property principles in the Lockean tradition.