June 2010 - Posts

Some thoughts on free-market banking
Thu, Jun 17 2010 1:10 PM
First of all there are many misinterpretations about what fractional reserve banking actually is. So lets being with sorting out some of our terminology.

A lot of people claim fractional reserve banking isn't fraudulent because everyone can agree on it. Well that is just the thing, they can't. A fractional reserve bank is by very definition a deposit bank which breaks it's promises. A deposit bank takes your money and promises you cash-on-demand, you can have them back anytime you want. If they then don't actually keep that money availiable on demand, but go and lend it to other people, they have broken the contract and it is a fraudulent operation. Most of the time this wouldn't be noticed much but the bank can in fact not keep it's contracts with all of it's client at the same time.

If you on the other hand agree on the bank lending the money to someone else and accept the risk that it may not be availiable if too many people demand money from the bank at the same time, then this is no longer a fractional reserve bank. It is simply a savings & loans bank with a very loose withdrawal policy. The receipt you get for your savings balance in such a bank is not money. It is an IOU or what we call near-money, it will always be traded at a discount (however small) compared to real money.

One interesting question here is if the will be any demand for full reserve banks in a free-market. After all having your money in a full reserve will cost you a storage fee and free-market short-term savings & loans banks will probably be very efficient at making there IOUs redeemable into cash most of the time so they will trade at a very small discount.

I think that in the beginnings of a free-market system there will be plenty of demand for full reserves. This is simply how bills will be issued so that people don't have to carry around gold coins where ever they go (any commodity can be used, but I will go with gold as the most likely example). These bills issued by deposit banks will be the first step money takes from being the actual commodity. They can be used in shops or deposited in savings contracts or whatever. Eventually though savings & loans banks may reach the efficiency and trust level necessary for shops to start accepting IOUs on savings deposits as payment, and the discount could be so small that it costs more to calculate it then the value of the discount. Making these IOUs de facto equal in value to money. This is when it starts getting really complicated to define what money actually is.

We also have several other services which interfere with the demand for real-money. Insurances, promises of credit when I need it (like on most credit cards) and so forth also reduces the amount of real-money that people will need to hold to be 100% sure that they can cover emergency expenses and so forth.

However I think that this isn't really that much of a problem. Even if savings & loans banks reach the extreme levels of trust and efficiency required to have there IOUs trade at the same value as real gold it is not likely that this will cause the same fluctuations in the money supply and subsidised prices on credit that we see today in our State run system. The two main factors behind the destructive business cycle according to Austrian theory.

More likely is that when these banks have reached peak efficiency the money supply will remain fairly constant. They will adjust there interest rates according to the demand and supply for credit to keep there lending levels at the same maximum. As long as only a very small amount of new gold is inserted into the economy the total balance sheet for all these banks should also remain fairly constant. Instead it is the interest rates that will fluctuate but they will do so according to the actual demand and supply of capital (some central banks may be attempting this today but they are in a terrible position to succeed). This will prevent the massive mal-investments that we see during boom cycles today when credit is too cheap and demand for goods overestimated and a lot less capital will be destroyed.

All in all as long as we remove the governments control over the currency, interest rates as well as removing deposit guarantees that remove trust as a competitive advantage for banks it should all work out pretty well. As long as we don't allow fractional reserves, because it is impossible for the market to compensate for the phenomena of money that looks like money but are IOUs.

This subject deserves a much more lengthy analysis naturally. The main purpose of this text is just for me to sort out some of my first glance reflections.
by hkarnoldson | with no comments
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Cameras & Cops
Fri, Jun 4 2010 2:36 AM
So it would appear that lawmakers have already started making it illegal to point cameras at cops.
According to this article it is already illegal in 3 states.

At first glance the only reason they would do this seems to be that they want the police to be able to break the law and abuse it's power. In a court your word is useless against a police officer, videos is basically the only way possible to apply the law to police officers. A lot of witnesses may work too but human perception is tricky, they all need to say the same thing and they need to be there too.

This interpretation might however be a bit to cynical. I think most lawmakers actually want the police to follow the rules they make too. So maybe there is something else that makes them do this?

Cops on tape are appearing all over the internet. The problem is that while filming for private use is legal in most places, makes the movies public is not. Except for certain rules applying to the media, you usually need the permission of the people you filmed before you make it public.
I don't agree with that but it is how the law is written. It may explain why lawmakers take this action. Police officers don't want there faces all over the net and the simplest way to stop that is just to let them arrest people who point cameras at them.

Until we get laws explicitly making it legal to video tape cops people who post police videos online would do themselves and everyone else a favor by blurring out the faces (it is not all that complicated unless you want it to look perfect) of the officers. This would hopefully reduce the officers contempt for cameras and make lawmakers less prone to take rushed stupid actions like banning them.
by hkarnoldson | with no comments
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School massacres happen in China too
Thu, Jun 3 2010 10:21 AM
China's spate of school violence: Lone madmen without guns

Could it really be that gun control or lack there of is not what causes mad people to go on massacres in schools ... no way!
by hkarnoldson | with no comments
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Israel and the war of the worlds.
Wed, Jun 2 2010 2:37 AM
So some ships bound for Gaza (supposedly carrying humanitarian aid) where stopped by the Israeli navy and bringing knifes to a gunfight 19 crew members on the Turkish ship where killed by Israeli commandos.
What the media don't report is that the Freedom Flottila manifestation could only have had one result. Regardless if they had reached Gaza or not, the only thing that could ever have come of this was an escalation of violence and more death on booth dies.

The one sided media and leftists all cry murder. Yes, technically maybe boarding a boat on international water and killing people is murder.
But that doesn't mean you can stop reporting about how despicable the people behind Freedom Flotilla are and only focus on painting Israel in a bad light.

Israel had made it's intentions clear for a very long time. The people on these ships where looking forward to martyrdom.
Sacrificing human life to make a political point is not acceptable. Nor is delivering supplies into the hand of terrorists to have them sold to the highest bidder.

Freedom Flotilla can not in any way be called a humanitarian effort. There reception in Gaza was openly being organized by the Hamas, which no doubt would have taken all the supplies and sold them to the highest bidder to finance terrorism (they have hijacked and sold aid shipments in Gaza before).
This would mean more attacks on Jews which in turn means a tougher response from Israeli military. As I said this manifestation could only bring death and misery.

What should also be noted is that Israel offered to allow them to bring in all the supplies by land thru the aid organizations currently active in Gaza, the Red Cross for instance. These organizations know what they are doing and are fairly good at getting there help out to civilians rather then letting terrorists sell there stuff. Further more that the Turkish ship had Islamic fundamentalists on it (at least I hope regular Muslims don't sing and cheer about the return of Muhammed's Army too often)


I do not condone anything a government does and that goes for Israel too. Violence and murder is the natural conclusion of the state and this conflict is no different.

But when trying to adopt a more pragmatic view it is difficult to see Israel as anything other then a product of desperation. Israel is a high priority target for Islamic fundamentalists all over the world, and Palestinians are being used as there cannon-fodder. Israel can not just up an leave and go home. The terrorism threat to Israel will not subside much if they leave the occupied territories and they would have no buffer-zone to stop attacks against Israeli civilians in.

Islamic terrorism is being empowered by the presence of the American military all over the world.
Lots of people have been thought by there governments to hate the West. But Soviets, North Koreans, the Chinese etc did not go and blow themselves up or crash planes into skyscrapers because of it. The difference is that no matter how well you control information or how much propaganda you use you can not make a lot people actually believe they are under physical attack by the West in places like North Korea. All they have ever seen of the west are rice bags that reads "A gift from the U.S.". They will not believe they are under attack without some tangible proof. As long as they don't believe they are under attack extremists can't brew hatred and a sense of desperation strong enough to make them travel across the world and strap bombs on themselves....

People don't like to be meddled with and in much of the Muslim world America has provided a great many things that can be used by extremists to brainwash the masses into a state of fanatic hate and desperation. Without this they would never be able to raise the support for terrorists organizations that they can today.

This conflict is much bigger then Israel-Palestine and can not be solved without seeing the big picture. Palestine is cannon-fodder for the Islamic community and Israel is just a product of desperation made possible by first the British then the American Empires. Nothing can be changed here. What we can do to make everyone safer is a global withdrawal of American forces and return to non-interventionist foreign policies through the west. This involves not only scrapping the American military complex but also the World bank, IMF and preferably even the United Nations.
by hkarnoldson | 4 comment(s)
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