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100% gold standard and clearing systems???

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sthomper posted on Thu, Dec 10 2009 12:07 AM

"The first thing to be observed about the "100 percent gold standard" is that nothing approximating it has ever been tested in practice. All historical metallic monetary standards had a supporting clearing system, more or less developed, which limited the actual payment in the monetary metal to net trade, that is, the difference between the value of total purchases and that of total sales. It follows from my analysis above that a "100 percent gold standard" will not be able to survive for reasons having to do with the burden it unnecessarily puts on savings. There isn't, nor will ever be, savings in sufficient quantity to finance circulating capital in full, given our highly refined division of labor and roundabout processes of production."

http://www.safehaven.com/article-3426.htm

i am unclear about what is meant here about a clearing system.  wouldnt a 100% reserve system have a clearing system?  am i misunderstanding this?

could a 100% gold system involve electronic transfers of gold claims between various locations?

ie..i verified amount of gold is found at a lcoation...an electronic transfer of a receipt is sent and title to a verified amount of gold elsewhere is transfered?

and what is circulating capital?  

 

is the article fake or wrong or both?

 

 

 

 

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I think we're slightly split on this website between "free bankers" (get the government out, but banks don't have to have 100% reserves) and "100% reservers" (get the government out, and banks are fraudulent if they hold less than 100% reserves). I am not totally sure on this point, although I have previously argued on the side of those opposing fractional reserve.

I had a Jevons quotation on my wall detailing that there can be three types of bank deposit. I will paraphrase him:

(1) A deposit contract detailing a specific bit of money (e.g. four specific gold bars -- no other gold bars, even if identical in size and weight, would be sufficient to fulfil the contract). Rothbard spoke of these as bailments, and for his analysis of them to ring true, the contract would need to specify that this "bundle" of money must be returned upon demand (demand deposit).

(2) A deposit contract detailing a specific quantity of money, but not one ring-fenced in the same way. Still a demand deposit, but any different four bars of gold will do. If this were the type of contract, then it couldn't be fraudulent to have less than 100% reserves, because one only promises to pay four bars of gold on demand, and not return your specific four bars of gold.

(3) A time-deposit contract like a bond. One gives four bars of gold to the bank, and has a contract that one will receive these [non-specific] back (presumably with interest) at a given date.

For example 1 the contract is violated if the deposits are not returned exactly. For example 2 the contract is violated if the deposits are not returned on demand. For example 3 the contract is violated if the deposits are not returned on the set date.

Example 2 could use clearing houses, as in the case that too many people for one bank demanded their deposits on a certain day, the banks could borrow short term money/gold from the clearing houses to service their obligations.

 

The only question is: can an inflationary business cycle be fuelled by class (2) of banking? (it obviously can't be fuelled by (1) or (3))

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Thedesolateone:
The only question is: can an inflationary business cycle be fuelled by class (2) of banking? (it obviously can't be fuelled by (1) or (3))

Block and Barnett provide this chart in their article http://www2.units.it/~etica/2009_1/BARNETT_BLOCK.pdf

  Fractional-reserve bank
(demand) deposits &/or banknotes  
 100%-reserve banking  
 Fiat money    ABC + price inflation    Price  inflation without ABC
 Commodity money    ABC + price inflation    Neither price inflation nor ABC  

I have bolded the part you refer to in your question 

 

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"Example 2 could use clearing houses, as in the case that too many people for one bank demanded their deposits on a certain day, the banks could borrow short term money/gold from the clearing houses to service their obligations."

 

this is what i dont understand, i thhoght a clearing system wouldnt need any borrowing of any sort with ex 2.  demand could be a exact weight of gold at one branch and another...but demanded on bank property, iow.  or some gold held at another banks leased vault space.  but there would never be a shortage of gold?

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I think it says clearings can be provided with very little amount of specie. So fractional reserve banks will outcompete the rest.

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Juan replied on Thu, Dec 10 2009 1:29 PM
I think we're slightly split on this website between "free bankers" (get the government out, but banks don't have to have 100% reserves)
That's not really free banking. Of course advocates of fraudulent reserve banking (FRB) like to call their scheme "free banking" and pretend that people who reject fraud are against "freedom". Pretty Orwellian. Fraud is Honesty.

But given that advocates of fraudulent banking tend to be amoralists/moral subjectivists/deranged subjetivists, they of course are not worried by fraud - it is all 'subjective' after all.

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ok...i am not certain about the current banking system in the us and fraud.

i assume you are referring to the current central bank/commercial bank system.  if not say so.

i am not sure about current demand deposit contracts and the wording...if it is even called a demand deposit anymore?  

if banks truly have to meet demand for cash from a govt central bank and never have what they claim to have...it sounds false, but if people/customers know they agree to the falsehood.

 

but i was asking   "All historical metallic monetary standards had a supporting clearing system, more or less developed, which limited the actual payment in the monetary metal to net trade, that is, the difference between the value of total purchases and that of total sales. It follows from my analysis above that a "100 percent gold standard" will not be able to survive for reasons having to do with the burden it unnecessarily puts on savings. There isn't, nor will ever be, savings in sufficient quantity to finance circulating capital in full,"....

i thought a clearing system would automatically work with a 100% reserve system.

and if savings are solely cash accumulations....well, i wouldnt see a burden if portions of savings cuold make their way into investmensts...perhaps not liquid ones though

http://www.lewrockwell.com/orig2/kondaks5.html   www.posfi.com

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Why don't you just ask the austrian advocates if they are amoralists or not?

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