Let us assume my propisition is true, for the sake of argument.
FRB is beneficial to private banks, allowing them to offer more and cheaper loans, and attracting more customers. The evidence is clear that even before the central bank, private banks practiced FRB, believing that tried and true (sic) line; "it won't happen to me."
How would a stateless capitalism society stop the use of FRB without the coercive power of the state to enforce it? If private companies find it usefull, they will practice it.
In States a fresh law is looked upon as a remedy for evil. Instead of themselves altering what is bad, people begin by demanding a law to alter it. ... In short, a law everywhere and for everything!
~Peter Kropotkin
Rapists find rape useful. Thieves find theft useful. X being useful to somebody is not a sufficient condition for X's prevalence or sustainability in a free market.
There will always be fools who "invest" their money into an inherently insolvent venture such as a fractional reserve bank. There will always be fools, period. But I have yet to see a reason why anyone MUST submit their money (capital, assets) to a scheme of conflicting property claims in order to invest it with or lend it to the market agents that need it. There's NOTHING that a FracR "bank" does which is not as easily done by a combination of full reserve storage, transaction services, and asset management/allocation services already available even in the government subsidized centrally planned banking system of today.
The supposed necessity of conflicting property claims for the operation of a "modern" society is the largest brainwashing scam performed over humanity over the last 400 years -- and still going stronger than ever.
Yes.
Also a good point. FRB works for the banks, allowing them to become large creditors through leverage. Nothing would stop this practice if it weren't stopped by the government nor law. ( i make the distinction between gov't and law because of polycentric legal orders )
How would a woman protect herself from a rapist in a stateless society? The exact answer is unknown, but she might carry a gun, pepper spray, tazer... or the environment might be set up to deter rape, such as a barbed-wire fence, high wall, lighiting...
To paraphrase Marc Faber: We're all doomed, but that doesn't mean that we can't make money in the process. Rabbi Lapin: "Let's make bricks!" Stephan Kinsella: "Say you and I both want to make a German chocolate cake."
Z and Daniel... I don't think you understand my question.
I am saying, let us assume that FRB will be a popular form of banking, more popular than Full Reserves. I believe this to be true, and think the evidence agrees with me; it is more attractive to customers.
How does a statless capitalist society bar the use of FRB, or even lessen it short of creating a "new capitalist man" similiar to the desires of utopian sociaists (with their call for a "new socialist man.")?
Daniel Muffinburg: How would a woman protect herself from a rapist in a stateless society? The exact answer is unknown, but she might carry a gun, pepper spray, tazer... or the environment might be set up to deter rape, such as a barbed-wire fence, high wall, lighiting...
or she can stop wearing those sexy skirts or tight jeans and see-through t-shirts!!! (/rapist mode)
(english is not my native language, sorry for grammar.)
Laotzu del Zinn: Z and Daniel... I don't think you understand my question. I am saying, let us assume that FRB will be a popular form of banking, more popular than Full Reserves. I believe this to be true, and think the evidence agrees with me; it is more attractive to customers. How does a statless capitalist society bar the use of FRB, or even lessen it short of creating a "new capitalist man" similiar to the desires of utopian sociaists (with their call for a "new socialist man.")?
lulz but if it's popular, why stop it? :D if people demand this kind of stuff, so be it. It's not like they are using violence of something...
I completely understood your question.
First, the evidence you think you have about FracR banking being the default in a free market in the past, is non existent. It has been debunked here more than once. Historically, previous episodes of FracR banking have, without exception, ended with (1) collapse/run, or (2) government subsidized central bank as a lender of last resort.
Second, even if private courts gave it a free pass in terms of fraud, and a FRB diclosed its activities to everyone, the value of the FRB notes they issue will be discounted by the free market relative to storage certificates which are fully backed by gold (or whatever else arises as money). In a free market everyone can and will be a bank, and able to issue notes. Counterfeiters who don't disclose their counterfeiting would be prosecuted for fraud. Counterfeiters who publicly disclose that they have just printed some colored paper down in their basement would find the value of such colored paper discounted accordingly by the free market.
Even today, all it takes is repeal of legal tender laws and capital gains taxes for competing currencies (and entities storing them, transacting in them, lending them, and investing them) to appear as alternatives to the fiat money. The market would discount the value of the fiat money in terms of the new, much more sound, money immediately.
Hopefully I made my position clearer.
Banks fail and people invested into such a risky scheme lose their money. That's the free market solution. There's no active process to prevent such scenarios, other than the fact that after it happens most people realize they behaved recklessly. But if people want to take such risks, why shouldn't they be allowed to?
How would a stateless capitalism society stop the use of FRB without the coercive power of the state to enforce it? If private companies find it usefull, they will practice it. In the words of the honorable judge Ron Whitey (from Futurama), a bank is a place where poor people put money that isn't properly invested. Non bene pro toto libertas venditur auro | Post Points: 20
wouldn't market forces raise reserve standards? We are assuming a commodity based currency, no? Banks that issue more fiduciary media than competing banks, will see actual resources leave the vaults when the other banks call them in on their notes. This will cause the FRB to become more and more leveraged and eventually there will be a run on the bank and all its customers will be out of luck, they will have learned their lesson and migrate towards a bank with higher reserves.
The banks would need to form a cartel and agree to have the exact same fractional reserve standards for them all to inflate at the same rate. Hmmm . . . what does that system remind me of?
Joe:This will cause the FRB to become more and more leveraged and eventually there will be a run on the bank and all its customers will be out of luck, they will have learned their lesson and migrate towards a bank with higher reserves.
History has shown that most people do not learn thier lesson... most people take the banks word that thier money will be safe.
Joe: The banks would need to form a cartel and agree to have the exact same fractional reserve standards for them all to inflate at the same rate. Hmmm . . . what does that system remind me of?
In a freebanking FRB scenario why wouldn't banks form a cartel(s) it would be to beneficial for them not to.
Big business is one of the leading proponents of government backed cartelisation and regulation. in a free market the leopard would not change his spots, he would just be unable to go to as big extremes.
Question for thread:
Should banks fully back their coupons/currency with 100% gold reserve? i.e. All coupons that people carry have a corresponding chunk of gold sitting in the bank.
Also, how would a stateless society enforce this? Would banks have to disclose wether or not they are practicing 100% reserve, vioating their right to privacy of their operations?
Malachi:...The market would only support banks whose banking practices were acceptable to the market. Here's how to clear things up. Would you, personally, accept notes from a bank that you didnt trust to support every note with the stated backing?
One may not have any choice in the matter...
I think history has shown that if FRB is allowed it becomes the dominant form of banking - the power of money creation is just too great a temptation.
You would have to have a very well educated poulace, or extremely principled banksters, for 100%RB to flourish in a market that does not outlaw FRB as the fraud that it is. Both of which are practical impossibilities...
A free market would have to recognize FRB as a form of fraud, for 100%RB to become preeminent.
I don't understand why this is such a problem. Market operates on profit and loss with no government to bailout anyone. If FRB will become such a problem nobody with low risk tolerance will invest in it second time because they will fear losing money. It is that simple. FRB is gambling. Why outlaw gambling with your own money? Who are you to force me not to invest in FRB? You can always save in commodities instead of FRB notes. You have a choice.
wouldnt they just not exist? frb gets its legitimacy from the state which sets the reserve requirenments. without this universal standard which accepts counterfeiting, wouldnt anything other than a full note be considered criminal? forgive the lack of capitals, im on my phone.
The Anarch is to the Anarchist what the Monarch is to the Monarchist. -Ernst Jünger
Why would frb not exist? Law is not objective. Property rights are not objective. A lot is possible under voluntary system. Profit and loss will determine winners and losers.
boniek: Why would frb not exist? Law is not objective. Property rights are not objective. A lot is possible under voluntary system. Profit and loss will determine winners and losers.
Because if I had one gold coin worth one dollar and then wrote a five dollar note to you to buy something, you would tell me to fuck off no? How then, when there will be no State sanction of this kind of behavior, could Banks continue to counterfeit and actually have their bills accepted. I guess they could still print them, but I'm not sure that anyone would take them.
Who knows? I don't. It could work given the discipline of profit and loss. Would it be risky for investors and depositors? Sure. Is it reason enough to ban it? I would not be against it but I would not (probably) invest in it either.