would they ensure responsible withdrawal of ones deposits?
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
GilesStratton: Historically banks that practise FRB didn't go bust (see White on Scotland). In any case, competition would ensure that banks practise responsible lending, by and large eliminating the danger of bankruptcy.
Historically banks that practise FRB didn't go bust (see White on Scotland). In any case, competition would ensure that banks practise responsible lending, by and large eliminating the danger of bankruptcy.
Wait a minute, if banks that practice FRB don't go bust, then how is a business cycle possible?
The fallacies of intellectual communism, a compilation - On the nature of power
Stranger: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.
"You don't need a weatherman to know which way the wind blows"
Bob Dylan
nirgrahamUK: would they ensure responsible withdrawal of ones deposits?
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?
GilesStratton: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.
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
GilesStratton: Stranger: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.
So you're rejecting the austrian business cycle theory?
nirgrahamUK:Etica & Politica / Ethics & Politics, XI, 2009, 1, pp. 455-469 Crash and Carry: Financial Intermediaries, the Intertemporal-Carry Trade, and Austrian Business Cycles1
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.
nirgrahamUK: 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?
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.
Stranger:So you're rejecting the austrian business cycle theory?
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.
GilesStratton: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.
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.
Knight_of_BAAWA: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.
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.
GilesStratton:Except, this just isn't so
GilesStratton: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.
GilesStratton: Stranger:So you're rejecting the austrian business cycle theory? 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.
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.
Jon Irenicus: Aristotle mainly. Other than him, David Gordon, Roderick Long Laurence BonJour, Daniel Dennett, Anton de Jasay, John Searle, Philippa Foot, Julia Annas, Laurence BonJour, Hoppe, Mises (yes, I do count him as one), David Kelley and Douglas Rasmussen. I like Kant but don't count him as a favourite. I loathe Wittgenstein, regardless of how much many philosophers adore him - his writings are ineffable. And I like Hume, but disagree with a lot of what he says, though I think he has many affinities with Aristotle that are often unnoticed.
Aristotle mainly. Other than him, David Gordon, Roderick Long Laurence BonJour, Daniel Dennett, Anton de Jasay, John Searle, Philippa Foot, Julia Annas, Laurence BonJour, Hoppe, Mises (yes, I do count him as one), David Kelley and Douglas Rasmussen. I like Kant but don't count him as a favourite. I loathe Wittgenstein, regardless of how much many philosophers adore him - his writings are ineffable. And I like Hume, but disagree with a lot of what he says, though I think he has many affinities with Aristotle that are often unnoticed.
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.
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.
Knight_of_BAAWA:It is so, and I'd like to see something more than your unsupported assertion that they chose the former. ,
OK, well, fortunately Lawrence White wrote a whole book on the subject, see here.
Knight_of_BAAWA:Lovely fallacy and evasion. Now try again.
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.
Stranger: 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.
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.)
Freedom of markets is positively correlated with the degree of evolution in any society...
Jon Irenicus: 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. 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. I haven't read much, just a couple of articles, but he at least writes perspicaciously.
Jon Irenicus: Damn, another one I forgot. 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).
I'm a fan of philosophers who can write without descending into gibberish and who can do so clearly so that their point is not lost in a mire of groundless abstractions and colorful but ultimately useless metaphors. The philosophers I mentioned are mostly neo-Aristotelian (with analytic influences) or analytic.
Jon Irenicus: I'm a fan of philosophers who can write without descending into gibberish and who can do so clearly so that their point is not lost in a mire of groundless abstractions and colorful but ultimately useless metaphors. The philosophers I mentioned are mostly neo-Aristotelian (with analytic influences) or analytic.
Who do you think descends into gibberish? (Hegel? )
PM me if you like, I'd rather not veer the topic further off track.
GilesStratton:OK, well, fortunately Lawrence White wrote a whole book on the subject, see here.
GilesStratton:There is no evasion,
Knight_of_BAAWA:Yes, there is. And it's time you realized that people won't take you seriously when you do such things.
Knight_of_BAAWA:How nice. Unfortunately for you, I'll just dismiss it.
Lol, teapot, kettle, african american.
Or perhaps showing you what you've been doing and seeing if you like it when it's done to you. Did that thought ever cross your mind?
I never said I'll dismiss it.
GilesStratton: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.
What the hell does that mean? It is true by definition. Fractional reserve works by banks lending out deposits instead of their own capital.
GilesStratton: I have an explanation of what causes business cycles. Central banks, financial regulations, FDIC, etc...
That's not an explanation, that's insinuation.
Why do you keep making this claim? Both Hayek and Mises claimed that banks can either keep the demand for real capital within the limits set by the supply of savings, or they can keep the price level steady; but they can't do both simultaneously. Mises flat out states that "banks must not lend more or less than has been deposited with them as savings." Do you not believe in the natural rate of interest? What do you think causes business cycles? You keep trying to prove Mises/Hayek wrong, and yet you never really back up this position with any kind of logical argument whatsoever. So far your only defense is that Mises believed that free banking would eventually lead to the end of fiduciary media.
"If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion."
Stranger:What the hell does that mean? It is true by definition. Fractional reserve works by banks lending out deposits instead of their own capital
No, it isn't. I consider the holding of cash to be savings. So, if people are voluntarily holding the notes provided by a bank, then they're foregoing real resources that may be lent out. It might well be that these savings are extremely short term, but the difference is one of degree not type.
Stranger:That's not an explanation, that's insinuation.
The explanation is by and large the same as yours. The market rate is pushed below the natural rate, with the interest rate effect causing the structure of production to become longer than voluntary savings would support, eventually the market rate will rise or Ricardo Effects will cause the structure to become shorter regardless.
I just see that the market rate is pushed below the natural rate in a different way.
Esuric, your appeal to authority carries little weight. All the less so since neither the views of Hayek nor of Mises are homogenous on this subject. Both had long careers and intellectual journeys and fractional reserves in banking is one matter that they both changed their mind on. I'm in half a mind to simply retort that you're trying to prove Selgin, White and just about every other economist over the past century wrong.
Now, if you'd kindly do some reading of free banking theory you'd find out that monetary equilibrium theory is not about keeping the price level stable, it's about keeping MV stable and as such making money as close to neutral as is possible. If the market rate of interest is below the natural rate, the regular boom bust cycle follows. If it is above, then relative price levels will be distorted and the capital structure will be too short. Clearly I believe in the natural rate of interest, however, I believe demand for money is one form of saving, as I indicated to Stranger.
GS:Esuric, your appeal to authority
GS:you're trying to prove Selgin, White and just about every other economist
Now, if you'd kindly do some reading of free banking theory
February 17 - 1600 - Giordano Bruno is burnt alive by the catholic church. Aquinas : "much more reason is there for heretics, as soon as they are convicted of heresy, to be not only excommunicated but even put to death."
GilesStratton:No, it isn't. I consider the holding of cash to be savings.
You can consider that, but it's false. If it were true, there wouldn't be bank runs.
Juan:the little troll
Is it just me, or has the term troll been used so much it's lost what little meaning it had to start with? You may disagree with Giles (it seems you'd be in the vast majority if you did), but he hasn't been trolling.
Juan: lol. the little troll can't even write a single contradiction-free paragraph.
It is often effective to refute a fallacy via simply using the fallacy against them. And, that was clearly his intention.
Did you omit the qualifier "I'm in half a mind to simply retort that. . ." dishonesty? Or, did you merely miss it?
If I wrote it more than a few weeks ago, I probably hate it by now.
Stranger: If it were true, there wouldn't be bank runs.
Ermm, why?
GilesStratton: Stranger: If it were true, there wouldn't be bank runs. Ermm, why?
Why would there be?
Stranger: GilesStratton: Stranger: If it were true, there wouldn't be bank runs. Ermm, why? Why would there be?
Because people feared, rationally or otherwise, that their bank was insolvent and didn't wish to lose their savings.
GilesStratton: Because people feared, rationally or otherwise, that their bank was insolvent and didn't wish to lose their savings.
Why would the bank be insolvent if they invested their savings in it?
Stranger: GilesStratton: Because people feared, rationally or otherwise, that their bank was insolvent and didn't wish to lose their savings. Why would the bank be insolvent if they invested their savings in it?
For the usual reasons (bad loans, reserve ratio too low, raids on reserves by other banks)? I don't see how this pertains to whether or not cash holdings are savings.