Political Theory

Re: FRB in Stateless Capitalism

Malachi — Thu, 03 Nov 2011 23:11:29 GMT

>>>>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.>>>> fraudulent notes are a very risky gamble. Historically, banks did attempt it and got burned a lot. Of course, we have no idea how many banks got away with secret fractional reserves. But if a specific bank's notes were known to lack 100% backing, at best they would trade at a discount until the bearer had an opportunity to redeem them, at worst they would be rejected for transactions, and an unqualified offer of such fraudulent notes in the course of a negotiation would be seen as an attempt to defraud the other party by offering worthless exchange media.

Re: FRB in Stateless Capitalism

Malachi — Thu, 03 Nov 2011 23:04:12 GMT

>>>>One may not have any choice in the matter...>>>> Then how is your question different from "in a free society how do you protect against robbery?" Really now, how is someone going to force me to accept fradulent notes? Why wouldnt they just attempt to rob me?

Re: FRB in Stateless Capitalism

boniek — Thu, 03 Nov 2011 21:34:30 GMT

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.

Re: FRB in Stateless Capitalism

Jargon — Thu, 03 Nov 2011 21:16:29 GMT

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.

Re: FRB in Stateless Capitalism

boniek — Thu, 03 Nov 2011 21:04:45 GMT

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.

Re: FRB in Stateless Capitalism

Jargon — Thu, 03 Nov 2011 20:39:48 GMT

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.

Re: FRB in Stateless Capitalism

boniek — Thu, 03 Nov 2011 20:14:29 GMT

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.

Re: FRB in Stateless Capitalism

.500NE — Thu, 03 Nov 2011 19:43:27 GMT

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.

Re: FRB in Stateless Capitalism

Malachi — Thu, 03 Nov 2011 19:05:22 GMT

>>>>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.>>>> I dont care what the banks do as long as they do not do it to me. If a bank were not known to have full reserves, I would be extremely reluctant to accept bank notes from them. As for your second question, what is to be enforced? 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?

Re: FRB in Stateless Capitalism

Giant_Joe — Thu, 03 Nov 2011 18:25:06 GMT

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?

Re: FRB in Stateless Capitalism

.500NE — Wed, 02 Nov 2011 20:54:24 GMT

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.

Re: FRB in Stateless Capitalism

Joe — Wed, 02 Nov 2011 19:18:55 GMT

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?

Re: FRB in Stateless Capitalism

James — Tue, 01 Nov 2011 16:32:28 GMT

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.

Re: FRB in Stateless Capitalism

K.C. Farmer — Tue, 01 Nov 2011 15:37:07 GMT

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?

Re: FRB in Stateless Capitalism

z1235 — Tue, 01 Nov 2011 14:12:46 GMT

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.")?

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.