Debunking fractional reserve conspiracies

Francesca R said:
I enjoyed it too or else I wouldn't have read it.

But it has stood rock still for decades while modern economic thinking and practice has evolved and progressed (and sometimes regressed). The austrian purists--to my mind and I'm not alone--merely regurgutate fifty year old texts which they chat to themselves about and publish in their own journals and blogs. It gets boring.
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Emphasis should be on the regress. That's why we use fifty year old texts. It may get boring, but it gets good results.
 
Patrick_R said:
I am unaware of their internal inconsistencies but what little I do know suggests they tend to have the most consistent theory currently available - the Austrian business cycle.
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Consistent is not necessarily a good thing. A "consistent" weather forecast is next door to useless. I want an accurate theory, not a consistent one.
 
I have to point out that several of Van Mises followers have denounced Lew Rockwell and his Van Mises institute as being gross distortions of Van Mises, and that Van Mises would have found several of Rockwell's stands..his defence of the Confederacy as being the true champions of individual freedom, for instance..abhorrent.
 
lightfire22000 said:
Emphasis should be on the regress. That's why we use fifty year old texts. It may get boring, but it gets good results.
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If "good results" meaning "confirm your beliefs", then yes it does. Otherwise, not so much.
 
The Von Mises stuff is an entertaining read and quite persuasive, for as long as you're reading it. Then you come back to the problems of the real world and discover that it's not that simple!

In the Von Mises world would they even be able to exist as a virtual institute with an international presence due to the web? Would this Forum exist? I suspect the answer is no because I'm not sure that the internet would exist!

Steve
 
drkitten said:
Sure there is. Because they don't understand how little what-they-are-willing-to-do is worth, or disagree with what employers' assessment is.

I think my ability to sing, act, and dance is worth several million dollars a year, but for some reason, I haven't been able to persuade a single Broadway producer of that fact.

In some cases, the work may literally be of negative value. If, for instance, you offer to paint my house, but only if I buy the paint for you, then it your work may be worth less to me than the cost of the paint, and I won't hire anyone to do the job. This is how we get unemployment. You want work as a house painter, but no one needs their house painted badly enough to pay for it. The value of your house-painting skills is literally negative.
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In your scenario you can't find the work you prefer, thefore you're choosing not to work. That is called voluntary unemployment. There isn't a lot that can be done to force somebody to work against their will. Isn't doing so called slavery? Of course governments can do things to compel people to be a productive member of society even if they don't want to be one.

I have an idea about how we get unemployment, I'm saying in a perfectly functioning society there shouldn't be any unemployment.
 
ServiceSoon said:
I have an idea about how we get unemployment, I'm saying in a perfectly functioning society there shouldn't be any unemployment.
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For perfectly functioning society, you need perfectly functioning people, which are not to be had for love or money - not on this side of the Nirvana.
 
ServiceSoon said:
I have an idea about how we get unemployment, I'm saying in a perfectly functioning society there shouldn't be any unemployment.
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Zero unemployment implies zero job mobility which is probably a symptom of a very unhealthy society.
 
Dictator Cheney said:
recently i met a CS banker, and he also said, Fractional reserve banking is a problem, but no conspiracy involved.
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Just to clarify, since no one else did, fractional reserve is a problem in a similar way that all monetary systems are a problem: there is always room for abuse, inflation, deflation, counterfeiting, and other market nuances. There have been problems in money systems since as far back as we remember. There's no shortage of people out there who seem to think that they have the perfect system, but as of yet we've collectively never had a system that is trouble-free.

And, in my own opinion, anyone who doesn't acknowledge that is just trying to sell you something (or lying or just stupid). It's top-heavy, particularly troublesome for developing nations to get momentum without assistance. It's the best we've got for now, though, and it'll eventually change like money systems do. About the only thing that it's likely to not change to is a switch back to a commodity-based system. Francesca probably has some book recommendations for those interested in theories on changing the current system or at least improving the current that don't involve a time-warp for modern businesses and markets.
 
Ummm... ALL money is "created" and all money is "fiat"... the complainers seem to really want to go back to a barter system, or they are seriously deluded/ignorant. Money is ALWAYS notional, whether it is backed by a fractional reserve, a full reserve, or is issued in gold coins. The reason is that the value of gold coins is ALSO NOTIONAL. Gold has no real value.
 
Improbable Joe said:
Money is ALWAYS notional, whether it is backed by a fractional reserve, a full reserve, or is issued in gold coins. The reason is that the value of gold coins is ALSO NOTIONAL. Gold has no real value.
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The properties that makes it politically useful for gold buggery is precisely that it is scarce, useless and costly to produce. What they're really trying to say is that any system that kind of, sort of works even if it's massively dysfunctional is preferable to what we have now as long as it does not involve government.
 
lomiller said:
Zero unemployment implies zero job mobility which is probably a symptom of a very unhealthy society.
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Priorities can change, job mobility exist with central planning and authority.

Chaos said:
For perfectly functioning society, you need perfectly functioning people, which are not to be had for love or money - not on this side of the Nirvana.
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I'm trying to construct utopia here. ARe you going to help :)
 
ServiceSoon said:
Priorities can change, job mobility exist with central planning and authority.

I'm trying to construct utopia here. ARe you going to help :)
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I´ve had my fill of people trying to construct utopias. Actually, virtually everybody in Europe has had their fill of these people... starting with wannabe utopian Marx, passing the torch to wannabe utopian Hitler, and continuing with the morons of Zeitgeist and The Venus Project.

**** utopia. Give me something that works.
 
Chaos said:
I´ve had my fill of people trying to construct utopias. Actually, virtually everybody in Europe has had their fill of these people... starting with wannabe utopian Marx, passing the torch to wannabe utopian Hitler, and continuing with the morons of Zeitgeist and The Venus Project.

**** utopia. Give me something that works.
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Just because we haven't figured it out yet doesn't mean it doesn't exist. I'll keep trying, but don't expect any credit when it happens.
 
ServiceSoon said:
Just because we haven't figured it out yet doesn't mean it doesn't exist. I'll keep trying, but don't expect any credit when it happens.
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Actually, "utopia" translates literally to "nowhere" (or "no place" for the hyper-literal). You may as well try finding the Garden of Eden.
 
ServiceSoon said:
Just because we haven't figured it out yet doesn't mean it doesn't exist. I'll keep trying, but don't expect any credit when it happens.
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What you expect is irrelevant. What will happen once you try out your ideas is that you will fail miserably, just like everyone before you, millions of people will die, just like every time it is tried out, and people like you will blame people like me for it.
 
The basic problems with fractional reserve banking:
1) Private company whose public offerings is guarantee by public money.
2) Private company's business practice is volatile and thereby requires a lender of last resort using public money.
The situation is very similar to going to las vegas and gamble, if i win i keep the profits, if i loose, the public pays.
Fractional Reserve Banking through its multiplicity effect create money out of thin air, it creates a volatile product that needs to be guarantee by public money.
During systematic stress banks who refer to the discount window are able to use and circulate before the inflation caused by the loan. By the time it gets to you, the currency is devalued and you are are systematically getting paid less. If you are a saver, in a fix income, if you are renting, you will be specially hurt by this practice. The median income in 1960 was about $6500 dollars and median home prices were about $14,000. Today the median income is about $40,000. and median home prices are about $180,000. This is despite advances in logistics and specific technologies.
 
se7ensnakes said:
The basic problems with fractional reserve banking:
1) Private company whose public offerings is guarantee by public money.
2) Private company's business practice is volatile and thereby requires a lender of last resort using public money.
The situation is very similar to going to las vegas and gamble, if i win i keep the profits, if i loose, the public pays.
Fractional Reserve Banking through its multiplicity effect create money out of thin air, it creates a volatile product that needs to be guarantee by public money.
During systematic stress banks who refer to the discount window are able to use and circulate before the inflation caused by the loan. By the time it gets to you, the currency is devalued and you are are systematically getting paid less. If you are a saver, in a fix income, if you are renting, you will be specially hurt by this practice. The median income in 1960 was about $6500 dollars and median home prices were about $14,000. Today the median income is about $40,000. and median home prices are about $180,000. This is despite advances in logistics and specific technologies.
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Epic Fail.
 
Improbable Joe said:
Ummm... ALL money is "created" and all money is "fiat"... the complainers seem to really want to go back to a barter system, or they are seriously deluded/ignorant. Money is ALWAYS notional, whether it is backed by a fractional reserve, a full reserve, or is issued in gold coins. The reason is that the value of gold coins is ALSO NOTIONAL. Gold has no real value.
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Indeed all money is a fiat barter system. Just instead of me fixing the computer system or sweeping up at the local gas station in trade for same gas, I just give them some money that they can exchange for that service or whatever they require (including more gas). In direct bartering I need to provide something of value for someone who has something I find of value so we can make that exchange. In a fiat barter system involving money or some token of exchange (as blutoski mentioned before) that need to consummate a direct exchange of value is supplanted by the an indirect exchange of value. Thus one has a broader range of exchange for value. I only need to find one person or company that values my products or services in order to exchange it the for the value of the products or services that I seek as opposed to my directly providing some service, product or value to all of them.
 
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