Francesca R
Girl
Well to some extent, anti fractional reserve lending goons merely mistake their ignorance and inability to understand, for someone else's conspiring. 
Debunking fractional reserve conspiracies
- Thread starter Merko
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Free Thinkr
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Which is true. But for some (most?) people, things must be black and white: because conspiracy theorists tend to latch themselves to this and other problems and wrongly ascribe conspiratorial malevolence to them, these problems must not exist at all! I believe the root of this thinking is simple intellectual laziness; it's just easier to classify oneself as being in the "right" group, and others as being in the "wrong," and not making much distinction beyond that (see: every post by The Central Scrutinizer).
se7ensnakes
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Francesca actually it is all wrong...banks dont lend money, they create it. They actually dont really have the money to lend.
se7ensnakes
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I am constantly correnting people here. Specially those that claim there is no conspiracy. Many people come here presenting the arguments for a conspiracy and they just get laugh at. There is no reason for these hecklers to be laughing because they dont appear to see a scam even if their whole life savings were taken. Okay let me get on with the correction:
SOYLENT in your illustrious sample you stated that:
Assets: $10 reserves, $90 loans. Liabilities: $100 deposits.
What you failed to mention is that while the $90 dollars is in a loan, the $10 dollars is now high powered money in a central bank....BUT THE DEPOSITOR CAN WITHDRAW FROM HIS CHECKBOOK ACCOUNT. Now they cannot possibly mean that they can withdraw from their checkbook account when they have most of it in loans, now can they? in the banks check book balance the deposit is both an asset and a liability.
SOYLENT in your illustrious sample you stated that:
Assets: $10 reserves, $90 loans. Liabilities: $100 deposits.
What you failed to mention is that while the $90 dollars is in a loan, the $10 dollars is now high powered money in a central bank....BUT THE DEPOSITOR CAN WITHDRAW FROM HIS CHECKBOOK ACCOUNT. Now they cannot possibly mean that they can withdraw from their checkbook account when they have most of it in loans, now can they? in the banks check book balance the deposit is both an asset and a liability.
lightfire22000
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Why not? I'm not disagreeing here, I honestly don't know.
Doesn't Disney World take those Disney dollars instead of US dollars and can set any value they want in US dollars to use them? If other people outside of Disney world decided to take Disney dollars couldn't Disney set up its own central bank?
soylent
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This is patently false.
The only money created by banks is actually created by the depositors when they treat their bank account if it were money instead of a promise by the bank to pay them back(i.e. debt); they do this by paying with or accepting as a means of payment checks, credits cards, wire transfers etc.
soylent
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No. On short notice the bank is only able to pay out the $10 it has in liquid assets to its sole depositor unless it can get an emergency loan from the federal reserve secured by its $90 illiquid asset. Given enough advance warning the bank may sell its $90 illiquid asset and repay in full, i.e. the bank is solvent and there is nothing fraudulent about it's business model.
The bank must either have excess capital or take in additional deposits in order to be able to pay back any of them in full on short notice.
Sure they can, they just need more deposits and excess capital so that they can repay on short notice more depositors than are likely to come and ask them for their money back.
Notice that even if a bank run happens and the bank collapses, the bank is still solvent if they have engaged in sound lending practices and depositors will eventually be repaid from the sales of those loans.
Notice that the bank has not willed any money into existance that didn't exist before. The money created by the bank appears when its depositors start treating their bank account not as a promise by the bank to repay, but as money. e.g. when its depositors voluntarily pay a voluntary recipient with debit cards, checks, wire transfers etc. in lieu of federal reserve bank notes.
Notice that the FDIC is legally obliged to step in and take the bank into recievership if it detects that the bank is insolvent. The bank pays an insurance fee to the FDIC to cover deposits up to a certain limit.
No.
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Alex Libman
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Privatized competing monies would be such a calamity...
How so? It's kind of like saying that "privatized competing online forums would be a calamity, the government should run one centralized hierarchy to fit everyone's needs and crack down on all others"... Converting currencies is far, far easier than searching around and interlinking multiple forums!
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Francesca R
Girl
They do both.
You don't need to "have" (own?) money to lend it.
Francesca R
Girl
What's a "free market currency"? Disney dollars would be a type of private currency whose value is backed by the expected ability of Disney to earn fiat dollars in the future.
I can't imagine much take-up if the company offered to pay employees, creditors, bond interest and shareholder dividends and buybacks in Disney dollars. Its own ability to generate future value in fiat dollars is never likely to be more credible than (or even as credible as) the store-of-value credibility of those fiat dollars themselves.
Plus, it could not legallly declare that Disney dollars were legal tender for all public and private debt.
blutoski
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What you're talking about is '[scrip]'.
Here in Canada we have "[Canadian Tire Money]"
The key difference is that scrip can be refused.
Two examples that have come up off the top of my head:
1. My business is not allowed to refuse to take government currency as payment, but I can refuse to take Canadian Tire Money as payment. Somebody with Canadian Tire money will have mixed luck finding somebody who will take it, and every transaction will be a negotiation for a spot exchange rate. I have to accept dollars as dollars, but if the customer wants to barter seashells, I can decide what they're worth. I can tell one customer his shells are worth more than another customer's identical shells because I say so. No law is being broken.
2. Secondly, since Canadian Tire Money is not enforced as currency by law, legal status is arbitrary. There was a woman who was robbed of her lifetime stash by a burglar last year. Her insurance company argued that it was merely paper, and offered a few cents to replace it as such. ("no cash value")
In any case: I raised an example above, based on the fact that scrip is pretty common actually. My impression is that it doesn't fail because of Big Brother - it fails because the currency exchange rates are volatile to the point of unpredictable, prone to hyperinflation, borderline illiquid, and there is a high premium on the exchange from weakly-backed scrip to strong scrip. eg: I have never seen $1 of labour earned in scrip exchanged for $1 of value in national currency. Everybody asks for a severe discount.
That's the way it used to be, and everybody thought it sucked. As they say: those who don't learn from history are doomed to repeat it.
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Yes. In the same sense that every other soldier in the platoon but you is out of step.
No. Disney dollars, like any other US-based scrip, must (by law) be valued in US dollars for tax purposes -- and the value must be legitimate and rational.
theprestige
Penultimate Amazing
It's not a conspiracy. How the banking system works is public knowledge. Nobody's trying to hide it.
A conspiracy is a secret plot to perpetrate shenanigans. You may think that the modern banking system is shenanigans, but nothing you've said so far is a secret... or a plot, really.
"Disney Dollars" have actually existed in earlier times in both the UK and USA (19th century). It was called "Company Scrip(t)" and was issued as wages in lieu of "real money" (in those days gold backed). It was a con as script was only valid in shops that the company ran and so the workers got screwed again. Both countries made it illegal.
Steve
Steve
I suggest some people check out the Von Mises Institute and Lewrockwell to learn more about fractional reserve systems. There is some legitimate criticism that is not at all related to conspiracy theories. They do note, however, that our federal reserve and fiat money system clearly benefit the government and bankers at the expense of consumers.
As far as I know free banking resulted in a stabilization of prices and it wasn’t until government started getting more and more involved that it screwed the system up.
Don't dismiss the ideas just because a few crazy people talk about them.
As far as I know free banking resulted in a stabilization of prices and it wasn’t until government started getting more and more involved that it screwed the system up.
Don't dismiss the ideas just because a few crazy people talk about them.
Francesca R
Girl
That's not why the ideas are dismissed. Look around some more at older threads. The below is quoted from a similar riposte some time back in another thread that was recently resurfaced:
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Can't speak for everyone but several members are familiar enough with the Von Mises Institute to know that, being a rare "hardcore Austrian school" joint, it has little beyond sprawling internal inconsistencies to contribute to mainstream economic thought and is firmly on the fringe.
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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. There are of course, very smart counterpoints to their claims but it seems to me that they make very big assumptions about the way the world works.
I'm not an Austrian economist, but I just enjoy reading their contrarian material because often, it makes a lot more sense than what you'll read from Krugman or Stiglitz or many other so called "mainstream" economists.
I'm not an Austrian economist, but I just enjoy reading their contrarian material because often, it makes a lot more sense than what you'll read from Krugman or Stiglitz or many other so called "mainstream" economists.
Francesca R
Girl
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.
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.
Honestly, I think it is better than renaming bad and broken theories and trying to convince other people you’ve got a new idea. Mercantilism became protectionism became nationalism, became infant industry theory, became import substitution...
And if it is bad to read stuff that is 50-100 years old, even assuming nothing new under the sun has been developed, why do we still read Socrates 2500 years later?
And if it is bad to read stuff that is 50-100 years old, even assuming nothing new under the sun has been developed, why do we still read Socrates 2500 years later?