I agree with your friend and believe it supports my position, which
is that it is not the "fractional" nature of fractional reserve
banking that is the issue.
The following passage by Rothbard is highly misleading. "Let's see
how the fractional reserve process works, in the absence of a central
bank. I set up a Rothbard Bank, and invest $1,000 of cash (whether
gold or government paper does not matter here). Then I "lend out"
$10,000 to someone, either for consumer spending or to invest in his
business. How can I "lend out" far more than I have? Ahh, that's the
magic of the "fraction" in the fractional reserve. I simply open up a
checking account of $10,000 which I am happy to lend to Mr. Jones."
If it's not obvious why this is misleading, then I can explain.
This from a buddy who I'm sharing this discussion with...regarding
Phil's comment below.
Absolutely agree. The US gov is practicing fraud on such a grand
it makes Madoff look like a piker. I do support private fraction
reserve banking when contracts between all the participants clearly
specify the business relationship. Reserve banking with reserves
by gold, etc. Limits on the types of investments, etc.
Right now we are treated as imbeciles since the gov has assumed the
of "protecting" us rubes. I don't have a choice in the marketplace
because bankers don't have to complete on the basis of character.
only have to appeal to our greed. The character part is out the
due to gov regs.
Free markets bring out the best in people in spite of their
due to self interest and competition.
From: email@example.com [mailto:lpsf-
On Behalf Of Philip Berg
Sent: Friday, December 19, 2008 8:03 AM
Subject: Re: [lpsf-discuss] Mattoff and social Security Schiff
Look for the gun. The gun is in the legal tender laws. Absent legal
tender laws, a private issuer of paper or electronic receipts could
create create extra receipts so long as he told all the receipt
holders aka depositors, ahead of time. Depositors would agree to
additional risk for communserate reward. Other competitibe
institutions would keep this in check. If the extra receipts were
created without consent then that is fraud. The legal tender laws
the fundamental problem. This is very difficult for folks to
understand as bad money always chases out good.. But if one asked
Zimbabwayans, they sure understand the hell of being forced to use
> I've still yet to see a convincing argument as to why fractional
> reserve banking is incompatible with Libertarian principles,
> that it is disclosed to depositors what the bank is doing. Have
>> thanks Phil.
>> You know, I was thinking earlier about how this guy is probably
>> just another
>> scapegoat like that 'rogue' SocGen trader a few months ago. I
>> know all
>> the details of this case yet, but apparently Madoff was diligent
>> paying out 10% dividends for years. Is that bad? That must be
>> better than
>> half of the other fund managers who paid less than 10% ( or
>> if he
>> hadn't paid that much, he wouldn't be in this pickle now??)
>> Anyway, my big question is - how many funds out there took in
>> new capital per year for the past 5 yrs or so, invested it on
>> and made some better return than 10%/yr - but - then ended up
>> losing 90%
>> of it in the last 6 months or so and wrote it off as an
>> loss? I
>> would bet - most of them. And the sad thing about this is - a
>> ponzi scheme means you don't do anything but spend or sit on the
>> capital, and they haven't even proved that Madoff did that yet!
>> So in that light, SSA be damned - what about the majority of the
>> and depository banks in this country? Are they not also ponzi?
>> is it more
>> legitimate that they took in 100% of their depository capital in
>> converted to 30X 'assets', and then lost the majority of it when
>> when bust?
>> IMHO the yard 'am should be both wide and deep with the guilty
>> From: Philip Berg <philzberg@... <mailto:philzberg%40gmail.com>
>> To: Mike Gittelsohn <gittel@... <mailto:gittel%40twocats.com>
>> Cc: John Denick <1420mason@... <mailto:1420mason%40msn.com> >;
>> Sent: Thursday, December 18, 2008 2:07:11 AM
>> Subject: [lpsf-discuss] Mattoff and social Security Schiff
>> Peter Schiff writes on 321gold.com. ..
>> The Social Security Administration runs its "trust funds" with
>> precisely the
>> same methods used by Madoff and Ponzi. As money is collected by
>> from current
>> workers, the funds are then dispersed to those already receiving
>> None of the funds collected are actually invested, so no