Mattoff and social Security Schiff

Derek and David,

Here's the Austrian view contra frb:
Fractional Reserve Banking Is Indeed Fraudulent

Fractional Reserve Banking

Warm regards, Michael

Michael - Okay, I think 'fraud' is being used rather loosely here. The workings of FRB, while illigitimate are well documented publicly, so it's an open fraud, which is not really fraud. They're basically telling you that your money will be stolen or debased up front. Only the ignorant would claim they have been defrauded, if they wrongly believe the banks are holding 'their' money in a vault or something. If people want to participate in a con game, why not let them?

From a libertarian perspective, one can opt out of the financial system if desired. Maybe by starting a commune in Utah and trading shells or something? Yes, taxes are due in USD but items of value are exchangable at time of payment without incuring currency debasement losses. (simplistic view, I know but still valid) And I don't think it's fair to comingle tax and legal tender law issues with the argument on whether FRB is fraudulent..

so despite my rant, i'm (reluctantly) agreeing with Derek for now.


Well at the very least it is socialism for the rich. the public is forced to pay for or insure the losses of the bankers either through taxes or inflation.Thus guns are used to rob the public, either through taxation or legal tender laws. As Pam Pam so eloquently said when I was on her KPOO radio show, It's stealin the bread without breakin the crust.
This thread is a good reinforcement for Derek, one of the few investment bankers who gets that he is working one of the greatest frauds in history.

Dear David,

I think Davidson's point is that even though both bank and depositor
agree--"open fraud" as you call it--FRB is fraudulent in a different sense,
that is, it's contradictory to claim that both the bank and the depositor
have ownership to the same money since this is a logical impossibility.

Warm regards, Michael

Well, I put fraud in quotes because I think the problem is really false expectations on the depositor based out of ignorance. In other words, I think most people think that when they put their money in a bank, it's still their money and there for safe keeping, but in reality they're essentially loaning money to the bank and are really assuming the same risks as any other creditor.

They should have first claim in default situation though, and of course there is the FDIC, which is not funded sufficiently (in government debt no less) to bailout any more than 2-3 large banks worth of depositors.

Then there is the common misconception about who owns the principle in a loan scenario. When both the creditor and debtor lay claim to the same money, it's essentially double accounting. There was a great article on a couple of years ago about this but I can't find it now. In short though, if you lend someone $20 it's no longer your money, no matter what you believe. You only have an obligation of future payback. This misconception is a huge problem in general and doesn't apply to just banks or FRB but to financial accounting in general.

Just to be specific though on my agreement with Derek - All we're saying is that FRB _as a concept_ is not at odds with libertarianism. The Fed (a private institution) has committed fraud on other levels of course, but ignorance by depositors of the workings and instabilities of circular credit do not constitute fraud. One still has the freedom to opt out of the system.


In a land of legal tender laws, how does one have freedom to opt out??

Phil - Just got back from the hills.

I'm no expert on legal tender laws, but I wouldn't regard the forced settlement of debts and taxes in fiat currency as opting in to the FRB system. In other words, if you hold your wealth in property and not banks, wouldn't that be opting out? Or rather, not opting in. Conversion to fiat at the time of settlement does not require a bank account or credit card which I would regard as the primary means of embracing FRB.

The Amish I think are a good example, and have mostly not opted in-