Fractional reserve lending is intrinsically inflationary, but I don't see that it is indefinitely, or unboundedly, inflationary, as fiat money is. Whether failure to meet demand were regarded as theft or not, there would surely be some liability which would act as a check on the fraction. So I would expect the currency to inflate rather quickly to that point and stabilize. That would affect only the currency of the issuing institution, in a free banking society, and not the entire economy. I assume that fractional reserve lending by some banks would exert market pressure on others to do the same, though presumably also the market would support a range in this regard. Some would figure better rates offered by fractional reserve banks worth the risk; others would pay more for the security of 100% reserves. So I'm siding with you and against Rothbard here, though I have a bit more reading to do.
[ Attachment content not displayed ]
I agree, hate to say it, but
Murray was wrong. Nobody
is perfect.
The Secretary of State sent
me two letters, one
rejecting my job title , the
next accepting it, so I
convinced them that
Environmental Health
Consultant was my job title
and will appear on the
ballot.
My old favorite stocks,
Novagold and Adanac Moly
while far from targets are
too dear to enter, so in the
hopes of having some
wealthy libertarians, I am
suggesting CWPC. OB,
Canadian West Petroleum,
is worth a serious look. By
some estimates you are
getting revoverable crude
oil for two cents a barrel.
Mike - I would contend that fiat currency is not
really currency at all and just simply 'bank notes'..
more akin to other types of investment mechanisms -
stocks, bonds, etc. If we were allowed to use hard
currency for conducting transactions in the country
inflation would be impossible. So if we somehow went
back to gold as currency, even an increase of supply
from a discovery of a mother lode wouldn't be the same
as inflation, as it requires labor and capital to
extract. If people want to 'invest in the fed' by
trading labor for dollars so be it.
That being said, I would also contend that 'inflation'
of notes is not theft but simply fraud - at best.
Maybe even incompetence.. For example, I hold the
unpopular view that Enron shouldn't have been tried
criminally for their actions, just a civil case of
fraud. As far as I know they didn't actually steal
anything. Maybe we should sue the Fed for the same
reasons..
d
--- "Acree, Michael" <acreem@...> wrote:
Fractional reserve lending is intrinsically
inflationary, but I don't see that it is
indefinitely, or unboundedly, inflationary, as fiat
money is. Whether failure to meet demand were
regarded as theft or not, there would surely be some
liability which would act as a check on the
fraction. So I would expect the currency to inflate
rather quickly to that point and stabilize. That
would affect only the currency of the issuing
institution, in a free banking society, and not the
entire economy. I assume that fractional reserve
lending by some banks would exert market pressure on
others to do the same, though presumably also the
market would support a range in this regard. Some
would figure better rates offered by fractional
reserve banks worth the risk; others would pay more
for the security of 100% reserves. So I'm siding
with you and against Rothbard here, though I have a
bit more reading to do._____
From: lpsf-discuss@yahoogroups.com
[mailto:lpsf-discuss@yahoogroups.com] On Behalf Of
Derek Jensen
Sent: Tuesday, March 21, 2006 1:25 PM
To: lpsf-discuss@yahoogroups.com
Subject: Re: [lpsf-discuss] Fractional reserve
lending - More On de SotoLet me make a small addition to this: Not only
because it is inflationary in nature, but is
incompatible with the beloved gold standard.Why not just have free banking, where banking is
open to free entry and competition, so that the
self-interest of debtors and creditors will result
in appropriate risk-reward ratios? As long as
depositors understand that their bank is lending out
their deposits, I don't see the problem.
The reason people like Rothbard don't like this,
even though it is to me the ideal Libertarian
solution for banking, is that fractional reserve
lending is inflationary in nature.
Dear Mike And Everyone Else;
The correct web address is
www.jesushuertadesoto.com
<http://www.jesushuertadesoto.com/> unfortunately
the period at the end of the url on Mike's original
reads as part of the url and won't connect.
Once you get to the web site on the main page at
the bottom go to entrar - then look for Articules
Ingleses on the left side - then go to free banking
for the fractional reserve banking article in
Ingleses.
There are several other Ingleses articles on his
site which also at first glance appear very readable
and knowledgable about Libertaian economics and even
an article on some early Spanish 1600's Libertarian
thinkers whom Hayek quoted and referenced as a
foundation for the Austrian School of Economics.
Ron Getty
SF Libertarian
"Acree, Michael" <acreem@...> wrote:Following up another thread from a couple of
weeks ago: As you know, Mises.org
<http://mises.org/> has recently published Jes�s
Huerta de Soto's Money, Bank Credit, and Economic
Cycles, which makes a vigorous case against
fractional reserve banking. Although I agree with
Derek that fractional reserve banking should not be
outlawed--"Let the market take care of it,"
indeed--I was interested in Huerta de Soto's case.
I've read only the first chapter so far, but it's
promising enough that I just downloaded the second.
(The third edition, 2006, is available for
downloading free from the author's website,
www.jesushuertadesoto.com.) De Soto is arguing that
failure to meet demand for deposits is tantamount to
theft, a view he traces to Roman law. (In the next
chapter I gather he will document the shift to the
present view.) If that's the way it were culturally
perceived, I would say, then judgments by
arbitration agencies might well serve as a
significant brake on the practice.SPONSORED LINKS
U s government grant
Libertarian party
California politics
_____YAHOO! GROUPS LINKS
* Visit your group "lpsf-discuss
<http://groups.yahoo.com/group/lpsf-discuss> " on
the web.
* To unsubscribe from this group, send an email
to:
lpsf-discuss-unsubscribe@yahoogroups.com
<mailto:lpsf-discuss-unsubscribe@yahoogroups.com?subject=Unsubscribe>
* Your use of Yahoo! Groups is subject to the
Yahoo! Terms of Service
<http://docs.yahoo.com/info/terms/> ._____
SPONSORED LINKS
U s government grant
Libertarian party
California politics
_____YAHOO! GROUPS LINKS
* Visit your group "lpsf-discuss
<http://groups.yahoo.com/group/lpsf-discuss> " on
the web.
* To unsubscribe from this group, send an email to:
lpsf-discuss-unsubscribe@yahoogroups.com
<mailto:lpsf-discuss-unsubscribe@yahoogroups.com?subject=Unsubscribe>
David:
What about when I figure out how to turn lead into gold? Would that
be inflation?
What about when I figure out how to turn lead into
gold? Would that
be inflation?
Interesting..but I would still say no because it takes
labor and capital to perform the alchemy. But of
course there would be rampant devaluation at that
point. Not to split hairs, but I'm making a
distinction between creating out of thin air
(inflation) and devaluation of some commodity due to
technical advances.
Even with all the lead added to the currency pool, the
value would eventually stabilize relative to
everything else..or people would move to silver or
something else. Unlike fiat which is inflatable to
zero..
David,
You mean to say that, in contrast with Steve's labor- and capital-intensive alchemy operation, the Fed uses wand-waving magicians to create money out of thin air, and there are no design, printing, personnel, or equipment costs involved? 8)
Yours in liberty,
<<< starchild >>>
Oops, I meant Derek's alchemy operation.
Starchild:
The costs of printing a $1 dollar bill and the costs of printing a
$100,000 bill are identical. It's the marginal costs that matter.
-Derek
Oh, I understand that. At least the identical costs part -- you'll have to refresh my memory as to what "marginal costs" are and how that applies. The Fed *could* save a lot of money and just print a handful of bank notes with a face value of $1 trillion a piece. Then it really would be like creating money out of thin air compared with an alchemy operation. But of course in reality they print lots and lots of $1 bills.
Yours in liberty,
<<< starchild >>>
Starchild:
The costs of printing a $1 dollar bill and the costs of printing a
$100,000 bill are identical. It's the marginal costs that matter.-Derek
> David,
>
> You mean to say that, in contrast with Steve's labor- and
> capital-intensive alchemy operation, the Fed uses wand-waving magicians
> to create money out of thin air, and there are no design, printing,
> personnel, or equipment costs involved? 8)
>
> Yours in liberty,
> <<< starchild >>>
>
> > > What about when I figure out how to turn lead into
> > > gold? Would that
> > > be inflation?
> >
> > Interesting..but I would still say no because it takes
> > labor and capital to perform the alchemy. But of
> > course there would be rampant devaluation at that
> > point. Not to split hairs, but I'm making a
> > distinction between creating out of thin air
> > (inflation) and devaluation of some commodity due to
> > technical advances.
> > Even with all the lead added to the currency pool, the
> > value would eventually stabilize relative to
> > everything else..or people would move to silver or
> > something else. Unlike fiat which is inflatable to
> > zero..
>
<image.tiff>
YAHOO! GROUPS LINKS
+ Visit your group "lpsf-discuss" on the web.
+ To unsubscribe from this group, send an email to:
lpsf-discuss-unsubscribe@yahoogroups.com+ Your use of Yahoo! Groups is subject to the Yahoo! Terms of Service.
<image.tiff>
You have stated it correctly. If you are going to be printing $1
bills, the additional (marginal) cost of the next $99,999 is zero, if
you instead just change the die and print a $100,000 bill.
..and of course the Treasury prints the bills, which
are a trivial dollar amount compared to the Fed's
electronic injections..
--- Derek Jensen <derekj72@...> wrote:
An electronic injection sounds painful.
This thread reminds to post this link -
http://www.wsu.edu/DrUniverse/money.html
too funny.. maybe Bernanke should read this. It's
written down to his level.
--- Derek Jensen <derekj72@...> wrote:
Reminds me of the Nova episode (PBS science series) I caught a few weeks
ago about Sir Isaac Newton's decade long detour from hard science into
alchemy. He actually managed to apply the scientific method to the
discipline of alchemy to obtain some remarkable results. Though he
never actually succeeded in transforming lead into gold, what he learned
in the process helped to advance the world's knowledge about basic
elements, compounds and the nature of how molecules work.
Terry Floyd
[ Attachment content not displayed ]