I will not make this a long, drawn out post (cheers erupt from the audience and likely Mr. Engel as well). I will comment on what strikes me as the primary points of emphasis or disagreement; this is not to suggest that I agree with everything else (I have other disagreements), only that these don’t seem as important to me.
Regarding my position that the current bank deposit contract does not fit the definition of FRB as Mr. Engel defines the term, it is offered:
…the entire plethora of Austrian works pointing the finger to our current Fractional Reserve system for our economic woes are entirely confused – for perhaps we don’t have an FRB system at all.
I will not get into a debate about the Austrian position; I do not believe it is this simple. I do believe that our current banking system is at the heart of our current economic woes – but it is the monopoly, not the practice of deposits and lending that is at the root.
Rest assured, I remain steadfast that ABCT is quite valid; the issue behind boom-bust is excess or artificial credit creation.
Now, define “excess” or “artificial.” I suggest excess or artificial can mean nothing more than credit created beyond that which is supportable by strictly free-market processes. Free markets don’t produce “excess” in any meaningful (“our economic woes,” suggesting national or international calamity) sense; in truly free markets, prices clear.
In other words, remove the monopoly (allow for truly free markets) and Austrian “busts” would be quite limited – both geographically and in scope. “Bust” will be nothing more than bankruptcies to individual entities based on poor or inaccurate entrepreneurial choices and decisions.
The validity of ABCT will serve as a warning against monopoly (or other means of governmental support) in banking and credit creation. Just remove the monopoly.
My next key point of emphasis / disagreement regards:
Hoppe argues that the problem with the free banking argument that today’s depository contract provides an example of a non-fraudulent FRB contract, lies with the contract itself in that the contract does not represent the actions of the two parties in fact. In other words, whereas the modern deposit contract appears to escape being a bailment contract, the action of the contract’s parties contradict this.
…if the nature of the demand deposit is that it is a debt, then the claim must be a title to a quantity of future money, not a present money, for the present money is presently under the ownership of the bank. And if this is the case, then the very idea that the money can be available on demand by the depositor contradicts the nature of the debt transaction itself.
Present money, future money, present money, future money. How much time must pass?
Now, there are a lot of words in between these two statements in Mr. Engel’s post, but what is being suggested is that for a creditor – debtor relationship to be proper (or valid or whatever similar term you like) there must be either a) a minimum term of time or b) perhaps a variable term after some minimum time period or notice period has lapsed.
In other words, an instantly callable loan cannot be a loan; it must be deemed a bailment.
To which I ask, why?
However, in fact, as Hoppe points out,
the money depositor A receives from the bank B a claim to present money, rather than a debtor equity title.
It is a conditioned claim. I find no reason or (more importantly) a non-aggression-introducing manner to stop two parties from conditioning between them the control, use, and disposition of property.
It is not the case, as is claimed, that fraud (breach of contract) is committed only if B, the fractional reserve bank, is actually unable to fulfill all requests for redemption as they arise.
I don’t even claim that this is fraud. Not every “breach of contract” is a fraud. It is bankruptcy. I don’t even like the term “fraud” very much; let’s just say it can only be fraud if it is first a violation of the contract. For fraud, other additional factors must be present. Anyway, this practice isn’t even a violation of the contract; when the bank can’t make good on the withdrawal claim, it may very well be nothing more than poor entrepreneurial decision-making.
That’s enough. I think I will remain on my square as I have previously defined it; in the meantime, I thank Mr. Engel for his views.