Wednesday, May 22, 2013

Not-so-free Banking: The Dialogue

Warning: this is a post brought forward from frustration.  If you don’t want to live through my venting, don’t read further. 

It would be frustrating if it wasn’t so predictable.  This is a continuation of the discussion referenced here.  In the comments section, you will find the actual interaction.

Sound Money Steve posted a comment, equating fractional reserve banking with fraud.  In response, I asked the following:

1) define fraud.
2) apply your definition to a contract the terms of which are a) agreed to by both parties, and b) are being met by both parties. In other words, today's typical bank contract.
3) Do this without resorting to strawman, red herrings, etc. For example, don't tell me that one party really doesn't understand the contract, or that the same party *believes* his deposit is being held, untouched.

From Steve, silence…crickets chirping in the dark (as of this post, 20 hours and counting).  But Inquisitor stepped in, not addressing any of the questions I raised, but introducing a totally unresponsive element (shocking, I know):

If a deposit is "lending", why do banks call it a deposit and where in a bank's contracts will I find the terms outlined explicitly stating this is a loan to the bank?

To which I replied (turning his question around):

...where in a bank's contracts will I find the terms outlined explicitly stating this is a deposit, always and everywhere instantly available upon demand and under all conditions?

Followed with a link to one part of my work on the deposit contract. 

Inquisitor came back, either not having read anything of the link, or just acting a troll: if it is commonly referred to as a deposit, it must be contractually a deposit.

To which I offered the following:

Your approach is consistent with others on this issue - ignore the contract and pretend it is something other than what it is.

"But, your honor, it is called a deposit. Why isn't my money there?"

"Son, did you read the contract that you signed."

"No, why should I? The bank teller that never graduated from high school told me it was a deposit. He even gave me a toaster."

"Next case."

Silence…and crickets…(15 hours later)

Forgive my venting, because that is all this is. 

It would be refreshing if issues were addressed directly.  That they are not convinces me even more of the shallowness of the views on the other side, and therefore my views on this subject.

Update:  There has been further dialogue.  Where I address fraud, the responses suggest that there is less-than-open disclosure.  With this, I have no disagreement.  But it isn't fraud - this was my point.  And given the countless shades of gray between less-than-open disclosure and fraud, I feel even more certain that the best regulation is to leave this entire topic to the market to resolve.

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