In FRB, two people own 100% of something.
It helps to have a definition; now I know Walter’s.
That’s incompatible with private
property rights, one of the basic foundations of libertarianism.
Given Walter’s definition, I agree.
But his definition gives me pause. Why is there so much debate, angst, wailing
and gnashing of teeth over a topic that is non-existent? Under this definition we do not live under an
FRB banking system.
I can accept that there might have been a time that such was
a standard practice; however this is not the practice today. I can accept that there might somewhere be an
institution that promises one thing but delivers another – but this isn’t an
FRB thing, it is a breach of contract thing.
Two people do not each own 100% of something in today’s banking world. Hand your money to the bank teller and the
money is now an asset of the bank. The bank owns it – 100%. You are the creditor; the bank owes you 100%. But you and the bank don’t each own 100%.
So I really don’t get it: why, for a practice that is not a
practice, is so much emotion spent?
Interview, shows common man is
ignorant of frb
Common man is ignorant of many things. Unless you can point to several examples by
banks offering one thing but delivering another (via advertising, contracts,
whatever), this is not really relevant other than to point out the sad state of
public education.
Bionic, I'm interested to hear your thoughts on Jesus Huerta de Soto's book Money, Bank Credit, and Business Cycles. He goes to great lengths at the start of the book to distinguish demand deposits and time deposits. His assertion, from what I understand at least, is that the two cannot coexist in the same product. A demand deposit that is also a loan is virtually impossible. Perhaps I'm wrong on that, but I agree with your assessment for the most part, but de Soto's book gives me pause. If the bank treats it as a demand deposit in every way except for the small print, it truly does, for all intents and purposes, result in s situation of two individuals owning a single item 100%.
ReplyDeletehttps://mises.org/library/money-bank-credit-and-economic-cycles
http://bionicmosquito.blogspot.com/2013/05/free-banking.html
Delete"If the bank treats it as a demand deposit in every way except for the small print, it truly does, for all intents and purposes, result in s situation of two individuals owning a single item 100%."
DeleteShow me any print - small, medium, or large - where it is stated that today's contract is a bailment.
Bank demand deposit is an an asset to the depositor and a liability to the Bank as long as the total demand of the Banks demand loans does not exceed the part of those deposits the Bank needs to keep as reserves plus any additional excess reserves they may have. Banks also do lend each overnight money to balance their books on a daily basis and they can have access to the FED being the clearing house of last resort. "Federal Deposit Insurance Corporation" (FDIC) guarantees the first $100,000 that you have on deposit.
DeleteThat would mean that a Demand Deposit is more like a non fully guarantied that it will be "On demand" liability of the Bank.
That become even more mysterious when the bank uses the proceed of a demand deposit to make a Demand loans.