Do Libertarians Really Want a Free Market in Banking?

[Fox McCloud]

It appears you are the one in need of a banking lesson. There is nothing illegal or treasonous about fractional reserve banking. It is not thievery either. Furthermore, in a free market banking situation fractional reserve banking would flourish.

I'd argue the contrary, considering the arguments Rothbard has put forth--take, for example, "What has the Government Done to Our Money? And the Case for the 100% Gold Dollar".

if you have fractional-reserve banking in addition to a gold standard, the issue is that gold can flow out of the country without it flowing back into it--with no fractional reserve banking and a gold standard, this doesn't happen, and everything remains a-ok.

 

[tmosley]

Well, that's the problem, the free market for everyone is a "concept". People want a free market in banking so we can return to sound money. I'm saying a free market in banking exists, and no one is using it. Therefore, even though all information and all signs point to the solution. No one is acting on it.

Maybe I can prove Mises wrong. Maybe the action axiom is flawed. Maybe humans don't "act" after all and just bounce around in there heads trying to solve puzzles that don't mean anything.

There isn't currently a free market, because the purchase of precious metals (below a certain amount) is taxed, and any "profits" from it's sale are taxed as income. It's not a free market if you have to pay a tax to change the form of your money.

As to the "evil" of FRB, it's only bad now because it is forced down our throats, and we ostensibly have only one bank, a big giant monopoly. If banks issued their own currency, FRB would be fine, so long as they informed their customers of what they were doing, and what the risks were (ie if we fail you lose X amount of your money until our assets are sold at auction, then you get a percentage back).

Basically we need to change the law to make gold and silver legal tender again so we don't get taxed from its trade. THEN we can open our own bank. If we do so before the law changes, it will be an untenable burden, unless you use it purely as a vault service (I bring bullion and deposit it, and it sits there doing nothing until I come pull it out).

 

[wizardwatson]

The Free Bank of Lakotah is an interesting concept. I wouldn't do it exactly that way, but it does show that there are possibilities out there. Like you say, we have to use what free market we do have left. What better way to demonstrate its wonders to those we wish would be committed to it?

Does anyone here work in banking? Anyone?

This was the point of my post. We need to get over the mental obstacle that we can't do it. I've been looking at community currency/community banking solutions for years, and I think it can be done, but there's a very sharp divide.

You've got libertarians on one side who believe in sound money and understand how sound money could fix 90% of our problems, but they don't understand 'how' to bank or think its too hard or whatever. On the other side you got all these community currency people, who understand banking is easy, that its just simple accounting, but they don't understand sound money and economics and what real money is.

We need to bridge this gap.

 

[acptulsa]

I believe the best avenue available to us is to switch ourselves over to gold and crowd out the FRN's. The faster we expand, the more insolvent banks in our communities will fold, and we'll still have a monetary system.

Of course, the fun part of this is ensuring that those people the bank's customers want to do business with accept the stuff. More than a few businesses will claim not to be bullion dealers and require FRNs.

But a bank that can pay your bills with FRNs out of your gold deposit would be a very, very convenient safe haven from inflation.

I think what we lack in terms of firing people up is a nuts and bolts way to make it work to our standards, but in the current, existing real world.

 

[Truth Warrior]

You know I agree with all that TruthWarrior, I'm only saying that we can't kill the State without killing the bank. We can't kill the bank 'through' use of the State, that is futile.

I believe the best avenue available to us is to switch ourselves over to gold and crowd out the FRN's. The faster we expand, the more insolvent banks in our communities will fold, and we'll still have a monetary system.

With a state ya still gotta wrangle with "legal tender". Kill the head, the body will follow. Whichever one is the head.

 

[dannno]

My idea of free market banking is that a bank can only do what an individual can do. That is transact money back and forth, not create money out of thin air. Therefore no fractional reserve banking.

 

[wizardwatson]

There isn't currently a free market, because the purchase of precious metals (below a certain amount) is taxed, and any "profits" from it's sale are taxed as income. It's not a free market if you have to pay a tax to change the form of your money.

As to the "evil" of FRB, it's only bad now because it is forced down our throats, and we ostensibly have only one bank, a big giant monopoly. If banks issued their own currency, FRB would be fine, so long as they informed their customers of what they were doing, and what the risks were (ie if we fail you lose X amount of your money until our assets are sold at auction, then you get a percentage back).

Basically we need to change the law to make gold and silver legal tender again so we don't get taxed from its trade. THEN we can open our own bank. If we do so before the law changes, it will be an untenable burden, unless you use it purely as a vault service (I bring bullion and deposit it, and it sits there doing nothing until I come pull it out).

Not necessary. And I I'm not claiming a free market in gold and precious metals. I'm saying there's a free market in 'banking'. Yeah, you get taxed but it's a one time deal. The article I link to in the OP addresses the tax issue as an obstacle. Basically its not an obstacle.

And again, with the "when this happens THEN we can do something". The legal tender laws prohibiting exchanging coins does not prohibit gold backed money substitutes like goldmoney.com and e-gold.

 

[wizardwatson]

My idea of free market banking is that a bank can only do what an individual can do. That is transact money back and forth, not create money out of thin air. Therefore no fractional reserve banking.

Brandon and TMosley need to read Walter Block, he makes the problem with FRB clear.

 

[acptulsa]

There isn't currently a free market, because the purchase of precious metals (below a certain amount) is taxed, and any "profits" from it's sale are taxed as income. It's not a free market if you have to pay a tax to change the form of your money.

This is indeed a huge obstacle.

It's also disgusting. If you make a 'profit' from gold, all that means is you avoid inflation. So, that amounts to a tax on what the Fed tried but failed to steal from you. Considering the gold standard is written into the Constitution, it sure feels that way to me.

Nonetheless, it is a real world problem we must address. FRNs have a monopoly on being currency and silver and gold are at best means of barter. How do we convince numerous faceless corporations to barter with their customers? The only way I know to do it is to convince the customers not to use the FRNs--and I do mean the majority of them, not just a few.

 

[Truth Warrior]

http://www.lewrockwell.com/rothbard/frb.html

 

[angelatc]

If state is involved it's NOT free market.

Of course it isn't, but I'm not a Libertarian. I believe there is a role for government, and I do believe in state's rights.

 

[acptulsa]

Of course it isn't, but I'm not a Libertarian. I believe there is a role for government, and I do believe in state's rights.

How does any of this make you anything but a libertarian? The only part that could is if you believe government has a major role as opposed to a minor one.

 

[angelatc]

My idea of free market banking is that a bank can only do what an individual can do. That is transact money back and forth, not create money out of thin air. Therefore no fractional reserve banking.

I can make money out of thin air. If I own 10 acres, and I sell you 1 for $50,000, and let you pay me in monthly installments at 6%...then I go buy 2 acres from the neighbor for $50,000 and pay him in monthly installments at 5%, I have just made money out of thin air.

 

[Truth Warrior]

Of course it isn't, but I'm not a Libertarian. I believe there is a role for government, and I do believe in state's rights.

So I guess that you are not wanting a free market. State capitalism and a mixed economy is just fine with you. Correct?

BTW, Ron endorses LRC.

 

[wizardwatson]

Looks like I'm pissing off people everywhere today with my post. Someone at Mises doesn't like it, and apparently doesn't really have a high opinion of RPF:

1. Too long, didn't read.

2. Your title is unappealing.

3. Reposting from the Ron Paul forums will not win you an audience. Write to us, for us, or you are not going to get much interest. You put little effort in, little will your results be.

4. This is even worse than your last thread. This style of writing is terrible.

Also, he is Mr. Rothbard, not Mr. Murray, even if you insist people call you Mr. Wizard, it's still your first name, not your last name.

My response:

Well, I try to communicate and I'm attacked because I'm not a good writer, and I get accused of being self-indulgent and I get all sorts of advice about how better to present my theory. So I thought I'd try a different angle.

1. It's shorter and more concise than my last post.

2. My title is the question and is most important and relevant. Maybe you're afraid to answer it.

3. I'm not writing for the "Mises Community" or the "Ron Paul Community". You're sounding very collectivist for a Libertarian.

4. Who cares if my writing is terrible and that its worse than my last thread. No one is reading things to understand. They are reading to see who agrees with their way of thinking and who does not.

I will call Mr. Murray whatever I want. He is dead. He can bitch at me when I go to meet him. Again, very anti-free speech for a Libertarian.

Please put me on your ignore list.

Maybe I should just sign off for the day. I'm too agitated.

 

[Truth Warrior]

Looks like I'm pissing off people everywhere today with my post. Someone at Mises doesn't like it, and apparently doesn't really have a high opinion of RPF:



My response:


Maybe I should just sign off for the day. I'm too agitated.

Nah, the RPF is full of lame critics. Hang in there.

 

[dannno]

I can make money out of thin air. If I own 10 acres, and I sell you 1 for $50,000, and let you pay me in monthly installments at 6%...then I go buy 2 acres from the neighbor for $50,000 and pay him in monthly installments at 5%, I have just made money out of thin air.

No, you have taken wealth from others in a free market exchange. The same amount of money exists before and after.

When a bank makes this transaction, they give the owner of the land a $50,000 check and wait for the payments from the buyer. In this case, the owner of the land has to wait for the payments and doesn't get the $50,000 up front.

 

[wizardwatson]

People say I'm being arrogant, but look at what that guy is saying:

You put little effort in, little will your results be. (Yoda?)

Like every idea that comes to him must be to his taste, written in a manner non-offensive to his sensibilities, wrapped in a pretty bow, and layed gently at his feet on a pillow of rose pedals.

The whole mass of the human race is crammed between the arrogance of the intellectual elitists and the power elitists.

 

[acptulsa]

Well, wizard, here it doesn't seem to be drawing anything but lame and overused quotes and links which are hard to wade through on the way to the actual topic...

But then, it isn't an easy question and there are a host of ins and outs to work out. And, I fear, the FRN will have to play a role considering the realities we all face.

But thank you for bringing it up again. It really does seem to me there's real promise in this idea. If we can get some good ideas crunched in between the random and unhelpful links and quotes, this could amount to something.

 

[Truth Warrior]

People say I'm being arrogant, but look at what that guy is saying:

You put little effort in, little will your results be. (Yoda?)

Like every idea that comes to him must be to his taste, written in a manner non-offensive to his sensibilities, wrapped in a pretty bow, and layed gently at his feet on a pillow of rose pedals.

The whole mass of the human race is crammed between the arrogance of the intellectual elitists and the power elitists.