Do Libertarians Really Want a Free Market in Banking?

[tremendoustie]

Well, that's the main problem though with legal tender laws, we can't coordinate in an attempt to circulate 'real' coins. There's some pretty significant legal obstacles in that regard that the Liberty Dollar smashed into. So while I agree that your assessment is correct as far as what should come first, and probably what would come first in a 'free market', that avenue is blocked. We have to do it the other way around unfortunately.

Ah, now that's what I was wondering -- is this avenue truely blocked? Can't we trade in silver 'rounds', or 'ounces', as long as we don't call them coins? And what about AEs and old 90% junk silver? They're 'legal tender', so why could we not use them as currency, and indeed call them 'coins'?

The only two legal issues I'm aware of with legal tender are:

1. You have to accept it as payment for a contract (the courts will not enforce a contract if the attempt has been made to pay in FRNs).

2. You cannot mint 'coins'.

These issues seem trivial to get around, to me. We're mostly dealing with point of sale, and we don't need to call the rounds we trade, 'coins' (or indeed mint any at all, we can use rounds in existance already). It seems that the only reason the liberty dollar ran afoul of the law is that they called it "dollar", and may have used the word "coin". Are there other legal issues I'm not aware of?

 

[wizardwatson]

My point is you are trying to convince people to agree to your goal when it is unnecessary, thus my ebay --> PayPal example. As in the Ebay ---> Paypal example the goal for ebay is really to siphon funds to be held in Paypal. See what I'm saying. They don't go and say hey deposit money in Paypal just because we want it in our new style bank, they use there frontend service "ebay site" to get people to enter the bank(Paypal).

If you understand that then you'll understand my point.

You are trying to directly convince people to hold there money(PM, whatever value holder), in your bank, that will not work in my opinion. What you should do is create a frontend (like ebay), that people want to use, and then offer an incentive for using the thing people are apprehensive about using(your bank). As the comfort level grows and trust grows, then people will simply start leaving some of that value in there. and directly trading in it, similiar to Paypal. I sell on ebay for example, I then buy on ebay with funds I got from selling on ebay. That could easily apply to your system. As in I sell on wizardwatson.com, and the gold is stored at wizardwatsonsvault.com. But eventually I'll want to buy on wizardwatson.com so instead of withdrawing it I just leave the gold in there, and trade it instead of withdrawaling it for FRN's.

Essentially my point is the ebay --> Paypal model is the same internet model that would work for your system. As in Wizardwatson.com trading stuff platform---> Wizardwatson.com Bank.

Same thing different goals.


I'm not sure how I can make any clearer than that.

I got you now.

You're looking a step ahead of what I'm talking about. You are right, a selling platform would be awesome, and would increase value retention if people could buy and sell on some kind of Ebay like platform.

But just like Paypal, how many of you have actually cashed out your paypal account and had them cut you a real check? Likely you found something online you could buy, Ebay item, Godaddy account, or whatever. There probably would be more pressure to cash out at first since there might not be a lot of places to spend your gold currency. But it would require more work to really cash out, because to cash out, you need to acquire the gold physically and then sell it into some other money system, which is likely to be FRN's.

What I'm talking about, and what I think you're overlooking, is no one can buy anything on Ebay or receive anything in Paypal, until someone somewhere, actually makes a payment from their bank to the paypal bank. The 'point of entry' into paypals system is from other FRN banks, not from Ebay or anywhere else. Ebay and all other paypal using entities are just moving balances from one account to the other. They are facilitating exchange.

So while what you're talking about is certainly viable for growing the system, it isn't how PM's would come into the system.

 

[acptulsa]

PMs have intrinsic value. Trading items of intrinsic value is barter, and isn't illegal (yet). It might even be a way to avoid sales taxes. The government will want to stop this barter, but barter is instinctive in humans and there will be resistance. Can it stop us?

I've thought the way to reintroduce a solid currency is to use the same composition and sizes as old silver coins (so they can be used also) and have an image of a male deer on the reverse. That way you can call them 'silver bucks' instead of silver dollars. For the half buck? How about a close up? Quarter buck? Just the head (portrait of a deer).

 

[tremendoustie]

I got you now.

You're looking a step ahead of what I'm talking about. You are right, a selling platform would be awesome, and would increase value retention if people could buy and sell on some kind of Ebay like platform.

But just like Paypal, how many of you have actually cashed out your paypal account and had them cut you a real check? Likely you found something online you could buy, Ebay item, Godaddy account, or whatever. There probably would be more pressure to cash out at first since there might not be a lot of places to spend your gold currency. But it would require more work to really cash out, because to cash out, you need to acquire the gold physically and then sell it into some other money system, which is likely to be FRN's.

What I'm talking about, and what I think you're overlooking, is no one can buy anything on Ebay or receive anything in Paypal, until someone somewhere, actually makes a payment from their bank to the paypal bank. The 'point of entry' into paypals system is from other FRN banks, not from Ebay or anywhere else. Ebay and all other paypal using entities are just moving balances from one account to the other. They are facilitating exchange.

So while what you're talking about is certainly viable for growing the system, it isn't how PM's would come into the system.

I think it might though! See, what if you/someone ran a PayPal like service, we'll call it 'GoldPay', accepted payment by bank transfer (or credit card), then used those FRNs to buy gold. New deposits would then show up in the account as X amount of gold, with the FRN equivalent listed below, based on the current gold price.

If I then check my account at 'GoldPay', I would see that I had 1/4 oz. gold, which is worth X dollars. If the gold price went up the next day, I would then see that I have 1/4 oz gold, which is now worth more FRNs. I could use this account to buy from vendors we set up to accept gold -- like something akin to that liberty store I mentioned. Also, I could use the account to buy from traditional vendors, based on the FRN value of my account.

The total amount of money in the 'GoldPay' system at any time, would be held in gold, or silver.

 

[tremendoustie]

PMs have intrinsic value. Trading items of intrinsic value is barter, and isn't illegal (yet). It might even be a way to avoid sales taxes. The government will want to stop this barter, but barter is instinctive in humans and there will be resistance. Can it stop us?

I've thought the way to reintroduce a solid currency is to use the same composition and sizes as old silver coins (so they can be used also) and have an image of a male deer on the reverse. That way you can call them 'silver bucks' instead of silver dollars. For the half buck? How about a close up? Quarter buck? Just the head (portrait of a deer).

Exactly, nothing illegal about barter! I don't think minting coins should be a priority. Many companies already mint rounds and bars, plus there are eagles, maples, philharmonics, etc. Why do we need to create a new currency, let's just sell stuff in 'silver ounces'! Thus we avoid the practical problems of setting up a mint, what to charge, etc.

I really think the first step is to go around to the local businesses near you with an american eagle, and offer to patronize them if they'll take it as payment, worth, say, 13-14$ or so, which is what I think they're going for. Or, you could try using rounds.

I did this with my local pizza place the other week, he said no, but that the coin was 'beautiful' -- and I could tell it got his gearbox turning. Now, if a few more people went to that same guy and others like him with the same request, I betcha a significant number of merchants would go for it.

 

[RonPaulIsGreat]

I got you now.

You're looking a step ahead of what I'm talking about. You are right, a selling platform would be awesome, and would increase value retention if people could buy and sell on some kind of Ebay like platform.

But just like Paypal, how many of you have actually cashed out your paypal account and had them cut you a real check? Likely you found something online you could buy, Ebay item, Godaddy account, or whatever. There probably would be more pressure to cash out at first since there might not be a lot of places to spend your gold currency. But it would require more work to really cash out, because to cash out, you need to acquire the gold physically and then sell it into some other money system, which is likely to be FRN's.

What I'm talking about, and what I think you're overlooking, is no one can buy anything on Ebay or receive anything in Paypal, until someone somewhere, actually makes a payment from their bank to the paypal bank. The 'point of entry' into paypals system is from other FRN banks, not from Ebay or anywhere else. Ebay and all other paypal using entities are just moving balances from one account to the other. They are facilitating exchange.

So while what you're talking about is certainly viable for growing the system, it isn't how PM's would come into the system.

I truly must be missing something. Here is what I'm thinking. I'll use Ebay and paypal, but it would be a ebay substitute, just to be clear.

Steps.

1.You set up your ebay site.
2. On your ebay site, buyers would be charged a percentage of the Final Value unless they paid with deposits at your PayPal type site. If they paid with there paypal money then there would be no fees.

3. Sellers, that keep an active balance at your paypal site, would accumulate value that could be traded for upgrades on your ebay site. So, normally for example you'd charge 10.00 to be featured listing. However, if you say we'll credit your account for listing upgrades at the rate of 2 percent a month of the average holdings in your paypal account. Then they'd be more likely to leave it there. And it wouldn't actually cost anything.


There are all kinds of ways to get the new FRN's in and converted to PM, and to create incentives to leave the money in the bank.

Unless I'm missing something.....

 

[wizardwatson]

I think it might though! See, what if you/someone ran a PayPal like service, we'll call it 'GoldPay', accepted payment by bank transfer (or credit card), then used those FRNs to buy gold. New deposits would then show up in the account as X amount of gold, with the FRN equivalent listed below, based on the current gold price.

If I then check my account at 'GoldPay', I would see that I had 1/4 oz. gold, which is worth X dollars. If the gold price went up the next day, I would then see that I have 1/4 oz gold, which is now worth more FRNs. I could use this account to buy from vendors we set up to accept gold -- like something akin to that liberty store I mentioned. Also, I could use the account to buy from traditional vendors, based on the FRN value of my account.

The total amount of money in the 'GoldPay' system at any time, would be held in gold, or silver.

What you have described already exists. It's called GoldMoney.com. And its legal. I've mentioned my reasons for thinking its model is not ideal above.

 

[wizardwatson]

I truly must be missing something. Here is what I'm thinking. I'll use Ebay and paypal, but it would be a ebay substitute, just to be clear.

Steps.

1.You set up your ebay site.
2. On your ebay site, buyers would be charged a percentage of the Final Value unless they paid with deposits at your PayPal type site. If they paid with there paypal money then there would be no fees.

3. Sellers, that keep an active balance at your paypal site, would accumulate value that could be traded for upgrades on your ebay site. So, normally for example you'd charge 10.00 to be featured listing. However, if you say we'll credit your account for listing upgrades at the rate of 2 percent a month of the average holdings in your paypal account. Then they'd be more likely to leave it there. And it wouldn't actually cost anything.


There are all kinds of ways to get the new FRN's in and converted to PM, and to create incentives to leave the money in the bank.

Unless I'm missing something.....

You're not missing anything, it's just that this is an idea on how to market the bank. I'm working on the structure of the bank. How it would exist in the legal sense as well as how you as a user would interact with it. Implementing such a thing over the Ripple protocol is another hurdle, as his semantics weren't specifically designed for it, but the payment routing model can fill the role.

 

[acptulsa]

But if you set up as a bank or credit union, you could issue debit cards. These work just as well and are widely accepted at brick and mortar merchants. Like you say, I don't think disbursements are the major problem. In fact, I would be looking to do an ATM network as well (though you won't find one right now that dispenses real money).

 

[wizardwatson]

Just wanted to link this thread, which is about RipplePay that someone came across independently. I guess they missed it when I referenced it in the OP.

Anyway, some good discussion about actually implementing sound money over RipplePay going on over there.

RipplePay and Agorism

http://www.ronpaulforums.com/showthread.php?t=171801

 

[acptulsa]

Have a little light reading yourself, wiz..:

http://www.ronpaulforums.com/showthread.php?t=159669

 

[wizardwatson]

Have a little light reading yourself, wiz..:

http://www.ronpaulforums.com/showthread.php?t=159669

I read it. I think that way (counteracting current monetary system by massive participation in Credit Unions) is blocked from a means and ends perspective, but you can see the reaction you get from even bringing it up.

All actionable roads lead to...

Need to do something about money system.

 

[Zippyjuan]

The biggest conflict I see between Libertarians and free market banking is the reserve requirement. Libertarians oppose fractional reserve banking (banks loaning out all but a portion of their deposits to new customes) because it creates money "out of thin air". But a free market bank has no rules including reserve requirements. They would be allowed to loan out 100% of their reserves if they wanted to in a free market. If you institute a 100% reserve requirement you are by definition regulating the industry and again by definition not operating a free market.

 

[nate895]

The biggest conflict I see between Libertarians and free market banking is the reserve requirement. Libertarians oppose fractional reserve banking (banks loaning out all but a portion of their deposits to new customes) because it creates money "out of thin air". But a free market bank has no rules including reserve requirements. They would be allowed to loan out 100% of their reserves if they wanted to in a free market. If you institute a 100% reserve requirement you are by definition regulating the industry and again by definition not operating a free market.

I'd argue that you are enforcing contracts, and preventing stealing. By creating money out of thin air, you are inflating, which is stealing from savers.

 

[acptulsa]

If you institute a 100% reserve requirement you are by definition regulating the industry and again by definition not operating a free market.

Oh, I don't think establishing and enforcing a few ground rules (i.e., prohibiting fraud) is quite the same as regulating a free market into something entirely different. Certainly the example I listed would only seem to create an uneven playing field to the perpetrators of fraud, not to the honest. It's when small fry can't play with the big boys because of regulations, or when those who don't pay off their local friendly represenatives can't play with those who do that I start crying foul. I don't mind that I can't move vertically or horizontally on a checkerboard, so long as you can't either.

Maybe I'm just not enough of a purist to suit you. But I never said I was an anarchist.

 

[nate895]

Oh, I don't think establishing and enforcing a few ground rules (i.e., prohibiting fraud) is quite the same as regulating a free market into something entirely different. Certainly the example I listed would only seem to create an uneven playing field to the perpetrators of fraud, not to the honest. It's when small fry can't play with the big boys because of regulations, or when those who don't pay off their local friendly represenatives can't play with those who do that I start crying foul. I don't mind that I can't move vertically or horizontally on a checkerboard, so long as you can't either.

Maybe I'm just not enough of a purist to suit you. But I never said I was an anarchist.

Also, as far as regulation. If we had no regulation, it would be possible to not have basic ingredient and nutrition facts on food. I am allergic to tree nuts, and if there is no ingredient information, I'd have to avoid a lot of foods or risk a reaction that could kill me. I am not willing to go my entire life without eating another cookie because it might be produced along with nut-filled products, and it is anti-free market for the government to say "you can't do that."

 

[carlangaslangas]

The biggest conflict I see between Libertarians and free market banking is the reserve requirement. Libertarians oppose fractional reserve banking (banks loaning out all but a portion of their deposits to new customes) because it creates money "out of thin air". But a free market bank has no rules including reserve requirements. They would be allowed to loan out 100% of their reserves if they wanted to in a free market. If you institute a 100% reserve requirement you are by definition regulating the industry and again by definition not operating a free market.

I have no problems with fractional reserve banking as long as the percentage of reserves is set, audited and posted publicly.
The fraud happens when customers think that the bank is just storing their money, but the bank is investing it instead.

 

[LibertyEagle]

Somehow I had missed this thread. It is quite interesting.

 

[tremendoustie]

Also, as far as regulation. If we had no regulation, it would be possible to not have basic ingredient and nutrition facts on food. I am allergic to tree nuts, and if there is no ingredient information, I'd have to avoid a lot of foods or risk a reaction that could kill me. I am not willing to go my entire life without eating another cookie because it might be produced along with nut-filled products, and it is anti-free market for the government to say "you can't do that."

That's not true at all, companies would be motivated to put the ingredients on food, if consumers want it. Companies that make products without nuts would have a strong desire to say so on the packaging, so people like you will buy them.

And, if they lie, it's fraud, so anyone injured would be entitled to damages.

You think the government requires the display of "Kosher" information? No, yet products that are tend to advertise it.

 

[brandon]

Fractional Reserve Banking is not fraud. When you deposit money with a bank you know what the reserve ratio is. If they claimed that they would keep 100% money in their reserves but then did not, that would be fraud. But no banks claim that.

Likewise, in a free market banks would be free to set whatever reserve ratio they want. When a customer deposits money with them, they are accepting the reserve ratio. Only if the bank enters into a contract to store money at a certain reserve ratio, and then later changes this ratio without legally amending or changing the contract with the depositor has the bank committed fraud.

In a free market, reserve ratio's would be set similarly to how interest rates would be set.

One bank may chose to have a very low reserve ratio. This will allow them to reduce customer fees and pay more interest on deposits. However it also will cause them to have to pay more money for insurance on the deposits. If they don't purchase insurance, then the rational person will not deposit money they cannot afford to risk with the bank.

On the other hand, some banks may chose a very high reserve ratio. This bank will have to charge the customers substantial fees for the services the low reserve ratio bank offers for free. They also won't be able to offer interest on deposits. But the bank will have to pay much less for insurance.

Ultimately, the private deposit insurance companies that replace the FDIC will have a sliding scale of insurance costs depending on a banks reserve ratio. Through the competition among the private insurance companies, ultimately the market will be setting the ideal reserve ratio.

And banks that don't get insurance essentially will be just like any other investment company.