Fractional Reserve Banking Is Not Fraudulent

[r3volution 3.0]

Bob and Jones want to make a deal. Bob will loan $100 to Jones at 1% per year.

Rather than a fixed term, the loan will be due whenever Bob requests repayment.

It's possible that, when Bob demands repayment, Jones won't have the money (as may happen with any loan).

Is this agreement fraudulent? Should it be illegal?

Of course not, and neither should fractional reserve banking.

When you deposit money in a checking account, you are making a loan to the bank: a loan which you can call in (i.e. "withdraw) at any time. The bank may do whatever it likes with that money (as any borrower can do with the money he borrows). If the bank makes poor decisions, it might not have the money to repay you when you call in the loan. But that's not fraud, that's just default (as can occur with any loan).

Discuss

 

[wizardwatson]

Ron Paul says it's fraudulent...

I really like the idea of allowing the market to determine what backs the currency, make sure there are no-fraud laws, and really look into the matter whether or not we should have fractional reserve banking. Yes, you have the Fed creating money out of this air, but then this is magnified by fractional reserve banking which is really fraudulent. And all it does is build financial bubbles guaranteeing the business cycle and the collapses, and as long as you patch it together, the longer you do that, the bigger the bubble. And now we’re in the midst of a big correction. - Ron Paul

https://www.ronpaul.com/2009-11-14/e...serve-banking/

Walter Block says it's fraudulent...

https://www.lewrockwell.com/2008/11/walter-e-block/is-fractional-reserve-banking-fraudulent/

A major matter of contention between the defenders and opponents of the legality of frb revolves, precisely, around the issue of whether or not a depositor, call him A, with some cash with the bank (in the form of a demand deposit), retains his property interest in those funds. I say No, and offer some reasons. One, if this is true, then, when the bank lends out money to a borrower, C, and gives him a demand deposit for (a fraction of) the amount deposited, there are not one but TWO people each of whom has a FULL ownership right in the SAME amount of money. This is a logical impossibility. - Walter Block

So, why should I, David Watson, a long time Ron Paul supporter agree with anonymous user agent associated with RPF username "r3volution 3.0" over the founder of the liberty movement this site is based on and well-established intellectuals he is associated with?

There are many Ron Paul supporters aware of the religion of money power. But as disciples of Austrian school of economic thought we reject inherently inflationary monetary models. Even if we were to betray the intellectual truth that FRB is fraudulent and illogical, FRB by nature is still inflationary and therefore an economically unsound policy.

Proverbs 11:1 "The LORD detests dishonest scales, but accurate weights find favor with him."

 

[r3volution 3.0]

In the loan agreement between Bob and Jones, who is being defrauded?

 

[wizardwatson]

In the loan agreement between Bob and Jones, who is being defrauded?

You are changing the definition. You did this same crap when we discussed definition of liberty a while back. I'm very aware of how intellectually dishonest people operate. I've been dealing with them in this forum for 10 years.

Everyone knows there's a difference between a deposit and a loan. Even a layman. Therefore, your entire argument rests on changing the definition of deposit to mean the same thing as loan.

Semantic gymnastics.

Your argument is contained in the link I provided for Walter Block. I have no desire to act out that dialog with you here. Sufficient was me dropping post #2 on your very anti-Ron Paul titled thread.

 

[Origanalist]

You are changing the definition. You did this same crap when we discussed definition of liberty a while back. I'm very aware of how intellectually dishonest people operate. I've been dealing with them in this forum for 10 years.

Everyone knows there's a difference between a deposit and a loan. Even a layman. Therefore, your entire argument rests on changing the definition of deposit to mean the same thing as loan.

Semantic gymnastics.

Your argument is contained in the link I provided for Walter Block. I have no desire to act out that dialog with you here. Sufficient was me dropping post #2 on your very anti-Ron Paul titled thread.

Out of rep. Same old same old from r3v

 

[dannno]

I guess it would not be fraudulent in a free market if the terms were spelled out, and anybody could get into the banking business.

It is fraudulent because it is a government enforced monopoly, and the insurance for non-payment is forcibly collected from the taxpayer.

 

[r3volution 3.0]

@wizardwatson

It is fraudulent for a bank to take call loans (ala Jones in the example) - true or false?

Out of rep. Same old same old from r3v

Same question

I guess it would not be fraudulent in a free market if the terms were spelled out, and anybody could get into the banking business.

It is fraudulent because it is a government enforced monopoly, and the insurance for non-payment is forcibly collected from the taxpayer.

Exactly

The problem (ethically and economically) is state interference in banking, not fractional reserve banking itself.

 

[Origanalist]

@wizardwatson

It is fraudulent for a bank to take call loans (ala Jones in the example) - true or false?



Same question



Exactly

The problem (ethically and economically) is state interference in banking, not fractional reserve banking itself.

Is anyone here disagreeing with this? I highly doubt it.

 

[r3volution 3.0]

Is anyone here disagreeing with this? I highly doubt it.

The Wiz does, as he thinks FRB is fraudulent.

 

[Zippyjuan]

You are changing the definition. You did this same crap when we discussed definition of liberty a while back. I'm very aware of how intellectually dishonest people operate. I've been dealing with them in this forum for 10 years.

Everyone knows there's a difference between a deposit and a loan. Even a layman. Therefore, your entire argument rests on changing the definition of deposit to mean the same thing as loan.

Semantic gymnastics.

Your argument is contained in the link I provided for Walter Block. I have no desire to act out that dialog with you here. Sufficient was me dropping post #2 on your very anti-Ron Paul titled thread.

Yes, everybody knows that deposits aren't loans, right? Even a layman.

Well, technically he's right. A time "deposit" isn't really a deposit. It's a contractual loan essentially. The depositor of a C.D. for instance is loaning the money explicitly to the bank. Savings accounts are the same way assuming they are not on demand. These facilities could still exist with a 100% reserve bank, because there's no counterfeit effect.

http://www.ronpaulforums.com/showthread.php?509813-The-Return-of-Sound-Money/page3 (see post #77)

 

[wizardwatson]

The Wiz does, as he thinks FRB is fraudulent.

Why don't you call out Ron Paul? I'm only reiterating his position? You seem reluctant.

Do you know why I'm here rev? Do you think it's for the accolades from all my admirers like you?

I'm here because I believe in Ron Paul's message. I also believe in the same Lord and Savior Ron does. Ron's message is quite unpopular, probably more unpopular than it was in 2007, but I'm still here. And it means something to me to stay here, in this tiny little ignored corner of the internet. It's more than a principled conviction, in truth, it's a religious conviction as well.

If a belief and a position is logical and truthful and I have faith that it's in the Spirit of God, then it doesn't matter if I'm the only one on Earth that believes it. I will believe it until my faith turns me away from it or reveals a deeper truth.

I won't budge to appease the majority, or seek the glory of men. Much less, anonymous nonsensical agents of the internet.

So you can defend the status quo all you want. I will keep the fire going myself if I have to. In truth, the kindling your anti-Paul posts provide burn brighter, though not as bright as the collective action related posts from the glory days of RPF, but times change.

In certain contexts you might be able to defeat me. On Twitter, maybe in some obscure economic forum, I don't know...wherever. Of course that's just my assessment as David. Ultimately, the Lord gives power to whom he will. Maybe He will choose to humble me for some reason and use you as a tool. Who knows.

So is there any other things you disagree with Ron Paul about that you want to get off your chest? You like abortion? There some countries you feel like we should bomb?

 

[r3volution 3.0]

Why don't you call out Ron Paul? I'm only reiterating his position?

If Ron believes that FRB is fraudulent, he's mistaken - for reasons explained.

The extent to which you rely on arguments from authority is disturbing.

Do you know why I'm here rev? Do you think it's for the accolades from all my admirers like you?

I'm here because I believe in Ron Paul's message. I also believe in the same Lord and Savior Ron does. Ron's message is quite unpopular, probably more unpopular than it was in 2007, but I'm still here. And it means something to me to stay here, in this tiny little ignored corner of the internet. It's more than a principled conviction, in truth, it's a religious conviction as well.

If a belief and a position is logical and truthful and I have faith that it's in the Spirit of God, then it doesn't matter if I'm the only one on Earth that believes it. I will believe it until my faith turns me away from it or reveals a deeper truth.

I won't budge to appease the majority, or seek the glory of men. Much less, anonymous nonsensical agents of the internet.

So you can defend the status quo all you want. I will keep the fire going myself if I have to. In truth, the kindling your anti-Paul posts provide burn brighter, though not as bright as the collective action related posts from the glory days of RPF, but times change.

In certain contexts you might be able to defeat me. On Twitter, maybe in some obscure economic forum, I don't know...wherever. Of course that's just my assessment as David. Ultimately, the Lord gives power to whom he will. Maybe He will choose to humble me for some reason and use you as a tool. Who knows.

So is there any other things you disagree with Ron Paul about that you want to get off your chest? You like abortion? There some countries you feel like we should bomb?

Not sure if you genuinely don't understand why you're wrong, or if you're just being stubborn, but either way, this is going nowhere...

 

[wizardwatson]

Yes, everybody knows that deposits aren't loans, right? Even a layman.

http://www.ronpaulforums.com/showthread.php?509813-The-Return-of-Sound-Money/page3 (see post #77)

Zippy, calm down.

connotation of "deposit" is "demand deposit".

people don't even use the term "time deposit", I only used it because Rev3 wanted to bring some jargon into the argument.

Every time I say "deposit" are you going to keep taking me to court with the post where I said "TIME deposits" are like loans?

You do understand when you add a word to another word the meaning of the original doesn't carry over.

"Cheese" for instance is a milk product.

"Chuck E. Cheese" is a rat.

It's confusing how it works sometimes.

 

[wizardwatson]

If Ron believes that FRB is fraudulent, he's mistaken - for reasons explained.

The extent to which you rely on arguments from authority is disturbing.

If?

Now you want to cast Ron Paul's beliefs about sound money as fake news? Ron Paul has authority because he has integrity and because he appeals to logic, reason, and upholds the principles of liberty and justice.

Furthermore, his principles are ultimately grounded in biblical law, which is the main reason he's remained ideologically consistent.

All true authority comes from God, whose laws are written in the hearts of men.

I've seen the "authority" in your style of arguing. It's based on lying.

Not sure if you genuinely don't understand why you're wrong, or if you're just being stubborn, but either way, this is going nowhere...

I'm not wrong. I gave you links and posted snippets of Walter's position, which is Ron's position, which is my position.

 

[r3volution 3.0]

your style of arguing

...is based on making arguments.



...kinda how the how debate concept is supposed to work.

 

[wizardwatson]

...is based on making arguments.



...kinda how the how debate concept is supposed to work.

Do you know how many times people try to pretend like they are some sort of scholar bowl, expert debaters on these freakin' forums?

I've also had this discussion many, many times.

Real debate doesn't even happen anymore. Society is so f'd up people can even agree on the definition of man and woman. You think it's possible to pin people down on the meaning of "liberty" in a forum like this? Give me a break.

Goals and strategy. That's worth discussing, because that is concrete. Your goals and strategy are abstract really, and if "educate the libertarian elite" is really the height of it, then superfluous as well, since you're already here.

 

[r3volution 3.0]

Do you know how many times people try to pretend like they are some sort of scholar bowl, expert debaters on these freakin' forums?

I've also had this discussion many, many times.

Real debate doesn't even happen anymore. Society is so f'd up people can even agree on the definition of man and woman. You think it's possible to pin people down on the meaning of "liberty" in a forum like this? Give me a break.

Goals and strategy. That's worth discussing, because that is concrete. Your goals and strategy are abstract really, and if "educate the libertarian elite" is really the height of it, then superfluous as well, since you're already here.

I'm not going to keep going back and forth over whatever you're talking about when you refuse to engage the topic of the thread.

When you're ready to give an answer to the question in the OP (i.e. is the call loan fraudulent), I'll be all ears.

 

[ThePaleoLibertarian]

True, it isn't. There's also nothing wrong with paper money in and of itself.

The problem with the Fed is:

1) The monopoly on currency
2) The printing press
3) The monopolized setting of interest rates, divorcing them from time preference of market actors

 

[r3volution 3.0]

True, it isn't. There's also nothing wrong with paper money in and of itself.

The problem with the Fed is:

1) The monopoly on currency
2) The printing press
3) The monopolized setting of interest rates, divorcing them from time preference of market actors

Indeed

I rather doubt paper money would make it in the market ala Hayek, but if it did, that'd be fine.

 

[wizardwatson]

I'm not going to keep going back and forth over whatever you're talking about when you refuse to engage the topic of the thread.

When you're ready to give an answer to the question in the OP (i.e. is the call loan fraudulent), I'll be all ears.

Posner(r3volution 3.0), in contrast, says Yes. That is, he claims that A no longer has a right to the money he has deposited. But he offers no REASON in support of this contention. Reading in between the lines, it is easy to see what is going on here: Posner(r3volution 3.0) is relying on PRESENT LAW, according to which he is entirely correct. This, indeed, is the exact manner that the courts have interpreted demand deposits. However, Posner(r3volution 3.0), sadly, is missing out on the context of the debate between me and Caplan. We were debating, not, what the law IS, but, rather, in sharp contrast, what the law SHOULD BE. Posner(r3volution 3.0) mistakenly interprets the Block-Caplan debate as over a POSITIVE statement of law, when it really involves NORMATIVE claims about the law. Yes, yes, Professor Posner’s(r3volution 3.0) views of bankruptcy law are entirely correct as regards which creditors are first in line, but they are equally IRRELEVANT to the debate between me and Caplan.

Why do I got to reiterate all this stuff? I'm aware of what you are saying. You are aware of what you are saying. It's clear we disagree. It's clear we aren't going to change positions. Why do I need to elaborate beyond what is in post #2? There isn't anything you are going to say that isn't status quo defending standard FRB supporting fare that you can find all over the internet. I generously posted a link to the standard status quo defending argument in post #2.

Not sure why you aren't satisfied.