Fractional reserve lending is NOT inherently fraudulent

[wizardwatson]

I hate joining arguments halfway without reading the whole thread but this one's too long.

Just wanted to comment about Walter Blocks argument. I read it a while back.

Saying fractional reserve banking is 'fraudulent' misses the mark. The problem is it creates a legal contradiction in property ownership. At least that's my take on what Block is saying. And that that no contract or agreement that is legally inconsistent can be valid.

 

[Optatron]

I hate joining arguments halfway without reading the whole thread but this one's too long.

Just wanted to comment about Walter Blocks argument. I read it a while back.

Saying fractional reserve banking is 'fraudulent' misses the mark. The problem is it creates a legal contradiction in property ownership. At least that's my take on what Block is saying. And that that no contract or agreement that is legally inconsistent can be valid.

I see what you're saying, in which case it's a conflict of legal rights, which would not be a problem if we defined them properly.

Doesn't a person have the right to agree to a stupid deal?

Doesn't a person have a right to buy a peice of paper knowing it's worthless?

Unless a person was told a paper entitles him to a car, and the promise was broken, what's wrong with selling him a paper where he KNOWS he either can't get the car or has a 90% chance of not getting it?

 

[wizardwatson]

I see what you're saying, in which case it's a conflict of legal rights, which would not be a problem if we defined them properly.

Doesn't a person have the right to agree to a stupid deal?

Doesn't a person have a right to buy a peice of paper knowing it's worthless?

Unless a person was told a paper entitles him to a car, and the promise was broken, what's wrong with selling him a paper where he KNOWS he either can't get the car or has a 90% chance of not getting it?

There's no legal conundrum really. Just a legal inconsistency. It's a signal that the model is rooted in conflict. The issue arises when someone who is under the assumption that their money represents some speific point value of wealth, when in reality it fluctuates up and down, wildly in some cases, depending on the current volume and price of a currency.

But again, there's really no right violation here either, a person is not really forced to use a bank. Anyone can store their assets/capital however they want.

Another issue at play here, is that these arguments, like Block's, about the inconsistency if FR system, is that they are really arising because of theoretical disagreements about the nature of money itself.

 

[Optatron]

There's no legal conundrum really. Just a legal inconsistency. It's a signal that the model is rooted in conflict. The issue arises when someone who is under the assumption that their money represents some speific point value of wealth, when in reality it fluctuates up and down, wildly in some cases, depending on the current volume and price of a currency.

Under the assumption is not the same as fraud or lied to.

Although this may sound like splitting hairs, there's a legal difference.

But again, there's really no right violation here either, a person is not really forced to use a bank. Anyone can store their assets/capital however they want.

Another issue at play here, is that these arguments, like Block's, about the inconsistency if FR system, is that they are really arising because of theoretical disagreements about the nature of money itself.

fair enough