Fractional reserve vs. ZERO reserve banking

[jon_perez]

The US banking system is on fractional reserve banking, which Rothbardians say is bad enough, but what do they say about the central banks which do not impose reserve requirements at all?

These would include the UK, Canada, Australia and Sweden for example. How does this square with real-world experience? Does it mean that the US banking system is safer at the expense of being less competitive?

As far as I understand, these countries have zero reserve requirements, but may have strict lending regulations (at least in Canada and Australia's case?) that prevented the abuse and overleverage currently plaguing the US banking system.

 

[Brian Defferding]

Canada is fractional reserve, just like the US. Right now Canada's banks are getting high marks for being the best in the world, and Democrats and liberals are praising them because they have stricter loan requirements and regulations (like you noted).

 

[jon_perez]

When you try to do a search, a lot of articles seem to turn up that say that Canada's private banks do not have any reserve requirements:

http://gilliganscorner.wordpress.com/2008/04/06/canadas-private-banks-have-no-reserve-requirements/

http://wfhummel.net/reservereqs.html

I also came across an article that says that greenspan tried to accomplish the same thing for the US banking system:

http://jengafinance.blogspot.com/2009/07/great-pyramid-of-geezer.html

this would be the so-called "sweep facility" I suppose.

 

[jon_perez]

Also, iirc, Rothbard advocates completely "free" (unregulated?) banking, meaning no central bank to impose reserve requirements among other things. Would the experience of these countries correspond (at least to some degree) to that idea of Rothbard's?

And if so, did the real world follow Rothbard's predictions of what would happen?

 

[tmosley]

Also, iirc, Rothbard advocates completely "free" (unregulated?) banking, meaning no central bank to impose reserve requirements among other things. Would the experience of these countries correspond (at least to some degree) to that idea of Rothbard's?

And if so, did the real world follow Rothbard's predictions of what would happen?

Not at all, as those country's banking systems are all controlled by central banks. In a free banking system, banks are free to issue as much currency as they want, but it is their OWN currency, not US currency. Under such a system, irresponsible banks wind up with worthless notes, while responsible banks have notes that have low inflation, no inflation, or even deflation. In generally, one can tell how sound a bank's currency is by the length of the bank's existence. Younger banks have more to prove, so they keep a sound policy as well.

Overall, it's a much better system. The US had a similar system (with very limited government controls) during the 1800's, and Scotland had a totally free banking system for many decades, and became the envy of the world because of it. It was eventually crushed by the Central Bank of England, since a free system posed a threat to their power...

 

[Conza88]

You are essentially wrong in every regard to Rothbard's positions.

What Has Government Done to Our Money? by Murray N. Rothbard

FRB = is fraud.

FRB is inherently inflationary. Inflation = hidden tax. Taxation = theft.

When you increase the money supply, you rob my savings of their value. Theft.

Rothbard advocates 100% reserve banking.

The Mystery of Banking

Fractional Reserve Banking by Murray N. Rothbard

 

[wgadget]

BTW, the US also requires no reserves...http://www.marketskeptics.com/2009/03/us-banks-operate-without-reserve.html

 

[HOLLYWOOD]

BTW, the US also requires no reserves...[url]http://www.marketskeptics.com/2009/03/us-banks-operate-without-reserve.html[/URL]

good find lots of data and facts.

Thanks

 

[jon_perez]

The article here http://multiplier.blogspot.com/2007/08/savings-bank-interest-rates-lowest.html gives one explanation as to why even having zero reserve requirements for banks in other countries did not lead to overleverage:

"What limits bank lending, aside from economic conditions, is the capital ratio requirement. That effectively limits a bank's loan portfolio to about 12 times its own capital."

The so-called "shadow banking system" (enabled by the repeal of Glass-Steagall?) seems to be what allowed US banks to overstep capital ratios.

 

[jon_perez]

You are essentially wrong in every regard to Rothbard's positions.

What Has Government Done to Our Money? by Murray N. Rothbard

FRB = is fraud.

FRB is inherently inflationary. Inflation = hidden tax. Taxation = theft.

When you increase the money supply, you rob my savings of their value. Theft.

Rothbard advocates 100% reserve banking.

The Mystery of Banking

Fractional Reserve Banking by Murray N. Rothbard

You may have not read the books in the URLs you posted as fully as you should have.

If I recall my readings correctly (mostly "Mystery of Banking"), tmosley's description comes pretty close. Free banking means no imposed reserve requirements (because there is no regulatory body ala central bank anyway). What Rothbard theorizes is that the market itself would eventually weed away all banks which do not practice 100% reserve even in the absence of a regulatory body.

The question is I have is if Rothbard's hypothetical results would really pan out in real life and if there have been any cases where such a hypothesis would have been tested out.

You're not the only one, Conza88, who does not seem to read the very books they love to tout very carefully (or at all?), but I do notice that the common behaviour among such people seems to be be too quick to the draw to call on others for what you think are their misunderstandings.



[By the way, if you are saying that Rothbard advocates 100% reserve banking in the sense that there are regulatory bodies to enforce such, I believe it is you who are completely mistaken. Perhaps, now is the time to actually read the stuff in those URLs you have put up...? ]

 

[Optatron]

You are essentially wrong in every regard to Rothbard's positions.

What Has Government Done to Our Money? by Murray N. Rothbard

FRB = is fraud.

It's only fraud if bank didn't tell customers how it worked.

What if they did, and people agreed to it?

FRB is inherently inflationary. Inflation = hidden tax. Taxation = theft.

not so fast.

inflation I agree, but it's not hidden or theft if people know about it in advance and agreed to it. It can be inherently deflationary as well if they never let you withdraw.

When you increase the money supply, you rob my savings of their value. Theft.

Yes, it's theft if I did it without your consent, but if I had your consent, that's not theft, and it's not wrong, is it?

Rothbard advocates 100% reserve banking.

The Mystery of Banking

Fractional Reserve Banking by Murray N. Rothbard

 

[Optatron]

You're not the only one, Conza88, who does not seem to read the very books they love to tout very carefully (or at all?), but I do notice that the common behaviour among such people seems to be be too quick to the draw to call on others for what you think are their misunderstandings.


[By the way, if you are saying that Rothbard advocates 100% reserve banking in the sense that there are regulatory bodies to enforce such, I believe it is you who are completely mistaken. Perhaps, now is the time to actually read the stuff in those URLs you have put up...? ]

 

[Conza88]

You may have not read the books in the URLs you posted as fully as you should have.

If I recall my readings correctly (mostly "Mystery of Banking"), tmosley's description comes pretty close. Free banking means no imposed reserve requirements (because there is no regulatory body ala central bank anyway). What Rothbard theorizes is that the market itself would eventually weed away all banks which do not practice 100% reserve even in the absence of a regulatory body.

The question is I have is if Rothbard's hypothetical results would really pan out in real life and if there have been any cases where such a hypothesis would have been tested out.

You're not the only one, Conza88, who does not seem to read the very books they love to tout very carefully (or at all?), but I do notice that the common behaviour among such people seems to be be too quick to the draw to call on others for what you think are their misunderstandings.

[By the way, if you are saying that Rothbard advocates 100% reserve banking in the sense that there are regulatory bodies to enforce such, I believe it is you who are completely mistaken. Perhaps, now is the time to actually read the stuff in those URLs you have put up...? ]

"Curiously, many people have argued that it would be impossible for banks to make money if they were to operate on this “100 percent reserve” basis (gold always represented by its receipt). Yet, there is no real problem, any more than for any warehouse. Almost all warehouses keep all the goods for their owners (100 percent reserve) as a matter of course—in fact, it would be considered fraud or theft to do otherwise.

Their profits are earned from service charges to their customers. The banks can charge for their services in the same way. If it is objected that customers will not pay the high service charges, this means that the banks’ services are
not in very great demand, and the use of their services will fall to the levels that consumers find worthwhile. We come now to perhaps the thorniest problem facing
the monetary economist: an evaluation of “fractional reserve banking.” We must ask the question: would fractional reserve banking be permitted in a free market, or would it be proscribed as fraud?"...​

You haven't read "What has Government Done to Our Money?", specifically go to Chapter 12 on Warehouses. And it's all in there chump. I know you haven't read it because you then wouldn't be asking the question, nor strawmanning if you had.

So how about you shut the fuck up before you call bullshit? Ignoramus.

YOU are the one who is profoundly ignorant.

"By the way, if you are saying that Rothbard advocates 100% reserve banking in the sense that there are regulatory bodies to enforce such, I believe it is you who are completely mistaken. "

YOU believe WRONG. EPIC FAIL.

Private courts mate. Don't worry, you're still learning. :o

 

[Conza88]

It's only fraud if bank didn't tell customers how it worked.

What if they did, and people agreed to it?

Nope. It's not. It would still be fraud. Creating money out of thin air. Not backed by anything.

not so fast.

inflation I agree, but it's not hidden or theft if people know about it in advance and agreed to it. It can be inherently deflationary as well if they never let you withdraw.

Wrong. No it can't be inherently inflationary if they never let your withdraw... I mean, cetris paribus ? Can you please not pull shit out of your ass. Howsa bout you elaborate so that your outline all your assumptions.. go on.

Yes, it's theft if I did it without your consent, but if I had your consent, that's not theft, and it's not wrong, is it?

Nope. Wrong. Creating more property than there exists. Backed by nothing. Fraud.

Is Fractional Reserve Banking Fraudulent? by Walter Block

 

[Conza88]

 

[Optatron]

Nope. It's not. It would still be fraud. Creating money out of thin air. Not backed by anything.

So creating a painting out of thin air backed by nothing but a canvas and some paint is fraud?

Selling a painting for $100 when the raw materials add up to less than $1, labor costs less than $20, that's fraud?

What happened to "value is subjective"?

I think you're saying, if you print money, that's not consented by EVERY PERSON WHO IS AFFECTED BY THE POOL OF THIS CURRENCY SUPPLY (not just the bank users), it would be fraud.

Wrong. No it can't be inherently inflationary if they never let your withdraw

Yeah, that's what I said, it's inherently DEFLATIONARY if they don't let you withdraw, what's your problem?

... I mean, cetris paribus ? Can you please not pull shit out of your ass. Howsa bout you elaborate so that your outline all your assumptions.. go on.

You can ask me what you don't get and I can do my best.

Nope. Wrong. Creating more property than there exists. Backed by nothing. Fraud.

so let me get this straight, you don't believe in voluntary exchange and consent?

If I told you yesterday 1 gold ounce is worth 1 paper Conzabill, you agree to exchange it.

Tomorrow I told you I feel like printing another one, to make one gold ounce worth 2 Conzabills, and you agree to it, that's wrong? (I'm not asking you why would you be so stupid as to agree to it, I'm asking you IS THAT ALLOWED?)


You have no right to devalue what the Conzabill in your hand? I have no right to change the value of what I made? It's not creating PROPERTY, IT'S CHANGING VALUE, BY CONSENT.

 

[Optatron]

I don't like doing this but here's the definition of FRAUD

1 a: deceit, trickery ; specifically : intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right b: an act of deceiving or misrepresenting : trick

2 a: a person who is not what he or she pretends to be : impostor ; also : one who defrauds : cheat b: one that is not what it seems or is represented to be

Whats wrong with two people agreeing what to do with their own money & wealth?

What's wrong with a bank devaluing the money the customer has no problem devaluing? How is CONSENTED MODIFICATION OR ALTERATION OF ONE'S OWN PROPERTY FRAUD?

 

[Optatron]

Private courts mate. Don't worry, you're still learning. :o

Private courts is what we have today, government and corporations working together to fuck the little guy BECAUSE THEY CAN. They answer to nobody but their money and interests.

Your whole "the market will keep them in check" is TRUE, but not as ideal as you may think, the market is PWND by the rich and the armed. You don't like being the oppressed, the victim today? Yeah it'll get better when somebody buys out the court, lawyers and jury, because you won't be the richest and most powerful person in the world (nor will I, but I'm not complaining today).

The only way you can prevent corruption and abuse of private courts is just how any system does it, PROFITS, THREATS, VIOLENCE, INCENTIVES AND AGREEMENT.

Am I assuming there's going to be a concentration rather than equal spread of wealth? HELL YES, only socialists think all humans are capable and willing to make the same amount of money and do the same for themselves. Some people aren't motivated to do things no matter what the situation is (and they'll be eliminated, fortunately in your world).

 

[wgadget]

I got dem low-down, nasty, Non-Borrowed Reserves BLUES....


FYI, and for what it's worth...(click on the links):

http://www.federalreserve.gov/releases/h3/nonborrowedreserves.htm

Recent Declines in Nonborrowed Reserves

The H.3 statistical release indicates that nonborrowed reserves of depository institutions have declined substantially since mid-December to a level that is now negative. This development reflects the provision of a large volume of reserves through the Term Auction Facility (TAF) and has no adverse implications for the availability of reserves to the banking system.

By definition, nonborrowed reserves are equal to total reserves minus borrowed reserves. Borrowed reserves are equal to credit extended through the Federal Reserve's regular discount window programs as well as credit extended through the TAF. To maintain a level of total reserves consistent with the Federal Open Market Committee's target federal funds rate, increases in borrowed reserves must generally be met by a commensurate decrease in nonborrowed reserves, which is accomplished through a reduction in the Federal Reserve's holdings of securities and other assets. The negative level of nonborrowed reserves is an arithmetic result of the fact that TAF borrowings are larger than total reserves.

 

[Conza88]

Don't waste my time. Please refute these articles. They explain my position. I agree with them entirely, the arguments are sound.

Refute them and you refute me.

Is Fractional Reserve Banking Fraudulent? by Walter Block

What Has Government Done to Our Money? by Murray N. Rothbard

Fractional Reserve Banking by Murray N. Rothbard

See sig. Nuff' said.