Ron Paul: Fractional Reserve Banking

[Conza88]

making sure you knew that!

No, you said I didn't. Then I corrected you!

 

[heavenlyboy34]

nice info, as usual. Thnx, Conza.

 

[Brian Defferding]

Some great quotes there.

 

[Conza88]

No worries guys

 

[Conza88]

 

[newbitech]

 

[Conza88]

Yeah, FRB is fraudulent. Not hard to understand.

 

[newbitech]

Yeah, FRB is fraudulent. Not hard to understand.

Is greek hard to understand?

Wrong CONza88. The way Fractional Reserve Banking is sometimes used is fraudulent.

 

[Conza88]

Is greek hard to understand?

Wrong CONza88. The way Fractional Reserve Banking is sometimes used is fraudulent.

Wrong newbitech. Is English hard to understand?

Able to differentiate between a RULER and a Leader? Hmmm? No? Failed that part in primary school?

What a shame..

 

[newbitech]

Wrong newBITCH. Is English hard to understand?

Able to differentiate between a RULER and a Leader? Hmmm? No? Failed that part in primary school?

What a shame..

So CONza88, did your copy/paste macro stop working when you decided to respond? Looks like you are missing something pretty obvious there in your response. Like the correct spelling of my handle. I know words are tough for you, no matter the language, but trust me, once you master things like letters and stuff, it gets easier.

Giving up on understanding bank fraud so soon? The words leader and ruler are synonyms sorta like the words disorder and anarchy. I am not sure what country you are from but where I am from we don't have "primary" school. We have Elementary School. Sheesh what kind of backwoods grotto did you grow up in? Anyways, sheesh, in that school they teach us things like word association. I am sure you learned in at your "primary" school.

It goes like this anarchy is to without ruler as disorder is to without _____.

Your choices are A, B, C, or D.

A.) Leader

B.) Intellectual Honesty

C.)3. FRACTIONAL RESERVE BANKING
The carte blanche for deposit banks to issue counterfeit warehouse
receipts for gold had many fateful consequences. In the
first place, it meant that any deposit of money could now take its
place in the balance sheet of the bank. For the duration of the
deposit, the gold or silver now became an owned asset of the
bank, with redemption due as a supposed debt, albeit instantly on
demand. Let us assume we now have a Rothbard Deposit Bank. It
opens for business and receives a deposit of $50,000 of gold from
Jones, for which Jones receives a warehouse receipt which he may
redeem on demand at any time. The balance sheet of the Rothbard
Deposit Bank is now as shown in Figure 7.1.
Although the first step has begun on the slippery slope to
fraudulent and deeply inflationary banking, the Rothbard Bank
has not yet committed fraud or generated inflation. Apart from a
general deposit now being considered a debt rather than bailment,
94 The Mystery of Banking
10Michie, Banks and Banking, p. 20. The answer of the distinguished
legal historian Arthur Nussbaum is that the “contrary view” (that a bank
deposit is a bailment not a debt) “would lay an unbearable burden upon
banking business.” No doubt exuberant bank profits from issue of fraudulent
warehouse receipts would come to an end. But grain elevators and
other warehouses, after all, remain in business successfully; why not genuine
safekeeping places for money? Arthur Nussbaum, Money in the Law:
National and International (Brooklyn: Foundation Press, 1950), p. 105.
11The economist, Jevons, in a cry from the heart, lamented the existence
of the general deposit, since it has “become possible to create a fictitious
supply of a commodity, that is, to make people believe that a supply
exists which does not exist . . .” On the other hand, special deposits, such
as “bills of lading, pawn-tickets, dock-warrants, or certificates which establish
ownership to a definite object,” are superior because “they cannot possibly
be issued in excess of the good actually deposited, unless by distinct
fraud.” He concluded wistfully that “it used to be held as a general rule of
law, that a present grant or assignment of goods not in existence is without
operation.” William Stanley Jevons, Money and the Mechanism of Exchange,
15th ed. (London: Kegan Paul, 1905), pp. 206–12, 221.
The Rothbard Deposit Bank
Assets Equity & Liabilities
Gold coin or Warehouse receipts
bullion $50,000 for gold $50,000
Total Assets $50,000 Total Liabilities $50,000
FIGURE 7.1 — A DEPOSIT BANK
nothing exceptionable has happened. Fifty thousand dollars’
worth of gold has simply been deposited in a bank, after which
the warehouse receipts circulate from hand to hand or
from bank to bank as a surrogate for the gold in question. No
fraud has been committed and no inflationary impetus has
occurred, because the Rothbard Bank is still backing all of its
warehouse receipts by gold or cash in its vaults.
The amount of cash kept in the bank’s vaults ready for instant
redemption is called its reserves. Hence, this form of honest, noninflationary
deposit banking is called “100 percent reserve banking,”
because the bank keeps all of its receipts backed fully by
gold or cash. The fraction to be considered is
Reserves
Warehouse Receipts
and in our example the fraction is
$50,000
$50,000
or 100 percent. Note, too, that regardless of how much gold is
deposited in the banks, the total money supply remains precisely
the same so long as each bank observes the 100 percent rule.
Only the form of the money will change, not its total amount or
Deposit Banking 95
its significance. Thus, suppose that the total money supply of a
country is $100,000,000 in gold coin and bullion, of which
$70,000,000 is deposited in banks, the warehouse receipts being
fully backed by gold and used as a substitute for gold in making
monetary exchanges. The total money supply of the country (that
is, money actually used in making exchanges) would be:
$30,000,000 (gold) + $70,000,000 (warehouse receipts for gold)
The total amount of money would remain the same at
$100,000,000; its form would be changed to mainly warehouse
receipts for gold rather than gold itself.
The irresistible temptation now emerges for the goldsmith or
other deposit banker to commit fraud and inflation: to engage, in
short, in fractional reserve banking, where total cash reserves are
lower, by some fraction, than the warehouse receipts outstanding.
It is unlikely that the banker will simply abstract the gold and use
it for his own consumption; there is then no likelihood of ever
getting the money should depositors ask to redeem it, and this act
would run the risk of being considered embezzlement. Instead,
the banker will either lend out the gold, or far more likely, will
issue fake warehouse receipts for gold and lend them out, eventually
getting repaid the principal plus interest. In short, the deposit
banker has suddenly become a loan banker; the difference is that
he is not taking his own savings or borrowing in order to lend to
consumers or investors. Instead he is taking someone else’s
money and lending it out at the same time that the depositor
thinks his money is still available for him to redeem. Or rather,
and even worse, the banker issues fake warehouse receipts and
lends them out as if they were real warehouse receipts represented
by cash. At the same time, the original depositor thinks
that his warehouse receipts are represented by money available at
any time he wishes to cash them in. Here we have the system of
fractional reserve banking, in which more than one warehouse
receipt is backed by the same amount of gold or other cash in the
bank’s vaults.
96 The Mystery of Banking
It should be clear that modern fractional reserve banking is a
shell game, a Ponzi scheme, a fraud in which fake warehouse
receipts are issued and circulate as equivalent to the cash supposedly
represented by the receipts.
Let us see how this works in our T-accounts.
The Rothbard Bank, having had $50,000 of gold coin
deposited in it, now issues $80,000 of fraudulent warehouse
receipts and lends them to Smith, expecting to be repaid the
$80,000 plus interest.
The Rothbard Bank
Assets Equity & Liabilities
Gold coin $50,000 Warehouse receipts
IOU from Smith $80,000 for gold $130,000
Total Assets $130,000 Total Liabilities $130,000
FIGURE 7.2 — FRACTIONAL RESERVE BANKING
The Rothbard Bank has issued $80,000 of fake warehouse
receipts which it lends to Smith, thus increasing the total money
supply from $50,000 to $130,000. The money supply has
increased by the precise amount of the credit—$80,000—
expanded by the fractional reserve bank. One hundred percent
reserve banking has been replaced by fractional reserves, the fraction
being
$50,000
$130,000
or 5/13.
Thus, fractional reserve banking is at one and the same time
fraudulent and inflationary; it generates an increase in the money
supply by issuing fake warehouse receipts for money. Money in
Deposit Banking 97
circulation has increased by the amount of warehouse receipts
issued beyond the supply of gold in the bank.
The form of the money supply in circulation has again shifted,
as in the case of 100 percent reserve banking: A greater proportion
of warehouse receipts to gold is now in circulation. But
something new has now been added: The total amount of money
in circulation has now been increased by the new warehouse
receipts issued. Gold coin in the amount of $50,000 formerly in
circulation has now been replaced by $130,000 of warehouse
receipts. The lower the fraction of the reserve, the greater the
amount of new money issued, pyramiding on top of a given total
of reserves.
Where did the money come from? It came—and this is the
most important single thing to know about modern banking—it
came out of thin air. Commercial banks—that is, fractional reserve
banks—create money out of thin air. Essentially they do it in the
same way as counterfeiters. Counterfeiters, too, create money out
of thin air by printing something masquerading as money or as a
warehouse receipt for money. In this way, they fraudulently extract
resources from the public, from the people who have genuinely
earned their money. In the same way, fractional reserve banks
counterfeit warehouse receipts for money, which then circulate as
equivalent to money among the public. There is one exception to
the equivalence: The law fails to treat the receipts as counterfeit.
Another way of looking at the essential and inherent
unsoundness of fractional reserve banking is to note a crucial rule
of sound financial management—one that is observed everywhere
except in the banking business. Namely, that the time structure of
the firm’s assets should be no longer than the time structure of its
liabilities. In short, suppose that a firm has a note of $1 million
due to creditors next January 1, and $5 million due the following
January 1. If it knows what is good for it, it will arrange to have
assets of the same amount falling due on these dates or a bit earlier.
That is, it will have $1 million coming due to it before or on
January 1, and $5 million by the year following. Its time structure
of assets is no longer, and preferably a bit shorter, than its liabilities
98 The Mystery of Banking
coming due. But deposit banks do not and cannot observe this
rule. On the contrary, its liabilities—its warehouse receipts—are
due instantly, on demand, while its outstanding loans to debtors
are inevitably available only after some time period, short or long
as the case may be. A bank’s assets are always “longer” than its
liabilities, which are instantaneous. Put another way, a bank is
always inherently bankrupt, and would actually become so if its
depositors all woke up to the fact that the money they believe to
be available on demand is actually not there.12
One attempted justification of fractional reserve banking,
often employed by the late Professor Walter E. Spahr, maintains
that the banker operates somewhat like a bridge builder. The
builder of a bridge estimates approximately how many people
will be using it from day to day; he doesn’t attempt the absurd
task of building a bridge big enough to accommodate every resident
of the area should he or she wish to travel on the bridge at
the same time. But if the bridge builder may act on estimates of
the small fraction of citizens who will use the bridge at any one
time, why may not a banker likewise estimate what percentage of
his deposits will be redeemed at any one time, and keep no more
than the required fraction? The problem with this analogy is that
citizens in no sense have a legal claim to be able to cross the
bridge at any given time. But holders of warehouse receipts to
money emphatically do have such a claim, even in modern banking
law, to their own property any time they choose to redeem it.
But the legal claims issued by the bank must then be fraudulent,
since the bank could not possibly meet them all.13
Deposit Banking 99
12Cf. Elgin Groseclose, Money and Man, pp. 178–79.
13See Murray N. Rothbard, The Case for a 100 Percent Gold Dollar
(Washington, D.C.: Libertarian Review Press, November 1974), p. 25.
Mises trenchantly distinguishes between a “credit transaction,” where a
present good is exchanged for a future good (or IOU due in the future), and
a claim transaction, such as a warehouse receipt, where the depositor or
claimant does not give up any of the present good (e.g., wheat, or money).
On the contrary, he retains his claim to the deposited good, since he can
redeem it at any time. As Mises states:
It should be clear that for the purpose of analyzing fractional
reserve banking, it doesn’t make any difference what is considered
money or cash in the society, whether it be gold, tobacco, or
even government fiat paper money. The technique of pyramiding
by the banks remains the same. Thus, suppose that now gold has
been outlawed, and cash or legal tender money consists of dollars
printed by the central government. The process of pyramiding
remains the same, except that the base of the pyramid is paper
dollars instead of gold coin.14
Our Rothbard Bank which receives $50,000 of government
paper money on deposit, then proceeds to pyramid $80,000 on
top of it by issuing fake warehouse receipts.
The Rothbard Bank
Assets Equity & Liabilities
Gold coin $50,000 Warehouse receipts
IOU from Smith $80,000 to cash $130,000
Total Assets $130,000 Total Liabilities $130,000
FIGURE 7.3 — FRACTIONAL RESERVE BANKING (PAPER)
100 The Mystery of Banking
A depositor of a sum of money who acquires in exchange for
it a claim convertible into money at any time which will perform
exactly the same service for him as the sum it refers to
has exchanged no present good for a future good. The claim
that he has acquired by his deposit is also a present good for
him. The depositing of money in no way means that he has
renounced immediate disposal over the utility it commands.
Ludwig von Mises, The Theory of Money and Credit, 2nd ed. (New Haven:
Yale University Press, 1953), p. 268.
14As we shall see later, while the pyramiding process remains the same,
the opportunity for inflating the base is much greater under fiat paper than
with gold.
Just as in the gold case, the total money supply has increased
from $50,000 to $130,000, consisting precisely in the issue of
new warehouse receipts, and in the credit expanded by the fractional
reserve bank.
Just as in the case of outright counterfeiting, the new
money—this time in the form of new warehouse receipts—does
not shower upon everyone alike. The new money is injected at
some particular point in the economic system—in this case, the
Rothbard Bank issues it and it is immediately loaned to Smith—
and the new money then ripples out into the economy. Smith, let
us say, uses the $80,000 of new money to buy more equipment,
the equipment manufacturer buys raw materials and pays more
for labor, and so on. As the new money pours into the system and
ripples outward, demand curves for particular goods or services
are increased along the way, and prices are increased as well. The
more extensive the spread of bank credit, and the more new
money is pumped out, the greater will be its effect in raising
prices. Once again, the early receivers from the new money benefit
at the expense of the late receivers—and still more, of those
who never receive the new money at all. The earliest receivers—
the bank and Smith—benefit most, and, like a hidden tax or tribute,
the late receivers are fraudulently despoiled of their rightful
resources.
Thus, fractional reserve banking, like government fiat paper
or technical counterfeiting, is inflationary, and aids some at the
expense of others. But there are even more problems here.
Because unlike government paper and unlike counterfeiting
(unless the counterfeit is detected), the bank credit is subject to
contraction as well as expansion. In the case of bank credit, what
comes up, can later come down, and generally does. The expansion
of bank credit makes the banks shaky and leaves them open,
in various ways, to a contraction of their credit.
Thus, let us consider the Rothbard Bank again. Suppose that
the loan to Smith of $80,000 was for a two-year period. At the
end of the two years, Smith is supposed to return the $80,000
plus interest. But when Smith pays the $80,000 (forgetting about
Deposit Banking 101
the interest payment to keep things simple), he will very likely pay
in Rothbard Bank warehouse receipts, which are then canceled.
The repayment of the $80,000 loan means that $80,000 in fake
warehouse receipts has been canceled, and the money supply has
now contracted back to the original $50,000. After the repayment,
the balance sheet of the Rothbard Bank will be as follows:
The Rothbard Bank
Assets Equity & Liabilities
Cash $50,000 Warehouse receipts
to cash $50,000
Total Assets $50,000 Total Liabilities $50,000
FIGURE 7.4 — REPAYMENT OF BANK LOANS
We are back to the pre-expansion figures of our original
example (Figure 7.1).
But if the money supply contracts, this means that there is
deflationary pressure on prices, and prices will contract, in a similar
kind of ripple effect as in the preceding expansion. Ordinarily,
of course, the Rothbard Bank, or any other fractional reserve
bank, will not passively sit back and see its loans and credit contract.
Why should it, when the bank makes its money by inflationary
lending? But, the important point is that fractional reserve
banks are sitting ducks, and are always subject to contraction.
When the banks’ state of inherent bankruptcy is discovered, for
example, people will tend to cash in their deposits, and the contractionary,
deflationary pressure could be severe. If banks have to
contract suddenly, they will put pressure on their borrowers, try to
call in or will refuse to renew their loans, and the deflationary
102 The Mystery of Banking
pressure will bring about a recession—the successor to the inflationary
boom.
Note the contrast between fractional reserve banking and the
pure gold coin standard. Under the pure gold standard, there is
virtually no way that the money supply can actually decline, since
gold is a highly durable commodity. Nor will it be likely that government
fiat paper will decline in circulation; the only rare example
would be a budget surplus where the government burned the
paper money returning to it in taxes. But fractional reserve bank
credit expansion is always shaky, for the more extensive its inflationary
creation of new money, the more likely it will be to suffer
contraction and subsequent deflation. We already see here the
outlines of the basic model of the famous and seemingly mysterious
business cycle, which has plagued the Western world since the
middle or late eighteenth century. For every business cycle is
marked, and even ignited, by inflationary expansions of bank
credit. The basic model of the business cycle then becomes evident:
bank credit expansion raises prices and causes a seeming
boom situation, but a boom based on a hidden fraudulent tax on
the late receivers of money. The greater the inflation, the more
the banks will be sitting ducks, and the more likely will there be
a subsequent credit contraction touching off liquidation of credit
and investments, bankruptcies, and deflationary price declines.
This is only a crude outline of the business cycle, but its relevance
to the modern world of the business cycle should already be evident.
Establishing oneself as a fractional reserve bank, however, is
not as easy as it seems, despite the law unfortunately looking the
other way at systemic fraud. For the Rothbard Bank, or any other
bank, to have its warehouse receipts functioning in lieu of gold or
government paper requires a long initial buildup of trust on the
part of the public. The Rothbard Bank must first build up a reputation
over the decades as a bank of safety, probity, and honesty,
and as always ready and able to redeem its liabilities on demand.
This cannot be achieved overnight.
Deposit Banking 103
4. BANK NOTES AND DEPOSITS
Through the centuries, there have been two basic forms of
money warehouse receipts. The first, the most obvious, is the
written receipt, a piece of paper on which the deposit bank promises
to pay to the bearer a certain amount of cash in gold or silver
(or in government paper money). This written form of warehouse
receipt is called the bank note. Thus, in the United States before
the Civil War, hundreds if not thousands of banks issued their
own notes, some in response to gold deposited, others in the
course of extending fractional reserve loans. At any rate, if someone
comes into the possession (either by depositing gold or by
selling a product in exchange) of, say, a $100 note from the Bank
of New Haven, it will function as part of the money supply so
long as people accept the $100 note as a substitute, a surrogate,
for the gold. If someone uses the $100 note of the Bank of New
Haven to buy a product sold by another person who is a customer
of the Bank of Hartford, the latter will go to his bank and
exchange the $100 New Haven note for a similar note from the
Bank of Hartford.
The bank note has always been the basic form of warehouse
receipt used by the mass of the public. Later, however, there
emerged another form of warehouse receipt used by large merchants
and other sophisticated depositors. Instead of a tangible
receipt, the bank simply opened a deposit account on its books.
Thus, if Jones deposited $10,000 in a bank, he received, if he
wished, not tangible bank notes, but an open book account or
deposit account for $10,000 on the bank’s books. The bank’s
demand debt to Jones was not in the form of a piece of paper but
of an intangible book account which could be redeemed at any
time in cash. Confusingly, these open book accounts came to be
called demand deposits, even though the tangible bank note was
just as much a demand deposit from an economic or a legal point
of view. When used in exchange, instead of being transferred
physically as in the case of a bank note, the depositor, Jones,
would write out an order, directing the bank to transfer his book
104 The Mystery of Banking
account to, say, Brown. Thus, suppose that Jones has a deposit
account of $10,000 at the Rothbard Bank.
Suppose now that Jones buys a hi-fi set from Brown for
$3,000. Jones writes out an order to the bank, directing it to
transfer $3,000 from his open book account to that of Brown.
The order will appear somewhat as follows:
Rothbard Bank
Pay to the order of John Brown $3,000
Three thousand and 00/000
(signed)
Robert Jones
This written instrument is, of course, called a check. Note that
the check itself is not functioning as a money surrogate here. The
check is simply a written order transferring the demand deposit
from one person to another. The demand deposit, not the check,
functions as money, for the former is a warehouse receipt (albeit
unwritten) for money or cash.
The Rothbard Bank’s balance sheet is now as follows:
The Rothbard Bank
Assets Equity & Liabilities
Gold $10,000 Demand deposits
to Jones $7,000
to Brown $3,000
Total Assets $10,000 Total Liabilities $10,000
FIGURE 7.5 — TRANSFERRING DEMAND DEPOSITS
Note that from this purchase of a hi-fi set, nothing has changed in
the total money supply in the country. The bank was and still is
pursuing a 100 percent reserve policy; all of its demand liabilities
Deposit Banking 105
are still covered or backed 100 percent by cash in its vaults. There
is no fraud and no inflation.
Economically, then, the demand deposit and the tangible bank
note are simply different technological forms of the same thing: a
demand receipt for cash at the money warehouse. Their economic
consequences are the same and there is no reason for the legal system
to treat them differently. Each form will tend to have its own
technological advantages and disadvantages on the market. The
bank note is simpler and more tangible, and doesn’t require quite
the same degree of sophistication or trust by the holders of the
receipt. It also involves less work for the bank, since it doesn’t
have to change the names on its books; all it needs to know is that
a certain quantity of bank notes is out in circulation. If Jones buys
a hi-fi set from Brown, the bank note changes hands without anyone
having to report the change at the bank, since the bank is
liable to the note-holder in any case. For small transactions—purchase
of a newspaper or ham sandwich—it is difficult to visualize
having to write out a check in payment. On the other hand,
demand deposits have the advantage of allowing one to write out
checks for exact amounts. If, for example, the hi-fi set costs some
nonrounded amount, such as $3,168.57, it may well be easier to
simply write out the check than trying to find notes and coins for
the exact amount—since notes will generally be in fixed denominations
($1, $5, $10, etc.).15 Also, it will often be more convenient
to use demand deposits for large transactions, when amassing
cash can be cumbersome and inconvenient. Moreover, there
is far greater danger of loss from theft or accident when carrying
cash than when having a certain known amount on a bank’s
books.
106 The Mystery of Banking
15Bank notes, however, were made more flexible in seventeenth-century
England by the banks allowing part payment of a note, with the payment
deducted from the original face value of the note. Holden, Negotiable
Instruments, p. 91n.
All of these factors will tend, on the free market, to limit the
use of bank deposits to large users and for large transactions.16 As
late as World War I, the general public in the Western world rarely
used bank deposits. Most transactions were effected in cash, and
workers received cash rather than bank checks for wages and
salaries. It was only after World War II, under the impetus of
decades of special support and privilege by government, that
checking accounts became nearly universal.
A bank can issue fraudulent and inflationary warehouse
receipts just as easily in the form of open book deposits as it can
in bank notes. To return to our earlier example, the Rothbard
Bank, instead of printing fraudulent, uncovered bank notes worth
$80,000 and lending them to Smith, can simply open up a new or
larger book account for Smith, and credit him with $80,000,
thereby, at the stroke of a pen and as if by magic, increasing the
money supply in the country by $80,000.
In the real world, as fractional reserve banking was allowed to
develop, the rigid separation between deposit banking and loan
banking was no longer maintained in what came to be known as
commercial banks.17 The bank accepted deposits, loaned out its
Deposit Banking 107
16 . . . banking in general only became important with the
development of the issue of notes. People would deposit coin
and bullion with a bank more readily when they received
something in exchange such as a banknote, originally in the
form of a mere receipt, which could be passed from hand-tohand.
And it was only after the bankers had won the public
over to confidence in the banks by circulating their notes, that
the public was persuaded to leave large sums on deposit on
the security of a mere book-entry.
Vera C. Smith, The Rationale of Central Banking (London: P.S. King &
Son, 1936), p. 6.
17The later institution of the “investment bank,” in contrast, lends out
saved or borrowed funds, generally in the underwriting of industrial or government
securities. In contrast to the commercial bank, whose deposit liabilities
exchange as equivalent to money and hence add to the money supply,
the liabilities of the investment bank are simply debts which are not
“monetized” by being a demand claim on money.
equity and the money it borrowed, and also created notes or
deposits out of thin air which it loaned out to its own borrowers.
On the balance sheet, all these items and activities were jumbled
together. Part of a bank’s activity was the legitimate and productive
lending of saved or borrowed funds; but most of it was the
fraudulent and inflationary creation of a fraudulent warehouse
receipt, and hence a money surrogate out of thin air, to be loaned
out at interest.
Let us take a hypothetical mixed bank, and see how its balance
sheet might look, so that we can analyze the various items.
Jones Bank
Assets Equity & Liabilities
IOUs from Demand Liabilities:
borrowers $1,700,000 Notes $1,000,000
Cash $300,000 Deposits $800,000
Total $1,800,000
Equity $200,000
Total Assets $2,000,000 Total Liabilities $2,000,000
FIGURE 7.6 — MIXED LOAN AND DEPOSIT BANK
Our hypothetical Jones Bank has a stockholders’ equity of
$200,000, warehouse receipts of $1.8 million distributed as $1
million of bank notes and $800,000 of demand deposits, cash in
the vault of $300,000, and IOUs outstanding from borrowers of
$1.7 million. Total assets, and total equity and liabilities, each
equal $2 million.
We are now equipped to analyze the balance sheet of the bank
from the point of view of economic and monetary importance.
The crucial point is that the Jones Bank has demand liabilities,
instantly payable on presentation of the note or deposit, totaling
108 The Mystery of Banking
$1.8 million, whereas cash in the vault ready to meet these obligations

1. The text that you have entered is too long (31996 characters). Please shorten it to 30000 characters long.

D.)

 

[Conza88]

So CONza88, did your copy/paste macro stop working when you decided to respond? Looks like you are missing something pretty obvious there in your response. Like the correct spelling of my handle. I know words are tough for you, no matter the language, but trust me, once you master things like letters and stuff, it gets easier.

Just like your caps seem to have malfunctioned. Stow it newbitch, it was just a typo.

Giving up on understanding bank fraud so soon? The words leader and ruler are synonyms sorta like the words disorder and anarchy. I am not sure what country you are from but where I am from we don't have "primary" school. We have Elementary School. Sheesh what kind of backwoods grotto did you grow up in? Anyways, sheesh, in that school they teach us things like word association. I am sure you learned in at your "primary" school.

I understand it... unfortunately you don't. Ron Paul understands it... and you obviously - don't.

It goes like this anarchy is to without ruler as disorder is to without _____.

Your choices are A, B, C, or D.
A.) Leader
B.) Intellectual Honesty
C.)3. FRACTIONAL RESERVE BANKING
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D.)

So this is how you logically reason? Word association games? Or whatever the hell you call this crap... Hahaha... !!

A RULER governs (dictator etc.), a leader guides (businessman / sports captain etc.)

One is based on voluntary consent and not violating the non aggression axiom (principle) and the other is in violation of both.

In non-archy - there would be no RULER (Dictator, state, parasitic class, a monopoly on the use of violence over a given territory, police state, genocide, death camps, no tyranny)

In non-archy, there would be law. Natural law. There would be private courts, PDA's, arbitration agencies.. just as there have over the centuries. There would be leaders of all kinds.. businessmen, entrepreneurs of industry etc.

What do you object to, with the non aggression axiom and private property rights?​

Ok, my turn...

It goes like this: State control leads to disaster, as government planning leads to ______.

Here's a hint:

Ron Paul: "Government planning leads to chaos"- Mises and Austrian Economics: A personal view ​

Stow your bs clown. I agree with Ron Paul... you can go and agree with the other socialists / statist fools.

 

[newbitech]

Just like your caps seem to have malfunctioned. Stow it newbitch, it was just a typo.



I understand it... unfortunately you don't. Ron Paul understands it... and you obviously - don't.



So this is how you logically reason? Word association games? Or whatever the hell you call this crap... Hahaha... !!

A RULER governs (dictator etc.), a leader guides (businessman / sports captain etc.)

One is based on voluntary consent and not violating the non aggression axiom (principle) and the other is in violation of both.

In non-archy - there would be no RULER (Dictator, state, parasitic class, a monopoly on the use of violence over a given territory, police state, genocide, death camps, no tyranny)

In non-archy, there would be law. Natural law. There would be private courts, PDA's, arbitration agencies.. just as there have over the centuries. There would be leaders of all kinds.. businessmen, entrepreneurs of industry etc.

What do you object to, with the non aggression axiom and private property rights?​

Ok, my turn...

It goes like this: State control leads to disaster, as government planning leads to ______.

Here's a hint:

Ron Paul: "Government planning leads to chaos"- Mises and Austrian Economics: A personal view ​

Stow your bs clown. I agree with Ron Paul... you can go and agree with the other socialists / statist fools.

A leader also governs and dictates. And a ruler also guides and directs. Why are you trying so hard to redefine anarchy to the point where you make up terms like non-archy? You use circular arguments ad nauseam. Your logical fallacy of proof by assertion is really boring the shit out of me now, and quite frankly until you can learn to accept definitions of basic words into your pseudo understanding of philosophy, I am forced to treat you like a ranting child and punish you or ignore you. Since I can't punish you, that leaves me only one option.

Now if you would like to ignore the above sentiment and continue an adult discussion, I will give you one more chance, one more, to escape your flawed logic and admit your errant understanding and application of Rothbard's proposed solutions. I do not object to non aggression principle. I object to anarchist falsely claiming that anarchy is a maintainable system to organize more than 100 million people (that is being generous btw), give or take a few 10 million. I also object to an anarchist claiming his ideal society to be a society that would foster within the individual a non aggression axiom. If your idea is something other than what is defined as anarchy, then it would be much easier to reject the term rather than try to redefine it. If you can get past that step, you will have more success in conversing with me and others that you may seek to impart your "wisdom" upon.

And since anarchy by definition IS chaos then you should be loving that government planning. Its one thing to agree with Ron Paul's predictions, its something entirely different to agree with his solutions. Let us be clear, you do not agree with Ron Paul because fundamentally you are an anarchist and Ron Paul is a Constitutionalists.

Are you an American citizen?

 

[nayjevin]

Ron Paul is god, nothing he says is objectionable. (according to what I learned from Conza88)

flamebaiter doesn't help forum

 

[Conza88]

A leader also governs and dictates. And a ruler also guides and directs. Why are you trying so hard to redefine anarchy to the point where you make up terms like non-archy?

A RULER uses coercion. A LEADER does NOT. Your sheer inability to understand this is fcken retarded.

You use circular arguments ad nauseam. Your logical fallacy of proof by assertion is really boring the shit out of me now, and quite frankly until you can learn to accept definitions of basic words into your pseudo understanding of philosophy, I am forced to treat you like a ranting child and punish you or ignore you. Since I can't punish you, that leaves me only one option.

Your inability to understand the most basic of differentiations is unbelievably sad.

Now if you would like to ignore the above sentiment and continue an adult discussion, I will give you one more chance, one more, to escape your flawed logic and admit your errant understanding and application of Rothbard's proposed solutions.

What flawed logic? OHHH you mean your flawed comprehension skills... ohh ok.

I do not object to non aggression principle. I object to anarchist falsely claiming that anarchy is a maintainable system to organize more than 100 million people (that is being generous btw), give or take a few 10 million. I also object to an anarchist claiming his ideal society to be a society that would foster within the individual a non aggression axiom. If your idea is something other than what is defined as anarchy, then it would be much easier to reject the term rather than try to redefine it. If you can get past that step, you will have more success in conversing with me and others that you may seek to impart your "wisdom" upon.

I'm not an anarchist... I'm a non-archist / anarcho-capitalist / anti-monopolist / voluntaryist...

Anarcho-capitalism is not a "system", that is an inherently statist notion. Why are you imposing numbers on the markets ability? Why are you saying the market cannot work for 100 million people?

And since anarchy by definition IS chaos then you should be loving that government planning. Its one thing to agree with Ron Paul's predictions, its something entirely different to agree with his solutions. Let us be clear, you do not agree with Ron Paul because fundamentally you are an anarchist and Ron Paul is a Constitutionalists.

Are you an American citizen?

Strawmanning again... I am not an anarchist, I'm a non-archist / anarcho-capitalist / anti-monopolist / voluntaryist...

I agree with all Ron Paul solutions, because I follow the Austrian School of Economics... just like Ron Paul does. I follow Lew Rockwell and Thomas Woods... they spoke at the RALLY FOR THE REPUBLIC...

I follow Rothbard who Ron Paul gives massive props to... and I follow Ron Paul who Rothbard gave massive props too...

 

[Conza88]

It goes like this: State control leads to disaster, as government planning leads to ______.

Here's a hint:

Ron Paul: "Government planning leads to chaos"- Mises and Austrian Economics: A personal view ​

*Cough*

 

[tmosley]

Wrong newBITCH. Is English hard to understand?

Able to differentiate between a RULER and a Leader? Hmmm? No? Failed that part in primary school?

What a shame..

Me insult anyone who disagree with me. Me lie and say people don't have argument when they do, even if me no recognize it as valid.

Me go hit squirrel with stick now. Him make me angry, try to steal me nuts.

 

[Brian4Liberty]

Your nihilism is retarded.

Good quotes from Ron Paul.

Please explain your use of the word "nihilism".

 

[Optatron]

And since anarchy by definition IS chaos then you should be loving that government planning. Its one thing to agree with Ron Paul's predictions, its something entirely different to agree with his solutions. Let us be clear, you do not agree with Ron Paul because fundamentally you are an anarchist and Ron Paul is a Constitutionalists.

Are you an American citizen?

Ron Paul is a politician, which means he believes in government, and participates in it, I don't care if he "ideally" wishes there was none. Conza is the guy who spits on anybody who defends the State, the government or anybody who's not as anarchist as he is, then he turns around and asks us why we support Ron Paul (and then says he likes to keep his name private so he can one day infiltrate the state he hates).

 

[Optatron]

Good quotes from Ron Paul.

Please explain your use of the word "nihilism".

Nihilism is somebody who believes in less rules than Conza88, because he believes in the bare minimum, and anybody who believes in more is a Statist who hates freedom, anybody who believes in less is a retarded nihilist.

Nihilist, libertinist, anarchist are the words he fears and hates, because he hates anybody who believes in freedom more than he does. He wants to force his idea of freedom on others who disagree with him.

 

[Optatron]

Me insult anyone who disagree with me. Me lie and say people don't have argument when they do, even if me no recognize it as valid.

Me go hit squirrel with stick now. Him make me angry, try to steal me nuts.

you can't steal what doesn't exist