” Can someone explain who is paying who here, and who wants to redeem the over-issued notes? “_Gernot Hassenpflug

The fiduciary media are issued to borrowers, who then use it in market transactions. Some of the people in the market who are paid with those fiduciary media then go to the issuing bank to redeem them. More fiduciary media issued, means more of them have the possibility to return to the issuing bank to be redeemed.

Also, suppose I work for a large publicly traded company. If I am worried about a downturn in this
companies fortunes (and thus my job) I buy out-of-the-money put options on my own employer.
Could this not be considered a form of insurance?

An example i gave in the post “The Legitimacy of Loan Maturity Mismatching: Bagus & Howden vs. Barnett & Block”:
http://blog.mises.org/archives/011398.asp#c649390

“A History of Money and Banking in the United States”, Murray N. Rothbard, pp 78-79:

“One effective, if timeconsuming, method of enforcing redemption on nominally specie-paying banks was the emergence of a class of professional
“money brokers.” These brokers would buy up a mass of depreciated notes of nominally specie-paying banks, and then travel to the home office of the bank to demand redemption in specie. Merchants, money brokers, bankers, and the general public were aided in evaluating the various state bank notes by the development of monthly journals known as “bank note detectors.” These “detectors” were published by money brokers
and periodically evaluated the market rate of various bank notes in relation to specie.47
(…)

During the panic of 1819, when banks
collapsed after an inflationary boom lasting until 1817, obstacles and intimidation were often the lot of those who attempted to press the banks to fulfill their contractual obligation to pay inspecie.
(…)
” Yet two days after this seemingly tough action, it passed another law relieving banks of any obligation to redeem notes held by money brokers,
“the major force ensuring the people of this state from the evil arising from the demands made on the banks of this state for gold and silver by brokers.” Pennsylvania followed suit a month later. In this way, these states could claim to maintain the virtue
of enforcing contract and property rights while moving to prevent the most effective method of ensuring such enforcement.”

“Since the over-issuance of fiduciary media on the part of one bank /../ increases the amount to be paid by the expanding bank’s clients to other people, it increases concomitantly the demand for the redemption of its money-substitutes.”

Can someone explain who is paying who here, and who wants to redeem the over-issued notes?

Many thanks,
Gernot Hassenpflug

And this is suppose to be based on some common sense “wisdom” or actual actuarial science?.

Unfortunately, per the Supreme Court corporations are persons.

“Business uncertainty is not insurable.”

Anything is insurable if someone wants to take the bet.

Free banking systems, per se, do not solve the problem. The key is in the structure free banking systems adopt. Mises’ suggestion for a convertible agency, in my view, was wrong. You can still have financial crisis under convertibility. If you disagree, I can provide the example of Argentina in 2001.

Business uncertainty is not insurable. Only risks associated with event probabilities that are subject to the laws of natural science.

The uncertainty of entrepreneurship cannot be classified as what Mises termed “Class probability”, but “Case probability”. Only events that can be categorized under Class probability can be insurable.