Comments on: Rothbardian Antibank League on the Rise

By: Potpourri

Potpourri — Tue, 16 Mar 2010 03:57:51 +0000

[...] This blew me away: Joe Salerno discusses Murray Rothbard’s call for anti-statists to pull their money out of the commercial banking [...]

By: Gerry Flaychy

Gerry Flaychy — Sun, 07 Mar 2010 03:01:48 +0000

In a bank run, it is not only the banker which is a loser.

By: Gerry Flaychy

Gerry Flaychy — Sun, 07 Mar 2010 02:43:39 +0000

“Murray Rothbard never tired of pointing out that in a free society plain citizens could bring inflationary fractional reserve banks to heel through a deliberate and concerted campaign to get people to withdraw their deposits in cash.”

Yes, good for the first 10% withdrawals if the ratio is 10%, but what about the depositors who want to redeem the remaining 90% which is not there ?
Will they be bring to heel too ?

Read more: Rothbardian Antibank League on the Rise — Mises Economics Blog http://blog.mises.org/?p=11773&cpage=1#comment-677317#ixzz0hSDvimMF

By: Jule Herbert

Jule Herbert — Fri, 05 Mar 2010 21:30:43 +0000

Ryan’s description sounds like some sort of “reverse-Ponzi” scheme — where it is the creditor, not the debtor, who creates the conditions which end in the unraveling of the scam. Can any of you macro-types comment on his analysis? — That FRB creates a system which necessarily fails in a way which is different from what is described in Austrian trade cycle theory.

By: Ryan

Ryan — Thu, 04 Mar 2010 15:54:21 +0000

FRB is powerful because it puts the bank in a position where it not only can pick and choose who receives new money, that is, new claims on production of resources, but that the choice of recipient is a transfer of purchasing power from all other recipients, strengthening the recipient while weakening all others. No wonder the king always wants a captive fractional-reserve bank.

FRB is also a Ponzi scheme. From the very first interest charge on the very first loan, there is not enough money in circulation to pay off the loan balance unless the recipient of the loan gains access to the bank’s reserves (i.e. by doing business with another bank customer). If compound interest on outstanding loans outstrips the bank reserves that can be reallocated in this way to meet interest payments, the total outstanding debt becomes impossible to pay back.

Also, when FRB debtors default, the total money supply permanently increases because of the debt that is not paid back.

It is more appropriately called inflationary banking for all of these reasons, which do not even address the central bank and its inflationary bailouts.

By: Marek K Nowak

Marek K Nowak — Thu, 04 Mar 2010 11:41:39 +0000

@ Sebaneau

You should read ‘Money, Bank Credit and Economic Cycles’ by de Soto, you’ll change your mind on fractional reserve banking.

It’s legally inconsistent, and economically destructive – no matter if there’s no state intervention, it causes dis-coordinations in temporal capital good allocation, and leads to malinvestment and crises.

By: Beefcake the Mighty

Beefcake the Mighty — Wed, 03 Mar 2010 17:07:06 +0000

WHOA

By: (8?»

(8?» — Wed, 03 Mar 2010 16:36:06 +0000

Wait a minute, are you trying to imply that people actually save dollars?

What a totally asinine concept!

By: Vanmind

Vanmind — Wed, 03 Mar 2010 10:05:25 +0000

Yeah, it isn’t as if anti-bank leagues would bankrupt a bank that advertised itself as holding, say, 90% reserves. Marginal something or other would trend constantly toward some ever-elusive equilibrium thingy.

By: Sebaneau

Sebaneau — Wed, 03 Mar 2010 05:47:57 +0000

Murray was wrong on fractional banking : it is neither fraudulent nor destabilizing, and what causes inflation is government interference.
He was just illustrating his own “Rothbard’s law” that economists believe themselves to be best on the subject where they are worst.
And of course the monopolists can print as many dollar bills as they please.

By: David C

David C — Wed, 03 Mar 2010 04:32:27 +0000

I think the problem is, most people in the know already wisely minimise their bank holdings

By: G

Wed, 03 Mar 2010 03:20:54 +0000

There isn’t a law against this… yet.

By: Gerry Flaychy

Gerry Flaychy — Wed, 03 Mar 2010 02:18:24 +0000

"Thus the banking system would not be able to withstand a concerted campaign to withdraw cash..."_Joseph Salerno

I don't think so. Too much checks, debit cards, credit cards, electronic transfers. People are too much used to it. Plus, no good for big amounts, and there is a lot of it !