Murray N. Rothbard is probably my favorite philosopher and economist -- I have adopted wholesale his natural rights/deontological libertarianism, and his application of this ideology to war and punishment theory. I have fallen in love with the writing of his favorite author, H.L. Mencken. Even on those issues I disagree with Rothbard on -- such as abortion, immigration, and children's rights -- I have to admit that he makes extremely strong cases.
But in my opinion, MNR's view on Fractional Reserve Banking is uncharacterically poorly thought out. While I certainly join him in calling for the abolition of that monster we call the Federal Reserve, Rothbard believed that Fractional Reserve Banking was inherently illicit and would be outlawed in the free society. He argued that since a bank in such a system does not actually have all the money it is storing and lending out, it is engaging in "fraud."
It certainly is criminal for the state to outlaw any competition with the money its Federal Reserve controls the supply of. Because we must accept the Fed and Fractional Reserve Banking, this enables them to do all sorts of evil things, to include the ability to create endless money to fund wars, pay back debts, and print their own budget. Surely, a "gold standard" or some sort of Full Reserve Banking, would be far preferable to Fractional Reserve Banking. This would at least limit the amount of money they could produce.
But a government gold standard would also be coercive, as we'd still be forced to take their commodity-backed money. Clearly then, the proper solution is to abolish government control of the money supply altogether. Embracing the sort of free market banking system Rothbard (as well as Milton Friedman and FA Hayek) favored would include competing currencies and competition between Fractional Reserve Banking and Full Reserve Banking.
So long as FractionalRB's did not misrepresent themselves to be FullRB's, it would clearly not be fraudulent to invest in them. Consumers investing in the bank would (or should) know that there was always a risk of a bank run and that their money would not be saved in the bank. If a consumer is willing to gamble his money under this circumstance, why in the world should he be stopped from doing so in a free society?
The Federal Reserve is criminal because it forces its currency on us by the barrel of a gun. There are so many great moral and economic arguments against this creature, so there is no need for us to use such flimsy ones. I believe the Rothbardian view on Fractional Reserve Banking, which many folks in the libertarian movement seem to have adopted, is simply false, and that promoting it unnecessarily undermines the "End the Fed" movement.
abortion, and children's rights
You do not agree with Rothbard's ideas on these three subjects, I suspect, because:
1 You are a male and not a female. If you were a female, you would never put up with the idea of someone, the state, controlling your body and turning you into property by force.
2 Children's rights. You have no children of your own, and therefore cannot yet understand the true nature of the threat that the state poses to your family. You do not understand Home Schooling and the problems the families that practice it face because the state claims property rights over children. You do not understand the implications of the state claiming property rights on your children when they mandate that you vaccinate your children against your wishes... etc etc.
In other words, when you become an adult, and create a family of your own, you will understand these issues. The 'children's rights' issue firstly (if there are no complications with pregnancy and labour. If there are, then you will experience the state taking ownership of your wife and your unborn child, should you disobey 'your' doctor's orders. Heaven help you if you want a home birth, which is illegal in many states), then the right of women to control their own bodies, as your wife and your daughters lose the property right in themselvs to the state.
'Children's rights' are nothing more than a scam and pretext to allow the state to claim and exercise property rights over your children. The same with the fallacious 'rights of the unborn child', which have been concocted solely to make women into slaves in a way that no man would ever accept.
If you do not accept these ideas as Rothbard has laid them out, then you are for violence against women and state ownership of all children by default.
Rothbard made me realize that clearly a woman has a right to expel the parasitic baby. After all, merely consenting to sex is not contractual approval for another human to live in her body.
However, I think Rothbard here ignores his own rules of punishment and proportionality--which I favor. The baby's offense is not proportionate to the death penalty. Should the health of the mother not be at risk, I view abortion as the same thing as a woman stranded in the middle of the ocean throwing into the water to drown a stranded baby from a lifeboat that she has a property right to, and he has none.(and say, will 'reach land,' 9 months later) Would you not consider this to be murder?
The baby, in both cases, is an unjustified "invader," but his offense does not merit the de facto death penalty. Just like the "lifeboat," situation, there is no way to peacefully expel the baby from the woman's body, so abortion much be deemed illicit.
Your comment must be viewed in the context of whether the unborn child is viable. Viability is a dividing line between life and no life. To illustrate, imagine a pregnant woman dying. If the embryo is not viable, it will die also. If viable, then it can be taken and assisted to live on. It is the only rational way to balance the two conflicting "rights." However, I would still leave it up to the woman to decide as she is the one who must live with the decision for the remainder of her days.
I'm surprised to see fractional reserve banking defended here. Rothbard is an Austrian, and Austrian economists condemn fractional reserve banking by definition. And it is fraudulent: I give you my money for safekeeping (in the checking account situation), with the understanding that it will be available for withdrawal at any time. You turn around and loan it to someone for profit. It appears to work out OK for a while, but ultimately bank failure under this system is almost inevitable, and my money is lost.
But wait, there's more! If I have money in my checking account, and your borrower has the same money in his, money is created from nothing, and that expansion of the money supply is just as inflationary as if the Fed had done it. Keep in mind, central banks throughout history have been formed specifically to allow the government to take direct advantage of the fraudulent and irresistably profitable practice of fractional reserve banking. It gives the government an inexhaustible supply of money, created by devaluing everyone else's money, which is unfortunately more politically expedient than taxation.
I agree. Let fractional reserve banks compete against full reserve banks. Let's see which system of banking the consumer's choose to place their money in. Fractional reserve banking, if not controlled by a central bank, would be fine as long as customers/investors knew they were investing in a FRB. A lot of economist (including Austrians) have mentioned FRBs foster economic investment. As long as a consumer has a choice between the two systems, I wouldn't see this as a problem. If someone wishes to take the risk of investing in an FRB in a free market environment that is their choice. I think there would be a demand for FRBs and they would serve a purpose in new risky investments. However, I do not think in a free market(absence of a state/central bank) that FRBs would gain some sort of monopolistic control over the banking system. Without 100% backing of reserves, the banks would service investors who were willing to take on extra risks to invest in new economic development. I will have to think about this one more. Good article.
On the abortion issue, I have to disagree with you. Claiming that the baby has a right to live inside the mother denies the mother's right to self ownership. She would be forced against her will (by courts, police, arbitration etc.) to raise the baby. This denies her the right to self ownership. No man has any right to compel another to do "positive" acts.
As I said, it is clear that the baby is a "parasite," the moment the mother no longer wants it. But the mother's absolute right to her person and property does not give her the right to use excessive force in defense of it. Thus, provided the pregnancy is not threatening her life, "aborting," it would be an illicit act of aggression.
Though all people have an absolute right to their person and property, this doesn't mean that laws of proportionality binding the force they may use in defense of it can be ignored. If a shoe thief has run away with your new K-Swiss, you don't have the right to blow their brains out to retrieve them, even if they will otherwise escape.
1. If we were to go to full reserve banking, where would the money come from and who would determine how much money there will be? Right now, the Fed creates money out of thin air based on the needs of the Treasury which is based on Congressional spending.
2. Also, how would you, me or GE be able to borrow money in a Full RB system? From where would that money come since the banks would be required to keep 100% of your money in your account?
3. How would the banks in a Full RB system earn money to pay costs? I assume there would be fees associated with your account.
1. The supply of money would be determined by the market. If golg is the general means of exchange the supply of money would be based on the supply of gold mined.
2. The money would come from investment. You could contract out with the bank that you will loan them say $1000 if paid say 5% interest. The bank then takes your $1000 and loan it to say GE and charges them 8% interest, thus making 3% profit. (This is the point the author of this artcile forgets. As long as the depositer is aware of the situation there is no problem. You can still get rid of FRB and have banks loaning money).
3. They could earn money in the way I stated above, or if an individual did not want to have his/her money loaned out, the bank would charge that individual a fee for storing their money in their bank (a fee for protection of the money). This is a just system of banking and one compatible with a free society.
I'm no expert on the subject and my intelligence on the matter is very limited so excuse me if this is a stupid question, but how exactly would a full reserve bank stay in business? The only way a bank makes money and stays in business is by making loans out and the only way a bank can make loans is by operating using fractional reserves. Therefore wouldn't a full reserve bank be doomed from the start? The only other way a bank could operate would be to charge a fee on people placing money within the bank, which would mean ultimately you would lose money by placing it within a full reserve bank. Please, someone help me with this.
Yeah, a full reserve bank would typically charge a minimal fee for storage/debit card services. The more cautious types (myself included) would be willing to pay this for the security offered. Though this is pure hypothesis, I suspect in practice many such banks would offer free banking for those with deposits below a certain sum, thus attracting a large clientele while still making money off big depositors.
Matt, have you read The Case Against the Fed by Murray Rothbard? I have, but please refresh me, I do not think he said fractional reserve banking should be outlawed.
I might be wrong... That is why I am asking you. I just don't think he ever said that. He might have been referring to the laws that have been passed that enable fractional reserve banking to exist.
I enjoyed your article!
Rothbard clearly argues that it is illegitimate here: http://www.lewrockwell.com/rothbard/frb.html
Also see Jeff Hummel and Bryan Caplan:
http://econlog.econlib.org/archives/2008/08/are_central_ban_2.html
Austrian Economist Bob Murphy is with me on this one: (see 2nd comment)
http://www.gene-callahan.org/blog/2008/07/mises-university-2008.html
It seems clear to me that a free society would allow FRB. I think the market would not favor FRB, but if an individual wanted to deposit money in a bank which would loan part of his money out and spend money it didn't even had, why would this be contrary to a free society? In a free society, only those individuals and institutions freely choosing to do business with a bank engaging in FRB would be subject to their risks, but these individuals would have to live by these consequences. The FRB itself would only be subject to legal sanction if it were dishonest about the nature of its borrowing and lending policies.
@Rocco, it is without a doubt a criminal action for the state to force us to buy into a system of FRB, but if an individual voluntarily agrees to loan his money to an entity openly engaged in the practice, he is responsible for the risks he takes. He may make more money or may lose it all, but it is not "fraud," for him to freely chose to do it.
Also, there is no "Austrian" view on whether FRB should be legal or not. Austrian Economics is a science, not a political platform. Methodological individualism leads to a pro-market conclusion, but this is a purely consequentialist analysis bereft of Rothbard's natural rights libertarian philosophy to which most modern Austrians associated with the LVMI are sympathetic to.(Mises, for example, was a utilitarian who at one point advocated conscription)
I am criticizing Rothbard for a normative position he took on FRB, which he (imo, erroneously) believed to be a fraud. This has nothing to do with the economic consequences of fractional reserve banking nor the economic and moral disaster of the Federal Reserve.
As far as FRBs are concerned, I believe that it would not be necessary for them to be outlawed in a free market. Because of strong banking competition, the banks that take too much of a risk will simply fail. End of story.
On the issue of abortion rights, I disagree with the standard Libertarian answer to the issue. I believe that all people have the right to life, liberty, and the pursuit of happiness. However, I believe that no one's right to liberty or the pursuit of happiness gives them the right to deny someone else's right to life. The government exists for two purposes only, protect life and liberty. In order to protect liberty, you have to protect life. Liberty without life is meaningless.
Of course, in this day and age, our government is far too oppressive to be trusted with protecting anything. I don't think this vision is really possible till we cut government down to the bare bones.
I believe that all people have the right to life, liberty, and the pursuit of happiness. However, I believe that no one's right to liberty or the pursuit of happiness gives them the right to deny someone else's right to life. The government exists for two purposes only, protect life and liberty. In order to protect liberty, you have to protect life. Liberty without life is meaningless.
Once again, this is an opinion from a male, and its interesting that there is no mention of the rights of the mother as a full human being in the anti abortionists stance. The correct wording here would be,
Not so pretty now is it?
Look at it in action: http://tinyurl.com/ygot9ld
If we are going to discuss this completely, then we have to discuss it from the point of view of a woman, and then put ourselvs in her position when the state makes her property. No man would ever put up with such treatment, and the only reason why some libertarians fail to take the correct position on this is probably due to the residual momentum from the time when women were second class citizens, combined with the people saying these things being men (first class citizens).
A baby in its mother's womb is as Rothbard describes; a parasite invader. She has the right to expel it. This is an absolute right. Anything less is slavery.
Asking for the state to protect these parasites from their owners is the same as collectives asking the state to steal money by proxy to finance something. The choice to terminate a pregnancy is the absolute right of the mother. The consequences of this choice are borne by the mother alone, and no one has the right to impose their own religious beliefs or moral opinions on another person. Impositions of this type are pure and simple violence; a violation of the non aggression axiom.
Liberty is indivisible. You cannot pick and choose which parts of it you like and throw away the rest, leaving the state to do violence on your behalf as a balm for your conscience.
While I'm at it, Fractional Reserve Banking; if we live in a free space where people can put their money where they choose, that means all forms of gambling and Ponzi Schemes are legal by default. As long as a Fractional Reserve Bank calls itself what it is, a Ponzi Scheme, then it should be legal, since it is nothing more than an entity that enters into contracts with individuals. If they know they are gambling and not just storing money for a fee, then it is not a problem. It is the fraud and counterfeiting of FRB that is immoral. If you are stupid enough to exchange your real money for Federal Reserve Notes or any fraudulent money, then you alone bear the responsibility and the losses, and you cannot complain as long as you knew the nature of what you were getting into in the first place.
In a Libertarian space, the word 'Bank' would be a reserved word for businesses that operate under a very narrow set of rules, so that fraud of the FRB kind is really not possible.
I entirely agree. Which is why, if one believes (as I do), that the unborn baby is a person entitled to life and liberty just as much as any other person, that abortion is unconscionable. If that is the case, then you cannot pick and choose which person gets life and liberty (the mother) and and throw away the rest (the child). That leave the state to do violence against the child by not protecting its rights -- which sounds to me like a balm for the conscience of the mother uninterested in giving birth. (Of course, it would certainly -- as Matt has argued -- be violence against the mother to expect her to raise an unwanted child once born. As he explained in the boat and drowning person analogy, the obligation is only to bring the person to shore/have the baby.)
On the other hand, if the baby is not a person entitled to life and liberty, then yeah, everything you've said is completely right and making abortion illegal would grossly violate women's rights.
This is not the place to go into detailed arguments about whether or not the unborn are people; I am simply pointing out that depending on the crucial answer to that question, it is possible to be consistently and completely libertarian while taking either a pro-life or pro-choice stance.
I myself am pro-life...and a woman, just for the record :)
That leave the state to do violence against the child by not protecting its rights -- which sounds to me like a balm for the conscience of the mother uninterested in giving birth.
This is bad reasoning. Violence is an act, not the absence of an act. The state cannot do violence against a child by not protecting it.
If you are a woman and you are 'pro life' then it is your absolute right to bring your pregnancies to term as you see fit, no matter how you got pregnant or what the disposition of your foetus is. You do not however, have the right to use the state as a tool of violence to force your will upon other women.
Lets think about the consequences of this idea that the state must protect the foetus.
If the feotus is to be protected by the state, that means that the state must take active measures to know who is pregnant; after all, how can they protect the foetus without knowing who is concealing one in their abdomen?
That means all women need to be compulsorily registered on a government database as soon as they become pregnant so that the state can protect 'their' unborn children. Their daily intake of food must be monitored so that any poisoning of the foetus can be prevented. Everything that the woman carrying a foetus buys should be subject to surveillance, so that for example, the buying of wine and cigarettes can be detected and the woman arrested for the crime of 'foetus poisoning'. Travelling by air while pregnant would of course, be a crime. Any infraction of these laws would result in the mother being imprisoned until the foetus came to term and was born.
Another consequence of this line of reasoning means that women should be monitored after they give birth to make sure that they are feeding the property of the state ('their' baby) correctly; wether the mother is good or bad is irrelevant - the state has a duty to ensure all infants are safe and well and the mother's rights are secondary from the moment of conception. Circumcision or not of males would be enforced at the command of the state, based on the latest scientific research.
All women are guilty of the crime of child abuse until proven otherwise, and proving otherwise is what they will have to do on a regular basis until the state is satisfied that the child is safe. This means a regime of surveillance and close monitoring for years until the child enters state school, whereupon the child can be relied upon to report the crimes of the parent to their teacher.
The fallacious argument of protecting the imaginary 'Rights of the Child' means the creation of a huge bureaucracy and money machine that swirls around children, intensive and invasive surveillance of families - everything that is anathema to real libertarians.
Children's rights are nothing more than a pretext for the state to own people, in this case, women and children. Morality is a purely private matter; and abortion is a weak spot that some 'libertarians' have which allows them to call for violence to be done to the ever present bad 'other' who has less rights than we do, simply because we have 'beliefs'.
When I said that liberty was indivisible, I meant that all individuals have rights. A foetus is not an individual, it is a parasite residing in the mother. Furthermore, children are a special form of property, precisely as Rothbard describes. This approach is the only way that everyone can be free and the rights of everyone are protected, and the emergence of the unforeseen consequences I sketched out above prevented.
People who are against abortion should group together into a voluntary collective to buy the unborn foetuses that they want to see come to term. This could be part of the baby market that Rothbard describes. It is a way for people with deeply held convictions about how human life works to stop what they consider to be 'crimes' without running to the stat to do violence on their behalf.
This means alot of work and organization, and normally the statist is an armchair violent type that is happy to watch other people violated and destroyed on his behalf whilst he doesn't have to lift a finger. Some of the more fervent types, rather than doing what I suggest, like to demonstrate, picket, harass and ultimately murder people who they disagree with, who are doing no harm whatsoever to them.
I entirely agree with you as well. I think making abortion illegal would be an aggression on the mother's individual rights, and force her against her will to do something which society deems a "positive" act. I personally do not agree with abortion just because of my own personal beliefs. However, this gives me no right to force my beliefs on a mother who chooses otherwise. We can still appeal to mothers conscience and present them with alternatives(adoption) if they do not want the child, but we can not force them against their will. I think this still fits with most christians' beliefs as well(I only bring this up because it seems to be a hurdle for most). Christians are not responsible for enforcing morality or judging people, but that does not mean they can't appeal to a persons moral conscience and share their religions beliefs.
Personally, I am against the state in entirety. I do not see how it would be possible to enforce anti-abortion laws through arbitration in a stateless society. If the victim is the child, who is the rightful heir that would receive damages?
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