Posts in "Fractional Reserve Banking"

By Zak Slayback at 11:07AM

Jan 6, 2011

The American Dream (Myth)

This is an incredibly entertaining and informative video (about 30 minutes in length) on the history of banking and on Fractional Reserve Banking. An excellent introduction -- though it may come off as conspiratorial (I believe the Rothschilds are used to represent global banking in general after the British Bank Crisis) -- to many free-market values and is a strong resource in the campaign to END the FED.

H/T Crushing Bastards

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By Peter Anthony Tariche at 12:53PM

Nov 8, 2010

Are Google and Paypal a Threat to Banks?

From ZDNET:

RaboDirect general manager Greg McAweeney told an audience from the finance sector in Sydney last week that companies such as Google and PayPal are more responsive and trusted than banks
....They are a non-traditional bank yet they have great reach, access, distribution and trust — they probably have more trust than most of the banks.

Is this a sign that innovation and an exposition of Austrian economics is working?

According to Peter Thiel, PayPal is not a bank in the traditional sense; they do not have fractional reserve lending nor are they backed by the Federal Reserve. Thiel suggests Paypal is equivalent to a money market account.

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By Brian Beyer at 7:30AM

Mar 20, 2010

Let's Abolish the Minimum Reserve Requirement

I, along with anyone who adheres to the Austrian School of Economics, would like to completely abolish every regulation in our currently unfree "free market." Not surprisingly, this includes abolishing the Federal Reserve which would ultimately give rise to commodity money (or "hard money"). This is because sans a government decree, no sane person would accept pieces of green paper backed by nothing as "money." They would expect it to be exchangeable for a tangible good, whatever it may be. Throughout most of history, money has been backed by either silver or gold for reasons too numerous to write. Money has also been as unconventional as bottles of water and tobacco.

Since commodity money is backed by a physical good, it cannot be created out of thin air. This is unlike fiat money which is backed by nothing, enforced through government decree, and can be created out of thin air.

As a result, a minimum reserve requirement in a free society (one with commodity money) is redundant. Banks would more or less serve as a warehouse for people's money. Unhealthy or reckless banks that could not produce its deposits for its consumers would likely go out of business because of increased consumer vigilance. Therefore, it would be both irresponsible and unprofitable, in the long run, to not hold all deposits.

The Wrong Way to Argue "End the Fed"

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.