Libertarian Thread #2: We Shall Never Die!

Negoba wrote:   I would argue that there is no "fair" distribution of wealth that is unequal.

That strikes me as odd.

akamaisondufromage wrote: Equality 7-2521 wrote: akamaisondufromage wrote: 'The Second Myth is that Capitalism generates an unfair distribution of mnmnmn I assume he says wealth' Myth nay I say and thrice nay.  Course it does.  Can you name a system that doesn't or present a cogent definition of "unfair"?   It seems to me that this prof felt like what he was stating in his three 'myths'  was that the opposite was true and that capitalism distributes wealth purely due to hard work and nothing else.    So you would accept that Capitalism is inherantly unfair?    No I can't  but I can describe one it would take a long time though.

It depends on what you mean by fair. I will say that Capitalism provides results in an undesirable distribution of wealth. I will also say that it is the system to best raise living standards for all people which makes me less concerned about the distribution of wealth.

I would add that Capitalism is the only system that treats people as the individuals they are and, in doing so, is also the only system of true equality.  This is, of course, based on the fact that equality is a starting point and not a result.  As long as there are at least two people in existence equality in results will be impossible.  Using force to try to tinker with the results is insulting.

Edited by manofmystery - January 23 2012 at 18:55

manofmystery wrote: I would add that Capitalism is the only system that treats people as the individuals they are and, in doing so, is also the only system of true equality.  This is, of course, based on the fact that equality is a starting point and not a result.  As long as there are at least two people in existence equality in results will be impossible.  Using force to try to tinker with the results is insulting.

The T wrote: I think news like this won't be liked by libertarians or freedom-friendly people in general. Opinions?

I think you would be correct. As has been said though, I doubt this ruling stands.

Oh well... Are you really quoting that useless thing? You might as well quote the latest issue of American Handy magazine, people might actually pay more attention to it than to that useless constitution thing these days...

Equality 7-2521 wrote: I think I lost you somewhere. I'm saying a CD is fine because it would only involve investing real funds handed over to the institution.

Negoba wrote: Equality 7-2521 wrote: I think I lost you somewhere. I'm saying a CD is fine because it would only involve investing real funds handed over to the institution.   The theory, I assume, is there is a fundamental difference between money I give the bank to hold for me for safekeeping. (Like my checking account funds or a passbook savings account). I expect to be able to take that money out at any time. In this case, really, the bank is providing a service to me and it would be reasonable to charge me for this. Instead, most banks instead invest a large proportion of those funds because most people don't need that money all at the same time. In return for being able to use that money for investment, they keep my money and accounts for free.   A CD or other bank-centered savings account is different. I intentionally give them my money now, knowing they will invest it, with the agreement that I won't ask for it back until the term is up. In return they pay me interest.   The "fraud" part of this is that the "keeping my money safe" part really never explicit involves me saying "sure go invest my money" even though it's been standard practice for centuries.   The "creating money" part of this is that the same money can be deposited and lent over and over and each transaction will still go on the books as an "asset."   Here's my question...can't this "creating money" phenomenon happen regardless of where the bank got the funds from in the first place...a "demand deposit" like a checkbook or a "time deposit" like a CD?

Yes it can happen regardless of where or under what conditions the bank gets the funds. 100% reserve banking refers not to any particular account activity of institutions, but it simply requires that the bank's loanable funds equal their actual physical assets. Usually, advocates are also making the claim that bank notes must equal specie being held or available to the bank.

Banks can operate however they want. Traditionally, yes banks charged a fee for what we would consider checking accounts, and you had other accounts for investment purposes which would earn interest. The pyramiding of deposits can occur with either account, but this is exactly what 100% reserves remove.

The fraud I refer to is the bank issuing money that it actually does not posses. When you place 100$ in the bank and the bank then proceeds to issue $900 to Joe, Jack, and Moe, it has claimed that between the four of you, the bank will pay you $1000 dollars when you demand the money. However, it only has $100 dollars in its possession. It's thus unable to meet these obligations by the very nature of reserve banking itself making it a priori insolvent. Bank runs used to keep this process in check, but the cartelization of the system and moving off a hard standard have removed this check.

Yes. They will use this created money as loanable funds. Doing it essentially rests on the assumption that the people's demand for cash is significantly lower than the money holdings. The ways of creation have varied. It used to be a printing of notes in excess of specie reserves. Now it happens more as an accounting ghost maneuver where the money is just created on the balance sheets of the banks, add a zero to their accounts on the computer.  

The fractional reserve is a limit which is put on banks to curtail this practice. For example, the fractional reserve could be set at 10% which requires that banks have 10% of all loanable funds as actual deposits (real money people have put in the bank). This gives the system some semblance of stability, but it's poorly policed and at a fine level for the banks. Basically 1/(reserve requirement) gives you the money multiplier that your deposit will have. It's actually generally higher because of the interaction with the Fed and other banks, but that's essentially what occurs.

Doesn't it seem wrong? As Brecht said, "What is the crime of robbing a bank compared to the crime of founding one?"

EDIT: It should be understood though that while fraud, this could still theoretically be justified if we see no direct harm inflicted upon persons or the economy as a whole. People will argue that no ill effects surface and also that monetary creation is necessary or not necessarily inflationary depending on the economic environment. The entire smoke and mirrors of the industry appeals directly to people, but I think one should be careful about staking their arguments against the institutions on that ground. There's perfectly good economic theory which attacks the banks and this practice showing the pernicious destruction of prosperity and wealth concentration.


Edited by Equality 7-2521 - January 24 2012 at 10:57