That
clueless troll and scoundrel, “Lord Keynes” is ranting again about Fractional Reserve Banking. He writes:
"The Rothbardian anarcho-capitalists are bizarre, utopian free
market cultists (who, strangely, also have a decidedly anti-free market bias in their mistaken opposition to fractional reserve
banking)".
There is nothing bizarre or anti-free market about
Rothbardian analysis of fractional reserve banking. A dollar is a specific coin made out of a
specific amount of fine silver. A
warehouse receipt for a specific coin is not a dollar. Nor is a bearer note for
any dollar coin. Now, a bank could
theoretically lend out 60% of its actual dollar holdings while still issuing
bearer notes for dollar coins, but those private notes would have to explain ON
THEIR FACE that the note is a fractional reserve note and of what variety. I suspect that such notes would be heavily
discounted if accepted at all.
“Lord
Keynes” will argue that no one requires such warnings on the face of the notes
because EVERYONE understands what those notes are. I think that’s plain nuts. In any event, the warnings would then be merely
redundant and harmless, right? Each note issuing firm
could have classes of notes (like classes of stock) representing 100% reserves
or various fractional reserve amounts to which the notes would be associated. People
who accept the notes will have been warned so they cannot complaint of fraud
and prices would be stated in terms of a particular class of a particular brand of
notes. Under historic fractional reserve
banking, paying $100 in silver dollars is described as the same price as paying
with $100 in fractional reserve notes. That is a source of false and unsustainable pricing. My idea of classes of notes avoids such fraudulent pricing too.
There. I have now solved the problem of fractional reserve banking.
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