Yaron Brook's Call to Action - October 2009

[FilipinoObjectivist]

I like this "Call to Action" segments a lot. Dr. Yaron Brook is awesome.

[XlancerTHEgreat1]

Since we're all objectivists here lets try to be objective and think rationally about how fractional reserve banking works. Let me show you:

Step 1) Deposit $100 in the bank

Total reserves: $100

Total loans: $0

Total money supply: $100

Step 2) bank keeps a 10% reserve and loans out $90.

Total reserves: $10

Total loans: $90

Total money supply: $100

Step 3) The loaned $90 is deposited elsewhere. Next this 2nd bank keeps a 10% reserve and loans out $81

[XlancerTHEgreat1]

Total reserves: $19 Total loans: $171 Total money supply: $190 Step 4) repeats step 3, $81 is deposited elsewhere. The 3rd bank keeps 10% and loans out $72.90. Total reserves: $27.10 Total loans: $243.90 Total money supply: $271 Step 5) this process keeps repeating. The bulk of the money is created after 15 repeats, but after what is left after 40-50 repeats is pretty much: Total reserves: $100 Total loans: $900 Total money supply: $1,000

[XlancerTHEgreat1]

I know this seems a bit unbelievable, and I don't want you to take my word for it. I would recommend looking at the Misesmedia channel on YouTube and listen to some of their lectures in banking.

"It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." — Henry Ford

[XlancerTHEgreat1]

what banker isn't a crook? The only difference between a "good" banker and a "bad" banker is that the "good" banker hasn't been caught yet.

[XlancerTHEgreat1]

"I believe that banking institutions are more dangerous to our liberties than standing armies . . . If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] . . . will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered . . ." -- Thomas Jefferson -- The Debate Over The Recharter Of The Bank Bill, (1809)

[waterstrike08]

I hope you know that Thomas Jefferson believed that a national bank was unconstitutional.

Objectivists dont believe anyone should just be printing money mindlessly, but that money should be backed by gold, that gold should be reserved in banks, and, possibly, bank notes issued as a sort of "IOU" relative to the gold supply, and that banks should only issue as much notes as is backed by gold. And, of course, the elimination of the Federal Reserve.

[XlancerTHEgreat1]

I agree with you and Thomas Jefferson that national banks are unconstitutional. The treasury department can only coin money and regulate the value thereof. If a bank issued IOU notes relative to the gold supply it had, it wouldn't be a fractional reserve bank. Show me a banker that doesn't use fractional reserve banking and I'll agree that he's an honest banker.

[waterstrike08]

then we agree that fractional reserve banking is wrong and is an immoral concept. That the point is not "who is doing it"(either government or private banks), but "what are they doing?"

I dont think it's just fraud, but theft, via inflation. Especailly to those who think that their money is being kept safe, and in full. If people wanted thier money to be loaned, they could loan it themselves and aquire the interest for them. Banks cannot make inappropriate use of other people's property,money

[XlancerTHEgreat1]

Wouldn't that be saying like saying murder is wrong and not care about who is a murderer? I believe that every fractional reserve banker should be charged with fraud(Do the banks tell you that they are going to use your money create 9 times that amount in new money?), theft(inflation steals value from everyones dollars), and embezzlement(the fraudulent appropriation of funds or property entrusted to your care but actually owned by someone else). What kind of punishment should they get?

[waterstrike08]

I agree with you on everything else except the first sentence. It's more like, the judgement of an action should not be determined by who acted, but what action had tooken place.

Using your analogy: a trial should not be focusing on the identity of the murderer, but by the fact that a murder was commited. And in effect, is he guilty?

And, of course, im not speaking about how things are, but as they should be.

[pakratmak]

I think you might be interested in a documentary or two- I have them on my playlists- Money as Debt (one and two) and The Money Masters(a little long but incredibly educational). Please feel free and drop me a note with what you think.

[deinse81]

On that logic, you might as well outlaw all businesses, and money. People could just trade horses for potatoes.

FRB backed by government (government force that insures banks out of funds collected from taxpayers) is immoral. But it's not true that people who use banks are automatically deceived. FRB is common practice, and common knowledge. The appeal to your superior knowledge, as the reason given for your idea of banning FRB, is precisely the method Objectivism calls brutish.

[deinse81]

That isn't true. Objectivists believe that money should be free, and not issued by government. Objectivism does not suggest that gold or any other materials should be used for money, nor do they suggest that fractional reserve banking should be outlawed.

All that is your own fabrication. Please call it something other than Objectivism.

[XlancerTHEgreat1]

I'm not suggesting that fractional reserve banking be outlawed, just that any bank that uses it should be prosecuted for creating inflation. (increasing the money supply with accounting entries, which is theft)

[deinse81]

I hate to tell you this, but prosecutors prosecute people when they break the Law. FRB is not illegal.

But we're getting away from the point of my post: stop speaking for Objectivism, you don't understand it.

[XlancerTHEgreat1]

I know that FRB isn't illegal, but theft is. FRB steals the purchasing power of the dollars I earn by inflating the money supply, and they should be prosecuted for that theft. (look up "Inflation" in the Ayn Rand Lexicon )

I never claimed to speak for Objectivism. I just want to make sure that the ARI does.

[deinse81]

If it bothers you that a currency is inflated, don't accept it as payment for your work. Ask your employer to pay you in gold.

If you're not allowed to do that by your government, then that's the problem, and see to it that it's fixed. But don't attack a practice that has nothing to do with it, such as banking.

[XlancerTHEgreat1]

I'm not attacking banking, just corrupt bankers and banking practices(FRB). FRB is the result of corrupt bankers, not banking. An honest banker wouldn't use FRB; they would use 100% reserve banking. How can you condone inflation? It's theft, plain and simple. The government is the only reason that FRB still exists

[deinse81]

No, the government is not the only reason FRB exists. FRB existed long before governement regualtion. Read up on that.

[XlancerTHEgreat1]

What!?!? I said, "The government is the only reason that FRB STILL exists." Our government is protecting the practise of FRB with the FED and by not allowing FR bankers to be charged with theft(inflation). Before the central bank, bankers weren't able to go much beyond a 50% reserve ratio because FRB is very risky without a central bank. If government stoped protecting FRB, competing banks would keep each other honest by informing the public that their FRB competitors are stealing from everyone.

[deinse81]

No matter how many times you write down that FRB is theft, it's not gonna come true.

Another thing that isn't true is that FRB is a secret, that's somehow hidden and protected. It's not, FRB is described in detail in books, articles, even on wikipedia.

[XlancerTHEgreat1]

So when a bank increases the money supply does that same bank also increase the production of goods? Because if the bank doesn't increase the production of goods at the same time and at the same rate as it increases the money supply, it results in each dollar now being worth less than before. Is it wrong to make the dollars in my pocket worth less?

[deinse81]

And it's wrong that your government forces you to use the dollar, under these conditions. However, that's not FRB, that's the tax system, and the FED's influence at work.

FRB works, and would be used, just as it was used in the past, without government force, with reasonable levels of reserves (like 50%). And you would have the choice to accept or refuse to deal with banknotes that are inflated.

Your idea, of calling this theft and punishing it, infringes on my right to use such money.

[XlancerTHEgreat1]

I wouldn't stop you from using a FRB. But I would also allow you to charge the bank for inflating away the purchasing power of your money.

An educated public would never use a FRB. As a business I wouldn't want FRB notes. FRBs depend upon the public's confidence because the banks can't refund all of the notes in circulation.

[deinse81]

You're insane. In fact I'm insane for trying to discuss it with you.

Something is either legal or illegal. The first condition of even the semblance of freedom is that no one will charge free men, for something other than things that are illegal, according to a set of objective laws.

If you want a society that charges people at a whim, because something doesn't appeal to you, you're the next Stalin, not an advocate of freedom.

[XlancerTHEgreat1]

I was being absurd to illustrate the absurdities of FRB.

You're right, FRB is protected by law and that people shouldn't be charged with crimes that are not illegal. That's why I'm advocating to change the law so that FRB is not longer protected.

[deinse81]

You're advocating for it. Fine. I don't care what you're advocating for. Just stop lying, by saying that's the Objectivist position.

[XlancerTHEgreat1]

I never claimed to speak for Objectivism. I only question how an Objectivist could support FRB. consider Ayn Rand's position on money.

"Money cannot function as money, i.e., as a medium of exchange, unless it is backed by actual, unconsumed goods." -Ayn Rand

For money to be "Backed by actual, unconsumed goods" can't happen without also having a 100% reserve banking system; for FRB only a backs up a fraction.

[deinse81]

Also, why do you think you're more educated than me? I understand exactly what FRB is, and I use it. And you don't need a crystal ball to guess what will happen if the government no longer supports banking practices, all you need is a history book. Get one, and find out if there was any FRB or not back when money was free of government interference, in the US. The more you learn, the more you'll realize that you're not as educated as you think, compared to the rest of us.

[XlancerTHEgreat1]

I'm sure that you know alot more than I do about the history of FRB than I do. But the concept of FRB is really quite simple.

What's wrong with the government only supporting 100% reserve banking? I'm well aware the history of the private goldsmiths of Europe and their FRB system. I don't understand why you think that FRB is necessary? It is the root cause of numerous bank runs and financial crises.

[deinse81]

That's the same exact argument people calling for the end of Capitalism make. The second defenders of freedom start justifying the utility of that freedom, they forfeit the moral argument for it.

FRB should not be illegal, because you haven't demonstrated that it isa violation of individual rights. I have no desire to convince you that it is necessary.

[XlancerTHEgreat1]

Look up "Fractional Reserve Banking versus Ayn Rand's Ethics" on youtube. Paul McKeever does a lot better job at explaning why FRB is a violation of individual rights than I ever could.

[deinse81]

Paul McKeever's position is the same as yours (because you copied his position), and he's about as effective at augmenting his position as you have been. You're both saying that the public is uneducated about the details, so it is fraud.

But noone is preventing the public from getting educated, even if it was true that only Paul and his disciples know the big secret about how banks don't keep the money you deposit in their vaults and magically come up with the interest when you go to collect.

[XlancerTHEgreat1]

I'm just trying to show you the problems of FRB, and that banks would be better off without FRB. 100% reserve banking is far superior to FRB. FRB would never survive the free markets; FRB always requires government support. If the 100% reserve banks got just 10% of the FRB customers, the resulting domino effect will colapse the whole system. Why would anyone want to do that? Simple, by colapsing the FRB system my dollars will become worth 9x more than they are worth now.

[deinse81]

What's 100% reserve banking?

[XlancerTHEgreat1]

This web page does the best job of explaining why we are both right

thefreemanonline.

org/columns/fractional-versus-­100-reserve-banking/#

Sorry if this is double posted. I don't think my first attempt worked

[JackDoitCrawford]

Fractional reserve banking,in and of itself, is not fraud as long as there is knowledge by the parties involved of what is happening.

[XlancerTHEgreat1]

you sure that it's not fraud? who gave the local city bank the authority to create money? You do realize that banks don't actually loan out money, it's more or less a bookkeeping entry that creates new money. Ever wonder why you can't touch the money on a home loan? It's really hard to believe, trust me, I spent a few months researching the Federal Reserve and fractional reserve banking. There are alot of conspiracy theories out there, so I would recommend Misesmedia or Money as Debt on youtube

[XlancerTHEgreat1]

I know that this is hard to believe, so I ask everyone to think, did you actually see the money the bank loaned to you? If you want to learn more about fractional reserve banking I would suggest looking at the Misesmedia youtube channel.(especially ARI)

There was a reason why Ayn Rand used gold as the only form of money in Galt's Gultch. And it wasn't just because fiat money is only worth the paper it's printed on, but to stop the fraudulent practice of fractional reserve banking.

[XlancerTHEgreat1]

How can Dr. Brooks support a banker? To say "bank fraud" is a redundancy. I don't know of any banks today that don't use the fractional reserve banking system. This system allows banks to create money out of thin air. When a bank gives us a home loan, they are not loaning us actual money, all the bank does is make an accounting entry saying that you own them the amount of your loan...

[charlessmyth]

He defends bankers within the context of free market conditions, not the system which permits some bankers to act inappropriately and thus tarnishes the reputation of all bankers.

[XlancerTHEgreat1]

I know you mean well, and Dr. Brooks probably does as well. But the truth is, any bank that uses fractional reserve banking(which is most if not all of them) creates money out of thin air. Ever wonder why banks can't pay off their depositors when alot of people withdraw at once? Luckily the Federal Reserve is busy printing money out of nothing so that banks don't collapse now that people are starting to realize that there is not enough money in existence to pay off all of the deposits.

[charlessmyth]

The complication is that customers and/or shareholders will not support a bank unless it adheres to the principles of fractional reserve banking and/or the FDIC. Therefore, a bank can only be as good or as bad as its customers and/or shareholders.

[XlancerTHEgreat1]

So it's ok for banks to create money out of thin air as long as fraction reserve banking is legal???

The FDIC creates huge moral hazards in banking; look up "Deposit Insurance: Keeping Dead Banks Walking" on youtube. the banks wouldn't need any confidence from it's customers if it didn't create money out of thin air.

[charlessmyth]

No it is not okay for banks to expand the money supply via fractional reserve banking, nor is it entirely legal. Almost everything to do with government and an alliance with the banking industry creates moral hazards, which is why the constitution specified against such an alliance. To fix the banks you need to vote for better government, since the federal government and its institutions is now the constitution and bill of rights, in a living form.

[XlancerTHEgreat1]

I completely agree with you. Which leaves me concerned with Dr. Brooks(and by association the ARI) defending any bankers untill this unconstitutional alliance is broken.

[charlessmyth]

He is not defending 'any bankers' per se, but is defending the majority of bankers who are erroneously categorised as crooks because of the high-profile misdemeanours of a few.