Fractional Reserve Banking versus Ayn Rand's Ethics

A response to those who think the ethics of Ayn Rand's philosophy, Objectivism, is consistent with fractional reserve banking.

In the first part of this video, Paul McKeever gives the general history of how gold came to be money, how banks came into being, how banks started to lend on a fractional reserve, how and why central banks were formed, and how gold was replaced with paper. In the second part, Paul explains the true nature of inflation, and exactly what it was that Ayn Rand found to be ethically wrong about it.

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News & Politics

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• Ayn
• Rand
• Objectivism
• Objectivist
• ethics
• 100
• 0.000000ractional
• reserve
• banking

[LIBERTYIAM4]

Restore the soverieng Constitutional Republic. Balance the Budgets. End the Fed. End the Wars. Secure the Blessings of Liberty. Vote RON PAUL! cvrp2012.com

[cannotbebothered100]

You mean to say that one isn't being helpful to others in society when one saves thriftily? Then you declare that saving is responsible? I agree that it is responsible-for it helps society! Imagine I save as the constant for these two scenarios; u consume, and you can presently consume more because I save/you save or lend, and u can arrange productions (prior to ending) over time to go on more cheaply because of your saving so that you will enjoy more wealth at th end of that saving

[cannotbebothered100]

@cannotbebothered100

In not being likely to honour that note as substitute, people would without knowing it have selected the notes of possibility to supply them limited to their being a deposit behind them, thereby limiting the supply of x money media to the amount of specie in circulation, with lending not increasing that supply but increasing the supply of media for eventual ownership or fractional reserve conversion into redeemable deposit ownership, of debt.

[cannotbebothered100]

All of which is to say that fractional reserve banking in the sense of lending out deposits for depositors to earn interest (earning moreso in selecting good bank lenders and lending for a longer term than other rentiers for returns from that allocation), would persist without those loans having a money note produced in the contract for returns on that loan or redeemability of it to turn it back from a loan into a deposit. Ppl would not honour that note as money substitute.

[cannotbebothered100]

anymore than your loan to x allows an additional pure money note to be printed.

So inflation would be limited to gold mining and notes of redeemable or ultimately redeemable (after the loan time contracted has elapsed) loans would not be money notes as such, so that in that sense fractional reserve banking could persist as loans do, but just as loans of deposits without any malign printing of money without ensuring deposit and non circulation of the money behind it ie inflation.

[cannotbebothered100]

thereby limiting by market selection the printing of notes without having pure 100% deposits of specie behind them, thereby keeping the money supply unable to rise without gold mining so as to be a perfect anti-inflation money in whose units to invest your faith in its purchasing power and liquid acceptability. Such confident trust not being forthcoming for tickets referring to your contractual bond yielding interest, those tickets wouldn't be money as such anymore than

[cannotbebothered100]

@cannotbebothered100

(cont, part 3)

thereby compelling that bank to differentiate its certificates for lent out money, from certificates that they have to redeem on demand, or rather to make it so that if you do receive a ticket that may be redeemed on demand but in money that is lent out as an interest yielding bond with that bank, that you might not be able to get that money back due to the vagueness of its 'deposited' nature but that faith could be had in good-as-deposited-gold notes

[cannotbebothered100]

(CONT)

But in a purely free market banking system, the lending of deposits as contracted by a bank following its customers' wishes, would be very hard put, fortunately, to conflate printed certificates extinguishable on redemption of the specie deposit to which they refer as deed, WITH certificates of ultimate if not unconditional redemption of money specie that is lent out. If their notes made that conflation, insolvency and a concomitant non trust in that bank's money certificates would arise

[cannotbebothered100]

I think that what this anti-FRB vein of thought is trying to say is the following:

Nobody opposes the contractual lending of money that would, if you might think it weird, nonetheless be contracted to be redeemable on demand like a pure deposit. What anti-inflationists like myself oppose is really fractional reserve MONEY in the sense that money substitute media printed on specie that is *lent* and not purely deposited, increases the money supply rather than being a deed for deposited money.

[vinnynumbnuts]

i'm a poet. "in flanders fields" is the poem you wear upon your breast. you carry the torch thrown to you on behalf of ayn rand and the others, no? i love your style--in a car. that was my style doing something else years ago. then one day, i found what i was looking for and settled down. hope you do.