Discussion
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Ken Schoolland

Chris,

Thank you for sharing this with me. It is a good argument. Still, I'm not completely convinced by Michael Rozeff. I agree that one has the right to bank with a fractional reserve bank, with all the risks involved, but I think few people who open checking accounts understand it that way.

Is it in the fine print that their money isn't in the vault? Perhaps, but then there is a bit of a contradiction to call it a "demand deposit" instead of potentially a time deposit. It is a very big difference. I consider that an intentional deceit.

Whenever I opened a checking account I was always assured by the bank account officer that my money was available whenever I wrote a check ordering them to transfer funds. They never explained that my money is mixed with that of others and that if all depositors write checks in a rush, then I might only get a tenth of my deposit, if that much. Oh, except for that coerced payment from taxpayers to cover my losses.

If I write a check knowing that there is no money in the account, I am committing a crime of fraud. Is there collusion in this by a bank that assures me in every advertisement that my money is absolutely secure, when they know it is not? Isn't that false advertising...also a fraud?

Also, it is inappropriate, it seems to me, to divorce the theoretical case of fractional reserve banking from the real unfree market, where all banks must have a federal charter as part of FED membership, limited competition, limited liability, legal tender laws, forced taxpayer guaranteed insurance, etc.

Perhaps the real victim in all of this is not the depositor, but the taxpayer. Thus it isn't simply a matter of the right of a depositor to choose a fractional reserve bank. The taxpayer (whether by direct taxes or by indirect inflation taxes) doesn't have any choice in this matter.

Thank you very much for helping to clarify my thinking on the subject, even though I am not yet firmly in either camp on this subject.

How are you buddy? My family is headed this week for Lithuania, Brussels (Li & Kenli only), then all of us to Madrid and Porto. Any chance I'll see you at the Libertarian International Conference this Sept. in Paris?

Aloha, Ken

[CB: I had at first wanted to snip the more private personal parts of this message, not pertaining directly to the discussion, but then, this discussion section of my "Main Fare ~" rubric having been inactive for a very long time, I had to reread some of the previous discussions in order to know how to format this one. Which reminded me, take as an example #1 (you have my permission to reread it also!), that the style of my sites, including these more academic discussions, is very personal and thus maybe more entertaining, contributing to the success they often have. So I left the "private parts" (no pun intended). ;-) Academia should not be too stiff and stuffy or it is running or strolling away from truth and reality and is becoming theology. Last night, at the University of Hamburg, Prof. Roland Vaubel from the University of Mannheim, in his lecture "Staatsversagen aus der Sicht der Public Choice Theorie" (= government malfunction or failure as seen by Public Choice theory) gave us a brilliant example of how amusing strict, solid and "dry" largely mathematical science can become, when done in a superior way. The exceptionally strong applause was well deserved. So Prof. Schoolland, of Jonathan Gullible humorous fame, will not mind my leaving him uncut and more generally the funny, entertaining and often even satiric style of my approach on these websites. He has even explicitly said so in the past. And this is anyway consistent with my Private Choice theory. Without mathematics... And without (government) failure... We are libertarians after all... And panarchists! Amen.]

Ken Schoolland

Thanks, Chris. I'm perfectly fine with you including the personal. It is more friendly. And, of course, I mean all my comments with all due respect to Michael Rozeff, as well, whom I look forward to meeting one day. Aloha, Ken