Is the US national "debt" an illusion?

[kmoney]

National debt isn't an illusion but they should stop taking more on.

Print debt free money! K:

 

[kmoney]

Why is it counterfeiting?

What's the alternative?

Not fractional reserve banking?

 

[Tinark]

Not fractional reserve banking?

Ok, but why should people be restricted in what they are allowed to do with their own personal property like that? What is the benefit of having the state have this significant of a level of interference in the free market?

 

[Mocking You]

Banks lend out money that clients have deposited.
FRB thus leads to a situation in which two individuals are made owners.
person A deposit money, person B gets a loan using person A deposit.
Person A and Person B are owners of the same money.
Legally this is impossible.

I've already explained that when you deposit money in a bank it is no longer your money. The bank owns the money and you own a demand deposit account. This is a legal definition. There are not two owners. The bank pays you interest to compensate you for "owning" your money.

Now, why is fractional reserve banking counterfeiting?

 

[Mocking You]

Not fractional reserve banking?

NFRB has been tried and it failed.


Seriously, if a bank was required to have 100% reserves on hand before making a loan.....there would never be any loans made. The bank would charge fees to depositors for them to use their bank vaults to safely store their money. Money would come in and no money would go out. This would be known as a money storage facility, or a money warehouse.

 

[Nimrod]

I'll only respond to your final point: that fractional-reserve banking with a free-market system would be illegal by its very nature.

Translation: someones private property is not private

Just as an easy example, let's say we have a system with private money, and the convention is to use gold as one of the primary forms of money.

Ok, great. Gold as money. Is gold the currency as well?

I deposit $100 worth of gold coins at a bank and sets up an account for me.

Ok

For this service, I agree to allow the bank to loan out this gold,

Ok

and I also may withdraw the gold at any time (demand deposits).

Not ok. You can't do both. You now have 2 owners to the same gold.
Legally impossible. See above. Counterfeiting has just occurred. Fraud.
If the Gold is loaned out as you agreed, you can't ask for it back until it is payed back, per contract.

No federal reserve, no government involvement whatsoever. This is what fractional reserve banking is. Do you understand and, if so, do you have any objections?

Fractional reserve as Murray Rothbard has said above, is counterfeiting. It is committing fraud.

Bank sends 1000 notes and only has 10 with the ability to pay back. Sure sounds like fiat currency is going on.

What happens when everyone goes back to the bank and want their money back at the same time?

 

[Mocking You]

Bank sends 1000 notes and only has 10 with the ability to pay back. Sure sounds like fiat currency is going on.

Do you even know the definition of "fiat currency"?

What happens when everyone goes back to the bank and want their money back at the same time?

The bank takes a loan from another bank and pays the depositors.

 

[Tinark]

Not ok. You can't do both. You now have 2 owners to the same gold.
Legally impossible. See above. Counterfeiting has just occurred. Fraud.

*Wrong* - when the gold is in the possession of the bank, there is only *one* legal owner to the gold - the bank itself.

An account holder has a legal claim to demand gold from the bank via an agreement made with the bank, but the account owner only becomes the legal owner of the gold once it is *withdrawn*.

You are essentially trying to argue that someone who loans money retains legal ownership of the money loaned, and the borrower does not have legal ownership of that money. That is bogus - the lender transferred the legal ownership of that money to the borrower via the agreement, even if that agreement says that the lender can demand the money back at any time they desire.

Simiarly, the account holder with a bank transferred that legal ownership with their bank account agreement, in exchange for a right to demand that money back at any time by making a withdraw, and other bank services, and possibly an interest payment on account balances.

 

[Nimrod]

NFRB has been tried and it failed.


Seriously, if a bank was required to have 100% reserves on hand before making a loan.....there would never be any loans made. The bank would charge fees to depositors for them to use their bank vaults to safely store their money. Money would come in and no money would go out. This would be known as a money storage facility, or a money warehouse.

Again, you failed to understand. Previously you noted two types of banking. One for deposits another for loans.

Bank for deposits can not loan out what client has deposited. They can charge interest for holding.

Bank for loans, the client brings in the money and loans it out at a higher interest. Client can not ask for full refund of money once the loan has gone out. There is only one owner to the money and there is a contract where the loaner promises to pay back.

Problem is, you mix them both up. Created a single behemoth than apparently do both but in the end commits fraud and counterfeits the currency.

 

[Nimrod]

*Wrong* - when the gold is in the possession of the bank, there is only *one* legal owner to the gold - the bank itself.

In your world, yes. What happens when the gold goes to the loaner? Who owns it now?

 

[Nimrod]

The bank takes a loan from another bank and pays the depositors.

What happens when all banks want their money back at the same time?

 

[Tinark]

In your world, yes. What happens when the gold goes to the loaner? Who owns it now?

Do you mean the borrower? The legal ownership of the gold transfers to the borrower as per the terms of the agreement made with the bank.

 

[Tinark]

What happens when all banks want their money back at the same time?

Then they become insolvent - unable to honor the terms of their agreements made. In other words, they break their contract. Something which happens from time to time when people conduct business.

When someone conducts business with another party, they should always consider the possibility that the other side will break their contract and exercise due caution in business dealings.

Note, however, that in the case of a bank insolvency, the contract is broken not due to fraud but rather due to economic circumstances (unless they promised the account holders that they would never loan out their deposits and did so anyway, which essentially is never done).

You seem to think the only function of banks is to be a warehouse to store physical money - never allowed to take ownership of that money even when the owner of that money agrees to it. You want to put a restriction on people's right to control their property and transfer ownership of that property in the manner they desire and make the agreements that they see fit with other parties.

 

[Mocking You]

What happens when all banks want their money back at the same time?

By agreement and government regulations, each depositor is guaranteed up to $250,000 of their deposits via the FDIC insurance program. You would have agreed to this when you opened the account. My advice would be to not have more than $250K in any one bank.

 

[Tinark]

By agreement and government regulations, each depositor is guaranteed up to $250,000 of their deposits via the FDIC insurance program. You would have agreed to this when you opened the account. My advice would be to not have more than $250K in any one bank.

I wouldn't confuse him with FIDC - he'll see it as an evil government institution that allows banks to get away with counterfeiting and fraud by bailing them out.

 

[Mocking You]

Bank for loans, the client brings in the money and loans it out at a higher interest. Client can not ask for full refund of money once the loan has gone out. There is only one owner to the money and there is a contract where the loaner promises to pay back.

Do you have a link to the website of one of these banks that act as a middleman for loans?

 

[Nimrod]

Then they become insolvent

Thank you.

To take it a step further. Let's say you have a million banks with the fractional reserve system. When a bank become insolvent ( i.e. 2008), government came in to prop up the big and let the small fail.
Kind of like what we have now. The big 5 holding most of the money. A horrible system.

Another problem with YOUR system (fraction reserve). It is very possible for the whole system to fail at once. KABOOOM!!!!

With a Gold standard and no fractional reserve, if a bank ever did fail it would not cause the entire system to blow up. It will be local.

Note, however, that in the case of a bank insolvency, the contract is broken not due to fraud but rather due to economic circumstances

Banks are insolvent because they printed more currency than what they held. What do you call that? If not counterfeiting.

You seem to think the only function of banks is to be a warehouse to store physical money - never allowed to take ownership of that money even when the owner of that money agrees to it.

I have no problems with contracts. Depositor signing a contract to loan money. The problem is having 2 owners to the same item. Legally impossible.

 

[Nimrod]

By agreement and government regulations, each depositor is guaranteed up to $250,000 of their deposits via the FDIC insurance program. You would have agreed to this when you opened the account. My advice would be to not have more than $250K in any one bank.

Where does the government get the money?

 

[Tinark]

Do you have a link to the website of one of these banks that act as a middleman for loans?

The concept is ridiculous - it prevents people who have different time preferences (depositor vs borrower) from being able to come to an agreement. A bank fulfills that role and makes a profit by doing so. If depositors A-G don't want their money locked up or restricted at all, but person B wants to borrow $10,000 for one year, and the total deposit balances for A-G rarely fall below $10,000, then everyone's needs can be met with the bank acting as middleman for all these various desires, with the bank having access to other short-term credit to meet the demands of A-G should the bank's cash get dangerously low.

It is a far more efficient arrangement, not to mention is far less restrictive on people's property rights and ability to form agreements on what terms and conditions others may use their property.

 

[Tinark]

Thank you.

To take it a step further. Let's say you have a million banks with the fractional reserve system. When a bank become insolvent ( i.e. 2008), government came in to prop up the big and let the small fail.
Kind of like what we have now. The big 5 holding most of the money. A horrible system.

Another problem with YOUR system (fraction reserve). It is very possible for the whole system to fail at once. KABOOOM!!!!

With a Gold standard and no fractional reserve, if a bank ever did fail it would not cause the entire system to blow up. It will be local.







Banks are insolvent because they printed more currency than what they held. What do you call that? If not counterfeiting.



I have no problems with contracts. Depositor signing a contract to loan money. The problem is having 2 owners to the same item. Legally impossible.

Can you please leave government out of this? It is confusing enough to explain a complicated financial system without you constantly bringing up red herrings and irrelevancies.

A bank can fail with no government involvement whatsoever. Do you think there were no widespread bank crashes before the federal reserve and other federal financial programs existed?

And you seem stuck on this idea of two owners to the same money. I've already explained to you that there is only a single owner to the money. Simply repeating refuted claims doesn't make you seem very rational or open to learn.

I can deposit money at a bank, transfer my legal ownership of that money to the bank, in exchange for the right to withdraw this amount of money at any time (and other agreed upon bank services and maybe interest). I am relying on the bank's ability to honor this agreement - there is no guarantee that when I make the agreement, that it will be honored. That's business. That's life. And an inability to honor an agreement does _not_ mean that fraud occurred. You've apparently have very little experience with business - agreements are broken all the time, both intentionally and unintentionally. Sometimes events take place that are out of ones control, making the agreement impossible to honor. These things happen.