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View Full Version : Which monetary instruments are fraudulent by nature?




Free Moral Agent
11-26-2010, 02:33 AM
Basically what my question boils down to is, which monetary instruments would cease to exist if fractional reserve banking was outlawed and replaced with full reserve banking? Second, do you currently utilize these said instruments?

* If you find that list too long to type out, then which instruments would only exist under full reserve banking?

Zippyjuan
11-26-2010, 01:56 PM
Let us start with what fractional reserve banking is. That means that a bank is required to keep on hand (either at the bank itself or on deposit with the Federal Reserve) a portion of the money deposited (typically 10%) and not loan it out. This is the "fraction" they must keep in "reserve"- hence the term. What would change would depend on how you change this.

Full Reserve Banking- banks are required to keep 100% of deposits on hold. The biggest change this would mean that banks would not be able to make any loans out of money they have on deposit. They have to keep all money deposited at the bank or with the Fed. This would reduce or even eleminate financial instruments based on bank loans.

The other end is No Reserve Banking. Banks are not required to keep any of their deposits on reserve- if they do, how much they keep is up to them. The money supply multiplier you see with the current fractional reserve requirement could potentially be up to infinity (in reality it would not hit that). There would be no change or restrictions on financial instruments under this system (based on the system itself- there could still be laws passed to allow or restrict financial instruments).

Anything between a full reserve bank and a zero reserve bank would be fractional reserve banking by definition.

I utilized a fractional reserve banking based instrument when I took out a mortgage to buy my home.

Travlyr
11-26-2010, 02:04 PM
Fiat is, by definition, money created out-of-nothing by privilege. So, if a bank keeps part of nothing (10% of nothing), what does that mean?

axiomata
11-26-2010, 02:12 PM
Things aren't "naturally" fraudulent. Fraud is a human construct requiring one party of a contract to either lie as to the facts, or break a contractual promise.

Free Moral Agent
11-26-2010, 03:14 PM
Things aren't "naturally" fraudulent. Fraud is a human construct requiring one party of a contract to either lie as to the facts, or break a contractual promise.

Ok, then lets call it a grossly unfair privilege. Happy? My question in the OP still stands.

sratiug
11-26-2010, 03:37 PM
Things aren't "naturally" fraudulent. Fraud is a human construct requiring one party of a contract to either lie as to the facts, or break a contractual promise.

Fractional reserve banking is, by definition, fraudulent.

erowe1
11-27-2010, 10:05 AM
Fractional reserve banking is, by definition, fraudulent.

No, it isn't.

Rancher
11-27-2010, 10:22 AM
No, it isn't.

It sure seems fraudulent to me.

I'm a hay farmer. If I have 10,000 bales of hay, and 10 of my neighbors want 1000 bales each for delivery at a later date, then I can sell all of them what they want when they want it. But if I sell 15,000 bales of hay (5000 more than I currently possess) believing that I will be able to produce another 5000 before the neighbors take delivery, that's fraud.

Just because I get away with it doesn't change the fact that I sold my neighbor "nothing" when he thought he bought hay.

What happens when hail destroys my new crop? I call a farmer holiday and borrow some hay from my cousin in New York? No. I go to jail for fraud.

erowe1
11-27-2010, 10:27 AM
It sure seems fraudulent to me.

I'm a hay farmer. If I have 10,000 bales of hay, and 10 of my neighbors want 1000 bales each for delivery at a later date, then I can sell all of them what they want when they want it. But if I sell 15,000 bales of hay (5000 more than I currently possess) believing that I will be able to produce another 5000 before the neighbors take delivery, that's fraud.

Just because I get away with it doesn't change the fact that I sold my neighbor "nothing" when he thought he bought hay.

What happens when hail destroys my new crop? I call a farmer holiday and borrow some hay from my cousin in New York? No. I go to jail for fraud.

If your neighbor and you both enter that agreement with full awareness of what's going on, which is what happens in fractional reserve banking, I don't see how it can be fraud. If your neighbor doesn't like the terms of that agreement, he doesn't have to make the deal.

Rancher
11-27-2010, 10:34 AM
If your neighbor and you both enter that agreement with full awareness of what's going on, which is what happens in fractional reserve banking, I don't see how it can be fraud. If your neighbor doesn't like the terms of that agreement, he doesn't have to make the deal.
If it spells it out clearly in the contract, then yes. I agree with you. But banks don't do that.

I am 54 years old. I learned of fractional reserve banking in the last couple of years. Banks did not inform me of their schemes before or when I opened my savings & checking accounts many years ago. They committed fraud.

They still commit fraud because very few people understand that banks don't have any money.

Rancher
11-27-2010, 10:40 AM
Fiat is, by definition, money created out-of-nothing by privilege. So, if a bank keeps part of nothing (10% of nothing), what does that mean?
Good point. Everybody talks about fractional reserve banking like it has meaning, but if the dollar is not defined, and fiat is something out of nothing, then a fraction of nothing is nothing. Banks that claim they hold dollars are holding an undefined symbol of nothing. That is fraud.

erowe1
11-27-2010, 10:43 AM
If it spells it out clearly in the contract, then yes. I agree with you. But banks don't do that.

I am 54 years old. I learned of fractional reserve banking in the last couple of years. Banks did not inform me of their schemes before or when I opened my savings & checking accounts many years ago. They committed fraud.

They still commit fraud because very few people understand that banks don't have any money.

There may be people who think that their banks actually keep all their money in reserves and don't make loans with it for various reasons--maybe they didn't read the terms; maybe they didn't ask enough questions; or maybe they've never seen "It's a Wonderful Life"--but those people are the exception. Most people, even small children, know that banks do that. And those that don't know have no one to blame but themselves. There may be some bank out that that fraudulently told people they kept 100% reserves. But I've never heard of it happening.

sratiug
11-27-2010, 12:54 PM
There may be people who think that their banks actually keep all their money in reserves and don't make loans with it for various reasons--maybe they didn't read the terms; maybe they didn't ask enough questions; or maybe they've never seen "It's a Wonderful Life"--but those people are the exception. Most people, even small children, know that banks do that. And those that don't know have no one to blame but themselves. There may be some bank out that that fraudulently told people they kept 100% reserves. But I've never heard of it happening.

When they put the name "Bank" on a business and show you a large vault inside full of paper they are implying it is, in fact, a place created to store money for safekeeping, simply because that's what a bank is. Nobody I meet day to day knows anything at all about fractional reserve banking. People assume the bank has its own money to lend. After all, why would anyone give a poor person all their money to hold on to it for them. That would be stupid.

erowe1
11-27-2010, 01:03 PM
Nobody I meet day to day knows anything at all about fractional reserve banking. People assume the bank has its own money to lend.

I find that hard to believe. If I met someone who really believed that, I'd have to ask them why they think the bank wants to store their money so badly that it will pay them interest just for the privilege of providing that service, and how it can afford to do that.


After all, why would anyone give a poor person all their money to hold on to it for them. That would be stupid.

I have money in a bank, despite the fact that I know about fractional reserve banking. Don't you?

Travlyr
11-27-2010, 01:09 PM
There may be people who think that their banks actually keep all their money in reserves and don't make loans with it for various reasons--maybe they didn't read the terms; maybe they didn't ask enough questions; or maybe they've never seen "It's a Wonderful Life"--but those people are the exception. Most people, even small children, know that banks do that. And those that don't know have no one to blame but themselves. There may be some bank out that that fraudulently told people they kept 100% reserves. But I've never heard of it happening.
What about the fact that the dollar is undefined (http://www.ronpaulforums.com/showthread.php?p=3002120). What does that mean to you? Does that mean that everybody understands what the banks are doing, or does it mean that nobody understands what banks are doing?

Fractional Reserve - A fraction of nothing is nothing, and claiming to hold something of value when that value is undefined value, is fraud.

erowe1
11-27-2010, 01:30 PM
What about the fact that the dollar is undefined (http://www.ronpaulforums.com/showthread.php?p=3002120). What does that mean to you? Does that mean that everybody understands what the banks are doing, or does it mean that nobody understands what banks are doing?

Fractional Reserve - A fraction of nothing is nothing, and claiming to hold something of value when that value is undefined value, is fraud.

That's not fraud, at least not on the parts of the banks.

They don't claim to hold any number of dollars beyond whatever fractional reserves they actually hold. They don't claim those dollars have any value they don't have. They don't make any promise to exchange those dollars for ounces of silver or anything else besides other dollars.

squarepusher
11-27-2010, 01:32 PM
all

Travlyr
11-27-2010, 01:35 PM
That's not fraud, at least not on the parts of the banks.

They don't claim to hold any number of dollars beyond whatever fractional reserves they actually hold. They don't claim those dollars have any value they don't have. They don't make any promise to exchange those dollars for ounces of silver or anything else besides other dollars.

But dollars are NOT defined. Do the banks tell you that? Full disclosure requires it.

erowe1
11-27-2010, 01:59 PM
But dollars are NOT defined. Do the banks tell you that? Full disclosure requires it.

We're the ones loaning the banks those undefined dollars, which they then hold in fractional reserves and loan to others. So if full disclosure demands that somebody tell somebody else that those dollars are of undefined value, then isn't it we who have that obligation to the banks and not the other way around?

Besides, I'm not sure why full disclosure demands that anyway. Everything that exists, including ounces of silver, has undefined value. The value any currency has, whether fiat or not, can never be anything other than a property it has in any given transaction in which the parties value it however they want.

sratiug
11-27-2010, 02:01 PM
I find that hard to believe. If I met someone who really believed that, I'd have to ask them why they think the bank wants to store their money so badly that it will pay them interest just for the privilege of providing that service, and how it can afford to do that.



I have money in a bank, despite the fact that I know about fractional reserve banking. Don't you?

Of course not. I'd guess maybe 5% of people know about fractional reserve banking.

erowe1
11-27-2010, 02:10 PM
Of course not. I'd guess maybe 5% of people know about fractional reserve banking.

I'm only guessing, but I'd say the opposite. My guess is only 5% of people think banks don't loan out any of the money we loan them.

So you really don't have money in a bank?

axiomata
11-27-2010, 04:40 PM
I'm only guessing, but I'd say the opposite. My guess is only 5% of people think banks don't loan out any of the money we loan them.

So you really don't have money in a bank?

I agree. The majority might no be familiar with the term "fractional reserve banking", they might not know the reserve ratio, but they certainly understand how banks make their money ... By loaning out a portion of the money that they have on deposit.

Otherwise the concept of a bank run and It's a Wonderful Life makes no sense.

sratiug
11-27-2010, 05:28 PM
I'm only guessing, but I'd say the opposite. My guess is only 5% of people think banks don't loan out any of the money we loan them.

So you really don't have money in a bank?

No. I have absolutely zero money, dollars, fed notes, gold in a safety deposit box, nothing at all in what has come to be known as a bank, but is really a stock exchange backed by government guarantees.

sratiug
11-27-2010, 05:36 PM
I agree. The majority might no be familiar with the term "fractional reserve banking", they might not know the reserve ratio, but they certainly understand how banks make their money ... By loaning out a portion of the money that they have on deposit.

Otherwise the concept of a bank run and It's a Wonderful Life makes no sense.

I think we should have a poll done, a real poll, to find out the percentages. I still say that fewer than 5% know what is going on. Anybody off the street knows that you cannot save money and spend it at the same time. The definition of saving is keeping the money - not loaning it, spending it, speculating with it or whatever anyone wants to say it is - it is just saving. Saving is a word that has meaning.

If you believe that the average person knows that it is legal for some people to counterfeit money, then I think you are mistaken.

Guitarzan
11-27-2010, 05:49 PM
No, it isn't.


If it's not fraud, it surely conflicts with property rights. Fractional reserve banking allows banks to loan out something that they don't have, while hoping that every depositor doesn't come to collect at the same time. My property (my deposit) isn't someone else's, and vice versa. If there were to be a "bank run", and the bank isn't able to return everyone's property at the same time, I would call that fraud, as I, and many people, put their money in banks for nothing else but safekeeping.


Also, I believe that if there were a system of full reserve banking, there would be different types of deposits. Deposits that cannot be loaned, and deposits that can be loaned...all done by contract.

Travlyr
11-27-2010, 05:52 PM
I think we should have a poll done, a real poll, to find out the percentages. I still say that fewer than 5% know what is going on. Anybody off the street knows that you cannot save money and spend it at the same time. The definition of saving is keeping the money - not loaning it, spending it, speculating with it or whatever anyone wants to say it is - it is just saving. Saving is a word that has meaning.

If you believe that the average person knows that it is legal for some people to counterfeit money, then I think you are mistaken.
Absolutely. The average person on the street wouldn't know. Unfortunately, repetition works.

Central Banks are allowed to counterfeit money. Nobody else is allowed to create money out-of-nothing. That is a violation of the Equal Opportunity Act of 1787.

Zippyjuan
11-27-2010, 09:25 PM
But dollars are NOT defined. Do the banks tell you that? Full disclosure requires it.

If you mean that a dollar is not defined as equal to a fixed amout of something else- like gold for example- that is true. The value of a dollar is determined by the market- people get to decide how many of these units (known as "dollars") they are willing to exchange for either their labor or for goods and services. A dollar is simply a unit of exchange. It not any store of value or anything like that.

If you think that it is wrong that a dollar does not have a fixed value in relation to something then you are arguing for the government to set and fix the price of that thing (gold or whatever).

I can find definitions of a dollar:
http://www.thefreedictionary.com/dollar

dollar [ˈdɒlə]
n
1. (Economics, Accounting & Finance / Currencies) the standard monetary unit of the US and its dependencies, divided into 100 cents
2. (Economics, Accounting & Finance / Currencies) the standard monetary unit, comprising 100 cents, of the following countries or territories: Antigua and Barbuda, Australia, the Bahamas, Barbados, Belize, Bermuda, the British Virgin Islands, Brunei, Canada, the Cayman Islands, Dominica, East Timor, Ecuador, El Salvador, Fiji, Grenada, Guatemala, Guyana, Hong Kong, Jamaica, Kiribati, Liberia, Malaysia, the Marshall Islands, Micronesia, Namibia, Nauru, New Zealand, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Singapore, Solomon Islands, Taiwan, Trinidad and Tobago, Tuvalu, and Zimbabwe
3. (Economics, Accounting & Finance / Currencies) Brit informal (formerly) five shillings or a coin of this value
look or feel (like) a million dollars Informal to look or feel extremely well
[from Low German daler, from German Taler, Thaler, short for Joachimsthaler coin made from metal mined in Joachimsthal Jachymov, town now in the Czech Republic]
Collins English Dictionary – Complete and Unabridged © HarperCollins Publishers 1991, 1994, 1998, 2000, 2003

sratiug
11-28-2010, 11:06 AM
If you mean that a dollar is not defined as equal to a fixed amout of something else- like gold for example- that is true. The value of a dollar is determined by the market- people get to decide how many of these units (known as "dollars") they are willing to exchange for either their labor or for goods and services. A dollar is simply a unit of exchange. It not any store of value or anything like that.

If you think that it is wrong that a dollar does not have a fixed value in relation to something then you are arguing for the government to set and fix the price of that thing (gold or whatever).

I can find definitions of a dollar:
http://www.thefreedictionary.com/dollar
That is not a definition of a dollar And he is not asking for anyone to set the price of the imaginary dollar, he is asking you what the dollar is. You can say a dollar is a cow and trade pieces of paper with pictures of cows on them without setting the price of cows. But those pieces of paper would not be dollars, they would be cow certificates. The dollar would be the cow itself. Show us a picture of a dollar.

Travlyr
11-28-2010, 11:07 AM
If you mean that a dollar is not defined as equal to a fixed amout of something else- like gold for example- that is true. The value of a dollar is determined by the market- people get to decide how many of these units (known as "dollars") they are willing to exchange for either their labor or for goods and services. A dollar is simply a unit of exchange. It not any store of value or anything like that.

If you think that it is wrong that a dollar does not have a fixed value in relation to something then you are arguing for the government to set and fix the price of that thing (gold or whatever).

I can find definitions of a dollar:
http://www.thefreedictionary.com/dollar

I am really happy that you found definitions for the dollar. They are, however, meaningless when considering what was mandated my the Coinage Act of 1792 (http://www.constitution.org/uslaw/coinage1792.txt). As is pointed out by Wikipedia, "Various acts have subsequently been passed affecting the amount and type of metal in U. S. coins, so that today there is no legal definition of the term "dollar" to be found in U. S. statute." That difference is kind of important when one puts critical thinking skills to work.

With a quick read of the Coinage Act, it becomes clear that government does not have either the practical ability or the authority to set the value of money. The government was mandated to set the standard. The standard is a measure of weight and purity of the elements, not of value. A very important distinction.