Economics Dictionary of ArgumentsHome
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| Banks: In economics, banks are financial institutions that accept deposits, provide loans, and offer services like payment processing and wealth management. They are channeling funds from savers to borrowers, enabling investment and consumption. Banks are integral to the monetary system, influencing money supply, and credit availability. See also Central Banks, Money, Credit, Consumption, Economy._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Murray N. Rothbard on Banks - Dictionary of Arguments
Rothbard III 802 Banks//Rothbard: Fraud/Money/Rothbard: E.g., (…) if spurious warehouse receipts are printed, evidences of goods are issued and sold or loaned without any such goods being in existence. >Goods, >Stock keeping, >Money/Rothbard. Money: Money is the good most susceptible to these practices. For money (…) is generally not used directly at all, but only for exchanges. It is, furthermore, a widely homogeneous good, and therefore one ounce of gold is interchangeable with any other. Banks: Since it is convenient to transfer paper in exchange rather than carry gold, money warehouses (or banks) that build up public confidence will find that few People redeem their certificates. The banks will be particularly subject to the temptation to commit fraud and issue pseudo money certificates to circulate side by side with genuine money certificates as acceptable money-substitutes. Homogeneity: The fact that money is a homogeneous good means that People do not care whether the money they redeem is the original money they deposited. This makes bank frauds easier to accomplish. Pseudo money certificates: "fraud" is a harsh term, but an accurate one to describe this practice, even if not recognized as such in the law, or by those committing it. It is, in fact, diffcult to see the economic or moral difference between the issuance of pseudo receipts and the appropriation of someone else's property or outright embezzlement or, more directly, counterfeiting. Banks: Most present legal systems do not outlaw this practice; in fact, it is considered basic banking procedure. Libertarianism: Yet the libertarian law of the free market would have to prohibit it. The purely free market is, by definition, one where theft and fraud (implicit theft) are illegal and do not exist. >Libertarianism. Rothbard III 803 Fraud/VsBanks: Even if the receipt does not say on its face that the warehouse guarantees to keep it in its vaults, such an agreement is implicit in the very issuance of the receipt. For it is obvious that if any pseudo receipts are issued, it immediately becomes impossible for the bank to redeem all of them, and therefore fraud is immediately being committed. Purely free market/Rothbard: In a purely free market where fraud cannot, by definition, occur, all bank receipts will be genuine, i.e., will represent only actual gold or silver in the vaults. In that case, all the bank's money-substitutes (warehouse receipts) will also be money certificates, i.e., each receipt genuinely certifies the actual existence of the money in its vaults. The amount of gold kept in bank vaults for redemption purposes is called its "reserves," and the policy of issuing only genuine receipts is therefore a policy of " 100-percent reserves" of cash to demand liabilities (liabilities that must be paid on demand.(1) >Money substitues/Rothbard. Reserve: However, the term "reserve" is a misleading one, because it assumes that the bank owns the gold and independently decides how much of it to keep on hand. Actually, it is not the bank that owns the gold, but its depositors.(2) >Monetization of debt/Rothbard, >Bank Reserve/Rothbard, >Money market/Rothbard. 1. Time deposits are, legally, future claims, since banks have a legal right to delay payment 30 days. Moreover, they do not pass as final media of exchange. The latter fact is not determining, however, since a secure claim to a money-substitute is itself part of the money supply. "Idle" cash balances are kept as "time deposits," just as gold bullion is a more "idle" form of money than coins. The deciding factor, perhaps, is that the 30-day limit is virtually a dead letter, for if a "savings" bank should impose it, a bankrupting "run" on the bank would ensue. Furthermore, actual payments are sometimes made by "cashiers' checks" on time deposits. Thus, "time" deposits now function as demand deposits and should be treated as part of the money supply. If banks wished to act as genuine savings banks, borrowing and lending credit, they could issue I.0.U's for specified lengths of time, due at definite future dates. Then no confusion or possible "counterfeiting" could arise. 2. Such items as bills oflading, pawn tickets, and dock warrants have been warehouse receipts rooted in the specific objects deposited, in contrast to the loose "general deposits" where a homogeneous good can be returned. See W. Stanley Jevons, Money and the Mechanism ofExchange (16th ed.; London: Kegan Paul, Trench, Trübner & Co., 1907), pp. 201-11._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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