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Rothbard on Recessions
I was reading through some of the Bernank's old papers, and my eyes started to bleed. Presumably those of you who frequent ZH are experiencing the same thing as the never ending recession has brought out more than its share of insane keynesian commentary.
Here is a bit of sanity for everyone on this Sunday afternoon - Rothbard on Recessions
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We all understand competition. The only way to limit the damage human imperfection can cause while making the most of human initiative is to oppose one individual's defects against another's in a market of supply. Why doesn't this principle then apply to money and banking? Fractional reserve banking is not the problem. The lack of competitive money is. No competitive money, no markets, no capitalism.
It is not just the banks.
Diogenes and his Lamp.
Jesus H. Marie
Banks...every damn last one of them; run by crooks and salesmen.
Fuck em.
NEXT!!!!!!!!!!!!
http://apps.npr.org/unfit-for-work/
Is anyone going to offer a rebuttal to my arguments? Or am I just going to keep getting downvotes by people unable to even articulate their viewpoint? I've recieved two responses, and neither of them took the time to even understand my position.
http://www.freebanking.org/2012/07/13/more-dumb-anti-fractional-reserve-...
http://www.youtube.com/watch?v=JeIljifA8Ls&feature=player_detailpage#t=917s (see the graph he shows not long after this time I linked to)
http://www.freebanking.org/2012/07/17/banknotes-are-not-and-have-never-p...
http://www.freebanking.org/2012/07/10/100-percent-censorship/
Note: I'm not defending central banks, I'm simply pointing out a very horrible flaw in Rothbard's view regarding fractional reserve banking.
Edit: I recieved a third response, but he completely ignored the core of my argument which can be summed up here: http://www.freebanking.org/2012/07/13/more-dumb-anti-fractional-reserve-... and here: http://www.freebanking.org/2012/07/17/banknotes-are-not-and-have-never-p...
Rothbard could describe it much better then me, but the basics of the problem is that Fractional reserve banking is inherently unstable in a downturn or major correction. Further complicated by the fact that the banks are not loaning out their own money, and your never as careful with other peoples money as you should be. trying to patch over the systemic flaw of fractional reserve banking doesn't work. The "insured" deposits would be somewhat successful if you limited the size and scope of banks, but they have lobbied these out of existence. banks should be boring, and bankers should be the dull boring people they were throughout history. when you allowed banks to merge with investment banks this created most of the problems with too big to fail, and such, also "insured" deposits greats a HUGE problem as people are not careful where they put their money, if they were not insured and they let them fail in downturns, people would not deposit money in banks that did the BS today's banks do.
The flip side of the coin is that you have faster growth and more investment with fractional reserve banking but induce inflation and instability into the system as well, and you have to have the discipline to let the system correct on the downturns, ie let deflation happen as its the natural correction of malinvestment, unfortunately the federal reserve did away with this. and hence more bubbles (malinvestment).
The author of that article is a complete idiot, and you should learn to use your head and logic through things. if you put 100k in the bank, and then they lend out 90k then they have created 90k as you still have access to the money, and so does the borrower. would be different if you agreed to have your money locked for a set time, and they loaned the money to someone else for that amount of time. anyways, if the next day you take out 100k the 90k is still out there, and his arguement is they go to the fed and borrow money to make up for their shortfall, well were did fed get this money? the created it.. duh.. it is common knowledge that fractional reserve banking creates money. this is why in downturns there is deflationary pressure as the leverage created by bank lending is reduced as asset prices fall, hence destroying money the banks created.
I dont really understand how people can be so ignorant to the this basic fact, so when people act like your stupid and those arguements are stupid its cause they are, you loan out 90k the person buys a widget the widget owner puts the 90k in the bank that bank loans out 81k, and so on... its a 10x multipler having a 10% reserve requirement.
Then why did the Canadian banking system suffer zero bank failures in 1930 when one third of US banks failed that same year. We both had fractional reserve banking, the only difference was Canada did not have a central bank, they had competing banks each issuing their own currency.
You're the one ignorant of the banking system... as I've quoted Selgin over and over (and everyone keeps ignoring) who explains it quite succinctly:
If you had even read the first link in my above post you would have already read this though, but it's obvious you as well as every other rothbardian it seems cannot click on a simple link or comprehend that Rothbard might have actually been wrong about something. Next time before responding at least understand the position you are arguing against... Oh and actually learn how a banking system without a central bank would be forced to operate.
you got your answer, your just looking to argue, your not smart enough to know wtf your talking about. EVERYONE knows fractional reserve banking creates money out of thin air, and the higher the leverage the more money that is created. now stfu and go away and educate yourself before you open your mouth... I explained the points you make, that it can be mostly stable if implemented correctly, but you are too stupid to read. not having a fed or deposit insurance actually makes it more stable as I noted, and that would explain canada... man some people are just to fucking stupid to talk to....
This coming from someone who doesn't know the difference between "you're" and "your".
"Everyone knows". What a compelling argument.
credit union
Perhaps your argument is not worth responding to.
Fractional reserve banking == fraud.
That's a great argument there bub! Way to argue your case by making a statement that asserts itself to be true without any logical backing.
http://en.wikipedia.org/wiki/Begging_the_question
Great way to prove my point that ultra-rothbardians are clueless though! Thanks!
Pointless to argue with an asshole.
Rothbard does not need a defese from me. His body of work stands on its own.
Little shits like you are not worth the sweat off my balls.
So I guess that would mean you're saying it's pointless to argue with you because you can't be reasoned with?
Pot, meet kettle
I'm willing to reason and argue with people. It's people like you and "Hey Assholes", who are refusing to engage in debate while offering nothing but ad hominem.
I may lace my words with ad hominem, but I do not base my arguments on them. There lies the difference.
No it has more to do with what I said above. Your arguments are all over the place and you are not making one single coherent argument that is grounded in a rational thought. In addition you are posting Youtube videos, not typing out an actual argument. Hard to take that seriously by anyone that actually understand the material you are attempting to critique.
In other words, you're not worth the sweat off that dude's balls.
You've repeated this over and over, but you've yet to actually respond to my arguments.
I've kept a consistent theme in all of my comments regarding his views on fractional reserve banking. That fractional reserve banking in itself is not fraud and that it is not an unstable or fraudulent system without a central bank having the monopoly on reserves and bank notes.
I posted one youtube video because I wanted to show the graph Selgin was referring to in the video. If the youtube video is such an issue then you can see the same graph of the Canadian monetary supply here: http://www.cato.org/sites/cato.org/files/articles/tir_14_04_01_selgin.pdf .
I challenge you to simply make a rebuttal to the argument I pasted multiple times by Selgin regarding fractional reserve here: http://www.freebanking.org/2012/07/13/more-dumb-anti-fractional-reserve-... and here: http://www.freebanking.org/2012/07/17/banknotes-are-not-and-have-never-p...
Then why have you bothered to reply to about 5 of my comments all claiming I don't understand Rothbard, without backing any of it up? If I wasn't worth the sweat off of your balls then why are you trying so hard to attack me personally while completely avoiding the arguments I've made?
At worst you're engaging in pure ad hominem at this point. You're attacking me and not the message. At best you're simply trying to distract from my arguments. If that's the best you can do then you've failed miserably in actually trying to engage in some sort of honest debate. Again, this further proves my point regarding Rothbard's die hard followers. They don't care if they are being intentionally misleading, just as their mentor was.
They are not your arguments, you grabbed a bunch of nonsense and smashed it together and claimed it as your own.
I don't give two shits what you think. Rothbard's work stands on it's own merit, I do not need to defend it here. However you are here trying to convince everyone of something without making a real point. To add it's obvious you haven't read Rothbard on the issue. He made it very clear what he thought on the main issue of central banking already.
Read my first reply to you again.
Which one? You responded to so many of my comments saying more or less the same thing I don't even know which one was the "first".
And yes, I took two arguments from Selgin since he explains them rather succinctly. I said I was quoting him, when did I claim his words were my own?
Are you going to form a rebuttal to either of them, or just keep making the same assertions with no evidence to back it up over and over again?
One more time, two urls with very short and succinct arguments:
http://www.freebanking.org/2012/07/13/more-dumb-anti-fractional-reserve-...
and
http://www.freebanking.org/2012/07/17/banknotes-are-not-and-have-never-p...
Form a rebuttal aganst either of them or shut up.
My evidence is Rothbard's work. You seem to keep getting confused on who is trying to prove a point here, it's not me, it's you.
Selgin is an idiot, and it seems to me that he's never read Rothbard either.
See this is why you can not understand Rothbard, because you're an angry prick that only want's people to do what he tell's them too.
Then quote the mighty Rothbard. Can you do it? Or are you only capable of ad hominem and blanket statements?
What in the hell is your argument? That Rothbard didn't specifically declare how banking should be done? That's is what Rothbard's whole point was your retarded ape. Selgin is even worse, the bastard has a Ph.D. and he can't even figure that that was Rothbard's entire point.
You can not dictate what is best for the markets, they will decide through the price discovery process. I'm not sure why this concept is so hard for you idiot socialists to understand.
The guy above is right, you are not intellectually capable of understanding this apparently.
I'm not dictating what is right for the markets. That's what Rothbard more or less was doing.
His view is that fractional reserve is bad and shouldn't be attempted because it's "fraud" even though anyone who knows anything about banking knows they loan out the money they get in deposits. So how is it fraud? How am I or Selgin dictacting what is best for the markets?
Selgin leaves it totally open by saying there should be no laws regarding bank reserves. Rothbard the otherhand asserts that without 100% reserve requirements all banking is "fraud".
Rothbard ever said that it should be illegal, and he was correct it is fraud. If you deposit you $50K and expect to be able to get that money back tomorrow after they made the loan on it, do you think you are going to get that money back immediately? Did the Bank not just create money out of thin air for that loan if they hand that money back? That means they are essentially loaning out money they do not have. Does that not mean that the banks are given the power to create money which is inherently against the law and fraudulent? It's obviously inflationary. So how is not fraudulent? In either case that makes the bank insolvent, and insolvent banks are essentially committing fraud when they write new loans in expectations to pay off old loans through interest on the newer loans. At that point you are so riled up in a fit of rage, because you realize that oops, Rothbard got you again. Why, because banks do this all the time, and it's completely legal.
Words to the wise, never try to outsmart Rothbard. Eventually someone will point out what he actually meant.
In either case, Rothbard made the comments in his own regard, he never once states that the markets should be one way or the other. He made it abundantly clear that he thinks the markets should decide, not one individual or the government.
You guys that are get hung on BS arguments from chumps like Selgin make me laugh. He argued that Rothbard was wrong in saying that currency that evolved from deposit slips in Europe were not like warehouse receipts, when that is exactly what they are. What a pedantic tool trying to make a name for himself by trying to bring down Rothbard.
Then you saying Rothbard doesn't know anything about banking after writing extensively on it, and apparently you have no idea about the majority of material Rothbard wrote on. As Rothbard said Ad Hom's are fine after you've made your point.
I made my point the first post, you haven't read Rothbard in the least, or didn't understand what he was saying. Selgin is just a tool trying to make a name for himself. You have no excuses, you're just an idiot.
If we're talking anarcho-capitalism then yeah there's no "illegal", but in the past if left to the free market fractional reserve is how the banking system worked. So either there is a state and fraud is illegal, or there is no state and there is just a total "free market", right? (Not that I believe anarcho-capitalism would work, I believe it would turn to fuedalism quite quickly or foreign invaders would come and rape us). So explain to me how Rothbard's view jives with reality..?
If I deposit $50,000 in an on demand checking account then sure. I would expect to be able to pull it out the next day if I so wanted. But stuff like savings accounts and CDs which generate interest should be lent out otherwise it's no different than a warehouse. Why not just get a safety deposit box and store your gold in it if that's what you want? If you actually want an account that bears interest though then it's a risk just like any other investment, and just because you failed to do your due dilligence and assumed the bank magically paid you interest with no risk at all doesn't mean they are engaging in fraud.
Money doesn't come out of thin air without the central bank. If they have a 10% reserve requirement then 90% of a $50,000 deposit would be loaned out leaving $5,000. They didn't create any money, they just loaned out the other $45,000 so they could make a profit and in turn yield your deposit interest.
I don't believe Rothbard didn't know anything about banking, I'm saying he was being intentionally misleading. He was bombastic and didn't care if he mislead people on the facts.
You're an idiot. First you say it isn't fraud, then you say fraud is ok to Rothbard. You are just all over the place, logic and rationalism be damned eh?
Fraud is dealt with in the Market Place, like it should be. I thought you knew what Rothbard was saying, this was like one of his most basic points. So now you're a liar as well as an idiot. Wait, that's right I already pointed that out.
Paying back interest doesn't mean they are not committing Fraud, what it means is that the Bank should allocate the Interest fees it charges to paying the depositor Interest on storing their money there.He states this because the Banks are providing a service, and in all reality they should be returning the favor to the depositors by trusting them for being willing to store the money there.
"Money doesn't come out of thin air without the central bank. If they have a 10% reserve requirement then 90% of a $50,000 would be loaned out leaving $5,000. They didn't create any money, they just loaned out money so they could make a profit and in turn yield your deposit interest."
Uh, you do know that even the Federal Reserve admits that the Fractional Reserve system is designed to have Inflation, and that your comment here points out how little regard you gave the thought process, and that chumps that think like you are quite humorous thinking you have caught Rothbard in a logical conundrum. Not even Hayek and Mises would try that. Mises even admitted to not being on Rothbard's level. Hayek wasn't even close to being a Mises either.
FFS, this is basic Rothbard stuff. He wrote about this in a book about Econ before Adam Smith, not even his work on money or banking. How hard is it to understand?
Rothbard wasn't misleading, he expected you to actually educate yourself and to know the material and if you didn't know the material to find it and learn it yourself. Not be spoon-fed like you are asking us here to do.
If you're Selgin, then damn... I only have a Master's, but it's plain as day where Selgin's logic is flawed to me.
You're such a pathetic waste of humanity, you can't even look up his work and DL his books that freely posted on Mises.org for all to read. That tells me something about the level of your intellectual inquiry, rather lack of it.
Even Slegin could have looked this stuff up and known how his critiques were already answered more than once.
But in the past where there were no reserve requirements and no central bank, where there was the closest thing to full free market banking in history, all of the banks were fractional reserve with competing currencies and it was a very stable system which was free to adapt to the monetary needs of the market as demanded. Pre-1935 Canada is a great example.
Huh? So then why don't you just get a safety deposit box and put your money in that? So the bank just magically pays the depositor interest when they can't loan out the money or otherwise make any sort of profit off of it? The point of loaning out the money is so that both you and the bank can make a profit on your investment.
Ya think? I had no idea! Again, the central bank/Federal Reserve is what allows the banking system to go so incredibly overboard. In pre central bank Canada the banks only temporarily increased the monetary supply as there was demand for it during harvest season and then promptly pulled it back in avoiding any inflation. Central banks on the other hand purposefully create inflation because there are no market forces stopping them from doing so. See the graph I kept referring to here: http://www.cato.org/sites/cato.org/files/articles/tir_14_04_01_selgin.pdf (page 10), or better yet watch the video I linked to.
Then it should be easy enough for you to look it up and quote it.
I can assure you I am not Selgin and I have never met him.
I've made multiple edits to this comment so you might want to make sure you re-read it all before replying.
"But in the past where there were no reserve requirements and there was the closest thing to free market banking we had all of the banks were fractional reserve with competing currencies and it was a very stable system which was free to adapt to the monetary needs of the market as demanded. Pre-1935 Canada is a great example."
What in the hell do you think Rothbard was advocating? He simply did not agree with Fractional Reserve Banking, and that was his personal opinion. He never once stated that it was the position that everyone should adopt.
"Huh? So then why don't you just get a safety deposit box and put your money in that? So the bank just magically pays the depositor interest when they can't loan out the money or otherwise make any sort of profit off of it? The point of loaning out the money is so that both you and the bank can make a profit on your investment."
Uhh, that book about Econ before Adam Smith, he spoke about this extensively. He goes over Interest quite thoroughly.
"Then it should be easy enough for you to look it up and quote it."
Yes, it might be, but then there's this thing about quoting someone. Rothbard said this once as well. Quoting someone is taking something out of it's context and removing it from some of what defines it's meaning and trying to interpret it in a fashion. Mises had a word for this, but I can't recall it off hand.
I posted above about quotes, and honestly if you are one of the fabulous Quotist Intellectuals I am done wasting my time here. If you want to know where it's from and what was said, go read his work. I'm not doing your work for you. I'm not the curious one, because I have already read almost all of his material.
I'm not editing this or replying anymore to you, I prefer to sleep. I already told you Rothbard covered all of your questions already. I find it amusing that after the CATO Institute denying Rothbard entry after applauding his work that they are still behaving like the little Warfare Socialists that they are. You can believe what you wish, Rothbard answered all of the criticisms you have placed here before they were even thought of. His work was extremely well thought out, and honestly few people will come close to the level of competence he displayed.
Charge interest on multiple times the amount you have lent....
Nice 'work' if you can get it
Print money when you need it - likewise.
Equality before the law - If they can print it, why does everyone else who tries it end up with stripes in their sunlight?
Equality before the law is yet another myth to keep the sheople in line - it doesn't actually exist - a bit like US gold reserves.
http://publicbankinginstitute.org/
Public Banking -- it already works in the United States and is catching on! 20 States are considering some form of state banking legislation.
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Solari Stories - What is Transparency?
http://solari.com/blog/
.
The Cyprus Bank Battle: The Long-planned Deposit Confiscation Scheme
A Safe and a Shotgun or Public Sector Banks?
.
http://www.globalresearch.ca/the-cyprus-bank-battle-the-long-planned-dep...
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"The push to confiscate the savings of hard-working Cypriot citizens is a shot across the bow for every working person in the world, a wake-up call to the perils of a system in which tiny cadres of elites call the shots and the rest of us pay the price. When we finally pull back the veils of power to expose the men pulling the levers in an age-old game they devised, we will see that prosperity is indeed possible for all."
e.b.
A state run bank is just that, a state run bank. A horrible idea, unless you are a socialist.
damage.....WTF, socialist? what could be more socialist than a "central bank"...
Obviously you didn't get the memo. I'm against central banks.
North Dakota. yea yea, they have wind and other
resources that saved their horrible banking system.
but go visit and you will see they aren't socialists
or commies or at least I wouldn't call them that to their
face.
Yea North Dakota found oil at these high prices, grain and cattle farmers became millionaires in a decade, and then wind investment iced their cake. Too bad none of the indians did not get in on much of it. 10 years ago, Ted turner could of bought it and gave it back to the natives.
I'm just confused how a state run bank is any better than a national run bank other than the scale.
cuts out the overlord. bridges, roads, environmental preservation,
cuts out wall street influence through control of Washington, potentially.
the money creation process is the key issue me thinks, it is like dna.
if it is structured to be a chicken it will be a chicken and then you will
see a chicken. if it structured to be a fruit fly then ...
same with money and its creation, it has a structure that the people
and economy will have to adhere to, so it is the important thing, its
nature and concomitant laws and such.
That made absolutely zero sense. Can you explain it to me in English maybe?
Why not just end central banks, quasi-government banks, and government banks altogether? Why would we want more government banks?
do you want bridges and roads where you live?
public water, public sewers? a power grid?
maybe not, fine. internet? how to pay for these
public, community used/shared, expenses?
maybe a court house and library?
can you tell me in English?
Banks aren't a natural monopoly. Neither is the internet.
Public water and public sewers are though. (unless you want to go with wells and septic tanks). Court houses are a necessary function of the government to enforce the rule of law.
Again though, banks are not a natural monopoly and there is no reason the government should be involved. Kill the central banks and your state banks are completely unnecessary and likely damaging.
Central banks have a monopoly in the creation of money.
What would be wrong with governments allowing competing currencies and putting in place laws (right, the laws already exist, but are not enforced evenly) to ensure a free market. Any entity with the monopoly power to create a countries money can dictate who the winners are and who the losers are, simply by determining who has access and who does not. I cannot borrow on the same terms as Goldman Sach... why not? Given as much money and access to money as Goldman Sachs has, I can guarantee that I can use that money to my benefit and to the detriment of others, just like Goldman Sachs.
If you bothered to read any of my comments you'd realize I am for competing currencies.
The state trying to create their own miniature central bank does not make anything right. I'm not sure what your argument is other than "two wrongs make a right".
As it should be very apparent from my other comments I'm for "free banking" with competing currencies. How does a state run bank not create the same moral hazard as a national central bank? It's basically the same thing.
I guess I just don't see how it won't be used as a means to try to monopolize the creation of money by the government again, just on a smaller scale.
there is some reason in what you write.
in the natural monopolies and those that
are de-facto monopolies, say in more congested
settings, urban areas, are you saying the
representative governmental body that is
responsible by popular demand cannot set up its
own financial system to fund itself and must
go to a private entity to borrow finance at the
going rate to procure the collective needs satisfaction?
if so, why and by what authority?
But popular demand doesn't necessarily equal good by any means. 51% of the population forcing the other 49% into slavery through democracy is not moral.
Assuming the state bank is actually truly competing against private banks without giving itself special privledges I wouldn't necessarily hate the idea. The issue I have though is it seems a very quick slippery slope to state central banks.
Governments can issue debt just fine with BONDS. I'm not sure why they need their own banks unless they are spending way way too much as it is, in which case it's not really functionally different than a central bank.
I don't see why a group of people collectively referred to as
government cannot create "bank notes", as in the system you
support (Canadian banking ala 1880-1893) at zero interest
to create currency for the exchanges required to accomplish
the construction and maintenance of the infrastructure the
people agree to be essential for their betterment and survival.
.
if any entity can create asset free bank notes certainly agreement
of 51 % of a population should have the same privilege. that is
the key thing about a bank (central or otherwise), not creating a bond as an
asset to justify the bank note but to demand the bank note come
into existence and out of nothing more than an accounting entry.
why should the "people" pay any interest on the creation of a bank note
or have to sell a bond? are they slaves or prisoners?
yes, they are, prisoners of the banking system that exhibits the dna
of a predator and a master and an overlord. imo
How is what you propose any different from "greenbacks"? How well did that work out in the long term? LOL.
@damage,
how about a bail-in? or a hair cut where the brain is exposed? (Cyprus)
which reminds me, the green backs didn't work out well for
Abe Lincoln, you have a point.
the continentals also suffered from counterfeiting and
international private banker aggressions.
there is quite a bit here to re read and think about.
thanks for the conversation.
have you seen money as debt II or read any or viewed any
damon vrable materials, you might like? lol?
The Founding of the Federal Reserve | Murray N. Rothbard
http://www.youtube.com/watch?v=Ta7q1amDAN4
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Uploaded on Dec 11, 2008
A speech by Murray N. Rothbard. Presented at the Mises Institute's 1984 "Seminar on Money and Government," in Houston, Texas.
"At least with Keynesianism, you can point to periods of time when it worked" Oh really? So you are comfortable with central planning an economy over a free market? Or with Keynes-- a sort of central planning lite? You fuck hole Keynesian,elitist, bankster shit-for-brains should not utter the name of Rothbard. Your not worthy.
"The most brilliant thought you ever had I had when I was two" Rehab