Rothbard on FRB: The Sheerest Poppycock
George Slegin:
"It is unfortunate that Congressman Paul has chosen to accept Rothbard's characterization of fractional reserve banking, thereby wedding his call for monetary freedom with an extremely mistaken idea of what such freedom would entail in practice. In fact bank "deposits" have been recognized both in practice and in common law since early modern times to consist of debt claims to money (coin, back then), ownership of which was in fact transferred, along with possession of the coins, first to the banker and then to the banker's borrower-customers. The original depositors retained a right to reclaim an equivalent sum of coin, sometimes on demand, and the banker's only obligation was to have sufficient coin on hand to meet any such demands, the normal penalty for failure to do which was failure. The contrary Rothbard view that bankers must be stealing whenever they lend part of their 'deposits' is the sheerest poppycock, legally, historically, and economically, and has been exposed as such in numerous forums. That many persons, who apparently lack real knowledge of these subjects subscribe to it doesn't make it any less false."
"It is unfortunate that Congressman Paul has chosen to accept Rothbard's characterization of fractional reserve banking, thereby wedding his call for monetary freedom with an extremely mistaken idea of what such freedom would entail in practice. In fact bank "deposits" have been recognized both in practice and in common law since early modern times to consist of debt claims to money (coin, back then), ownership of which was in fact transferred, along with possession of the coins, first to the banker and then to the banker's borrower-customers. The original depositors retained a right to reclaim an equivalent sum of coin, sometimes on demand, and the banker's only obligation was to have sufficient coin on hand to meet any such demands, the normal penalty for failure to do which was failure. The contrary Rothbard view that bankers must be stealing whenever they lend part of their 'deposits' is the sheerest poppycock, legally, historically, and economically, and has been exposed as such in numerous forums. That many persons, who apparently lack real knowledge of these subjects subscribe to it doesn't make it any less false."
I'll admit, I never found Rothbard's rejection of FRB to be all that compelling, and in fact, I was somewhat supportive of Selgin's position on the issue. That is until I read Hoppe's take on it. Hoppe essentially handed Selgin and White their asses. Needless to say, I am no longer on the fence regarding this issue.
ReplyDeletehttps://mises.org/journals/qjae/pdf/Q11_2.pdf
Sigh. I read about five paragraphs and realized I am too busy for such badly argued tripe.
DeleteHmph! You wouldn't happen to be related to Tyler Cowen, would you? Brothers? Cousins, maybe?
DeleteConsider this one, Joe: Hoppe says fractional reserve notes give different people claims to the "same object."
DeleteIs he serious?! Bank notes do not give you a claim to a particular piece of gold! They say, "If you stop by our bank with this note, we will give you this much gold. They aren't *titles* to anything, any more than gift certificates are. Does Hoppe also think gift certificates are fraudulent because if everybody showed up at the same McDonald's for a happy meal at the exact same time, they could not all get one.
This paper is a bad joke, Joe. Hoppe handed himself his own ass.