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Ron Paul’s Fractional Reserve Banking Congressional Hearing – June 28 2012



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What we have is "fictional reserve banking", as I call it... not fractional reserve banking.

Those who keep bashing on what is really free banking, need to watch this video on Ron Paul's own youtube channel.

http://www.youtube.com/watch?v=JeIljifA8Ls

What do you consider to be "free banking?"

Fractional reserve banking is not free banking, it's fraudulent banking.

Even if everyone knows how it works?

That doesn't make any sense.

Obviously you wouldn't want to fractionalize checking, much if at all. However savings is meant to be loaned out or the savers wouldn't get any decent return on the investment.

That's how an interest bearing savings account works. The monetary supply should respond to demand, not some rules you've arbitrarily come up with.

Did you even watch the video OP linked to more than 20+ minutes in? During the 20-30 min mark the speaker puts forth the same view I have.

Hardly anyone knows how it really works

That's how banks get away with it. Just like hardly anyone understands that the Fed is actually counterfeiting money.

I watched the entire video.

If you don't want the bank to

If you don't want the bank to loan out your money then you can just keep it in gold or in checking only. A savings account should be an investment with risk, just like anything else. Otherwise you'd not get any return on your money. If you don't want risk then don't put it into an interest bearing savings account, but to call it fraud when anyone who isn't completely ignorant on financial matters knows it is loaned out is completely absurd.

Did you even watch the video OP linked to more than 20+ minutes in? During the 20-30 min mark the speaker puts forth the same view I have.

Did you even read my post?

I said I watched the entire video, yet you repeat yourself.

So you're another showing up here that disagrees with Ron Paul, whom has specifically said and explained how fractional reserve banking is fraudulent?

Where are you guys getting dis-informed?

But that's just an oversimplication...

Meant for the layman... if you watched the video 20-30 mins in he's not blaming Fractional Reserve Banking, but rather Central Banking and the FDIC.

Also if you watch this video on Ron Paul's channel the speaker is advocating free banking like there was in Canada until they had a central bank, which involved ALL banks loaning out money and fractionalizing savings accounts.

http://www.youtube.com/watch?v=JeIljifA8Ls

The difference is they were competing banks issuing competing currency. Not a monopoly on currency like we have now with a central bank.

No, it's not over simplification, it's blunt truth

You cannot even engage in fractional reserve lending with sound money.

But if you're a libertarian...

The market should decide what is money and what isn't. You're making up your own regulations as to what people should and shouldn't use as money.

Let everyone decide for themselves.

What?

Where did I ever make up a regulation or say what money should be?

Don't tell me you're a part of the Ron Paul wrecking crew too?

That's all you said...

"You cannot even engage in fractional reserve lending with sound money."

Then what was the gold standard before 1913 in the US and before 1930 in Canada? That's EXACTLY what it was... Gold Backed Fractional Reserve Banking.

The banks had COMPETING currencies, not just one central bank monopolizing it..

Sound money is gold only?

Here were we go again...lies upon lies.

I see you down voted a direct quote and video from Ron Paul himself explaining that fractional reserve banking is fraudulent.

Why did you do that?

Because he's since corrected his view...

And has said we should introduce competition... which is what we had before 1913. Instead of forcing more regulations and calling something fraud when it isn't.

Ron Paul hasn't "corrected" his view

It's still the same. If you truly understood money and fractional reserve banking, you would correct your view.

Can you rent or sell your car to two people at the same time? What would happen if you tried?

It's the same with money.

If I'm lying...

If I'm lying then the guy 20-30 mins in on OPs video is lying and so is this guy on Ron Paul's own youtube channel also?

http://www.youtube.com/watch?v=JeIljifA8Ls

You lying doesn't make everyone else a liar

If you lie, you're a liar.

What am I lying about though?

Before 1913 in the US, and before 1930 in Canada. We had competing currencies and they were ALL from banks loaning out a percentage of savings deposits, which is the very definition of fractional reserve banking.

All you are doing is calling me a liar without actually checking any of the facts... did you watch the video I linked yet?

Can you look a few posts back?

You have trouble even following your own conversation?

What am I not following?

Hmm?

Competing currencies and fractional reserves are not equivalent

You appear to have a comprehension problem equivalent to amartin315.

Ron Paul has not "corrected his view" because he is right. Would you like to try to reference your claim?

But when we had competing currencies before 1913

In Canada and the US, they were all fractional reserve.

The competition is what kept things balanced.

But government interference banning branch banking and forcing the banks to keep a certain amount of their reserves in government bonds is what caused the issues pre-1913.

It doesn't make fractional reserve lending any less fraudulent

Just because competition and risk may have kept it in check in the past does not make it any less fraudulent, it was simply less prevalent, because those engaging in the fraud realized they could be called on it at any time and lose.

See, in order for fractional reserve lending to exist there must be multiple claims to the same amount of money at a time. Two people cannot legitimately claim the same money, ever.

But if they aren't lying about it...

And anyone who knows even the first thing about finance knows that's how a savings account pays you interest... how is it fraud?

A savings account is an investment that carries risk just like any other investment that pays a return.

If you want a savings account that pays near-zero interest then sure, go "full reserve", but if you actually want to make interest on your savings that is how the bank makes the money to pay your interest with, by loaning it out.

You're confusing two concepts, banking and FRB

There's nothing wrong with banking. A customer makes a timed deposit and the bank loans that deposit. The bank earns interest on the loan and pays the customer a share.

FRB is when a customer makes a deposit which is available to them at any time and the bank not only promises to give the deposit to the customer when they want, but also fraudulently loans it out too, effectively counterfeiting the amount of the deposit that is loaned.

"Bank runs instruct the public in the essential fraudulence of fractional reserve banking, in its essence as a giant Ponzi scheme in which a few people can redeem their deposits only because most depositors do not follow suit."

- Murray N. Rothbard

Now you're making a very narrow definition of fractional reserve

And it's just going to confuse things. I'm not advocating they loan out on-demand type deposits which are supposed to be 100% available all the time.

I think it's bad to bash on "fractional reserve banking", when that very well can refer to simply loaning out long-term savings.

Really what we have now is zero-reserve, paper reserve or "fictional reserve"... there are no reserves at all... so to even be talking about "fractional reserve", is pretty silly.

It also makes people who actually know anything about finance, wary of Ron Paul because when they see his supporters bashing on Fractional Reserve Banking, they probably think you mean that all accounts should just be 100% reserve, including long-term savings which the whole point of is to loan out so the person with the savings account can earn interest.

There's only one type of fractional reserve banking!

There's no way to "narrow" the definition of fractional reserve banking, because the definition is simply holding a fraction of deposits in reserve. The only thing that is variable is the fraction that is held in reserve.

"Loaning out long-term savings," doesn't require fractional reserves at all! If you make a long-term deposit in savings, the bank can loan it out during the term of the deposit. In fact, the length of the deposit is irrelevant. A bank can loan out any deposit for any length of time agreed upon, and pay a share of the interest to the depositor - all without fractional reserve banking.

I think people who actually know anything abour finance...

Would beg to differ on your singular definition and would instead adopt mine.

So now you pretty much agree with me, we're just arguing over the "proper definition" of Fractional Reserve Banking... and it's just about saving face, which I hardly care about... I'm done.

Keep going on about "fractional reserve banking", and see how many people who actually know something about finance are turned off by your confusing rhetoric when you should be focused on the fact we have NO RESERVE BANKING... not Fractional Reserve Banking.

Really? So defend that, let's hear about a different type of FRB

So, I've already mentioned fractional reserve banking is keeping a fraction of deposits in reserve.

Let's hear about your other definition of fractional reserve banking!

I don't agree with you at all. You claim that fractional reserve banking is not fraudulent, and I agree with Ron Paul that it is.

Further, we do have fractional reserve banking! In the very same reply you claim that we don't?

You're impossible.

And you're being obtuse...

And can't admit when you're wrong, and try to save face and then you get upvoted because most of the people left on this site have no ability to even form a coherent and logical argument at this point.

To be honest, I don't think even lending out checking deposit accounts is fraud either, as long as the bank isn't lying about it to you.

I just think it is less risky to only loan out mostly savings and keep near 100% reserves on on-demand checking.