2 votes

Socialism and Anarcho-Capitalism Intersect

They intersect, that is, when one abolishes fractional reserve banking.

Why?

I have been thinking about finance and the economy for a long time and have figured it out.

1.

There is NO MULTIPLIER!!! Banks can only put as much 'money' into the economy as they first get. Fractional reserves only means that they can lie to the savers about demand deposit availability. Fractional reserve banking is BY DEFINITION the use of the inflation tax to defraud savers.

Without FR savers would have to set aside savings into CDs or explicit investment funds in order to receive returns. If they had to do this THEY WOULD DEMAND A HIGH RETURN. Thus, banks would receive fewer profits and savers - even small savers - would receive a greater portion of common economic growth.

2.

Without the ability to alchemically 'summon' money into the world (defrauding savers through inflation and FR), bankers might not have the funds to persuade workers to save rather than consume.

Assuming basic needs are met, workers can elect to live under varying conditions of austerity.

Under FR banking, Dave can spend his deposited savings on Christmas goodies while simultaneously the bank supports the wage of worker Dan.

Theoretically, worker Dan's desire to 'put in' extra man hours is independent of 'money supply' which is arbitrary. Rather, Dan's private microeconomic conditions determine how much he will 'put in' although money can influence his behavior.

Without FR, however, if Dave seeks to spend his money rather than save it, the bank has NO funds to support Dan's desire to expend excess labor. Dan might just sit on his hands and chill for the Holidays.

Under this circumstance, the bank would issue debt to Dan. The bank would owe DAN money, with interest!!!!

Because labor - man hours - is the heart of the real economy, not 'money', socialists have sort of correctly pointed out the problems with finance capitalism.

Under a non-FR banking system, there would still be rich or poor, rich capitalists would control technology and infrastructure as property that gave them an inherent wealth advantage.

However, any labor or savings would have immense and inherent value, which would lead to a much more even distribution of wealth.

History has conclusively proven that FR banking is insolvent without a central bank backed by a government that enforces legal tender exclusivity and taxes to coercively grant value to said fraudulent money.

In other words, eliminate FR banking, via abolishing the role of the state in finance and economic planning, and you should have those labor-favorable conditions that liberal socialists have been talking about.




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I wouldn't say eliminate FR

I wouldn't say eliminate FR banking because it is a businesses choice if they want to do that. Instead, stop reviving the failing banks and corporations that practice it because, ultimately, FR banking fails on its own and we are just flushing money away now by trying to support the zombie capitalism it brings.

Good post.

Southern Agrarian

The problem with FR is

The problem with FR is twofold.

First is the little fraud. They offer demand deposit - a lie - to get 'more' money then they would otherwise get. This lets the bank get a lion's share of profits from investment whereas the saver would want and deserve a greater share of those profits if they knew their money would be locked up in investments.

Second is the big fraud. There's no 'multiplier'. Banks can only put back into the economy what they receive. When a saver has the 'confidence' of a demand deposit, it's all fake with minimal interest if he's not spending it. Thus, when the saver wants to withdraw, and the bank wants to loan - money is created. Bank notes NOT backed by the real asset - let's say gold. This is inflation pure and simple. It's a TAX on saver and wage laborer for the bank's privilege to make the most interest off of everyone possible by fraud.

It always collapses in a panic. In the old times, depositors lost money, people lost jobs, there was a 'reset', and the bankers' position was stronger.

They created the Fed to 'fix' this problem. But all it did was institutionalize a subtle inflation tax and entrench the bankers' position.

The answer is CDs. Savers put money into CDs. Workers - in times of consumption - are paid in CDs backed by the loan given to the capitalist.

This way interest would serve those who deserve it: savers and workers. True, some workers' (executives per se) labor would be much more valuable than other workers. Also, there would be BIG savers (capitalists). But a free market favors participants equally, saving and labor would be inherently profitable enterprises - even in small doses.

Big skyscrapers might take a hit though, in favor of more home ownership. Alas.