5 ms·

actually they are connected. with a gold standard banks that run FRB risk actual bank runs. with a fiat system the government (fed) can provide unlimited back

actually they are connected. with a gold standard banks that run FRB risk actual bank runs. with a fiat system the government (fed) can provide unlimited backing so instead of a bank run the fed would print money, causing inflation (see the Savings and Loan crisis of the 80's). your buying power decreases in exchange for socializing the risk of bank runs. one of the reasons austrians bug me is their insistence on 100% reserve banking even though a cursory examination of history reveals that there is market demand for FRB. sure, demand would certainly be lower than it is now if there was no "lender of last resort" fed subsidizing risk, but it would still exist. most people care about 100% safe investments. however the austrian criticism that banks who mismanage their funds should be allowed to fail is spot on.

_delirium 17y ago
Yeah, there's more scope to maneuver in a fiat-money system; I was mainly objecting to what seemed to be the suggestion that under a gold standard FRB and the money multiplier somehow wouldn't exist. It seems that some people in this group want to somehow mandate that everyone conduct their transactions by literally exchanging gold coins in bags. But the people with that viewpoint tend to also be libertarians... how, consistent with libertarianism, can the government prohibit private individuals from exchanging pieces of paper saying "I owe you 5 ounces of gold", and force them to physically exchange the 5 ounces of gold instead? But if the government doesn't force them to physically exchange the gold, you have a money multiplier, and, in effect, privately minted fiat currency. And the related bubbles and crashes would also exist, as they have for centuries.
- nazgulnarsil 17y ago
  well.... http://unqualified-reservations.blogspot.com/2008/09/maturity-transformation-considered.html http://unqualified-reservations.blogspot.com/2008/09/maturit...
splat 17y ago
I was under the impression that there has been a variety of opinions concerning fractional-reserve banking in the Austrian School. While Rothbard was fervently opposed to it and Mises was hostile to it, I know that Hayek, at least, believed a fractional-reserve banking system to be necessary for an efficient economy.
- nazgulnarsil 17y ago
  it seems to me like the vast majority of modern austrians are basically rothbardians.

_delirium 17y ago

Yeah, there's more scope to maneuver in a fiat-money system; I was mainly objecting to what seemed to be the suggestion that under a gold standard FRB and the money multiplier somehow wouldn't exist. It seems that some people in this group want to somehow mandate that everyone conduct their transactions by literally exchanging gold coins in bags. But the people with that viewpoint tend to also be libertarians... how, consistent with libertarianism, can the government prohibit private individuals from exchanging pieces of paper saying "I owe you 5 ounces of gold", and force them to physically exchange the 5 ounces of gold instead? But if the government doesn't force them to physically exchange the gold, you have a money multiplier, and, in effect, privately minted fiat currency. And the related bubbles and crashes would also exist, as they have for centuries.

nazgulnarsil 17y ago
well.... http://unqualified-reservations.blogspot.com/2008/09/maturity-transformation-considered.html http://unqualified-reservations.blogspot.com/2008/09/maturit...

splat 17y ago

I was under the impression that there has been a variety of opinions concerning fractional-reserve banking in the Austrian School. While Rothbard was fervently opposed to it and Mises was hostile to it, I know that Hayek, at least, believed a fractional-reserve banking system to be necessary for an efficient economy.

nazgulnarsil 17y ago
it seems to me like the vast majority of modern austrians are basically rothbardians.