Irregular Deposits and "Acts of God"

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dsimo04 Posted: Fri, Sep 5 2008 12:38 AM

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On page 7 of Money, Bank Credit and Economic Cycles Professor Jesus Huerta de Soto claims - seemingly without justification*- that a social function of irregular deposits (deposits of fungible goods) is that they are guaranteed by the depositary "even in the case of an act of God" while regular deposits are not.  

Can anyone explain why this is?  If a depositor of fungible goods and a 100% reserved depositary from Pompeii are on a trip to Rome, and upon return to their destroyed city (bank and all) is the depositary truly legally responsible for the depositor's lost deposit?  What is the important difference in this case between a regular and irregular deposit that allows for the depositary to be liable?

*  Professor Huerta de Soto does provide a reference in Italian.  I do not read Italian, but I think my Spanish is good enough to make out that his reference (note number 7 at the bottom of page 7) doesn't justify the case, it simply reiterates what Professor de Soto says.

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Anonymous Coward replied on Fri, Sep 5 2008 6:58 PM

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So if god commanded the owner of the bank to melt down all the deposited gold coin and make a golden calf for public display the depositors would be out of luck then?

A more realistic example would be if the Bank of Pompeii were to transport their gold deposits by ship and the ship went down in a storm. Now all the depositors gold is lost at the bottom of the ocean, do you think the bank owners should be able to just claim 'an act of god' and go about their lives without being held responsible under their contractual obligations?

Or if they lost 10% of their deposits, do all depositors get to share in this bad luck by having their bank balance reduced by 10%?

dsimo04:

What is the important difference in this case between a regular and irregular deposit that allows for the depositary to be liable?

If someone lost a non-fungible deposit, say like their grandmother's favorite chair, then all they would be able to do is give the replacement value if that were stipulated in the contract. The original item is lost. Who's going to store an item of value in a non-insured storage facility.

Fungible deposits don't really matter, if a bank is destroyed then the money lost could be replaced by selling off some other piece of property and returning the stored 'items' to the depositor. The contract is fulfulled to the satification of all parties involved.

Claiming an 'act of god' is pretty bogus anyway.