I asked this question in one thread and I don't think it was ever answered.
So I'm going to ask it again. For all the complaints about fractional reserve banking and how it lends out from checking accounts and savings accounts, I have to ask how is this not implicit in the contract when there is already a "warehouse" type system in place for people - safety deposit boxes. Is their a gold-bug argument against this?
For more, I'd consult the podcast at FEE by Jeffrey Rogers Hummel.
existence is elsewhere
Because safety-deposit boxes are not-for-demand use. That is to say: the items in it must be taken out by hand and by going there. Demand deposits are a looser form of a safety deposit box in that it's simply money which can easily be transferred and for which only you have use.
But is that really such a great deterring factor considering that people spend a great majority of their money in local areas? I just don't find that to be a very convincing argument. Seems like if people really didn't want their money to be lent out through their savings and checking accounts, they would spend more cash and leave their savings in a safety deposit box close to their homes - where most people rarely wander far away from.
Wilmot of Rochester:Seems like if people really didn't want their money to be lent out through their savings and checking accounts, they would spend more cash and leave their savings in a safety deposit box close to their homes - where most people rarely wander far away from.
I forget...why is it that people cannot have 100% reserve banks or advocate such a banking system?
'It is difficult to imagine any normal person wishing to meet Marx for a third time.' - Alexander Gray, The Socialist Tradition
Anarchist Cain: Wilmot of Rochester:Seems like if people really didn't want their money to be lent out through their savings and checking accounts, they would spend more cash and leave their savings in a safety deposit box close to their homes - where most people rarely wander far away from. I forget...why is it that people cannot have 100% reserve banks or advocate such a banking system?
See... I think they actually can though. That's where safety deposit boxes come into play. They just don't want to have that type of bank, and rightly so I think.
Wilmot of Rochester:But is that really such a great deterring factor considering that people spend a great majority of their money in local areas?
Wilmot of Rochester:I just don't find that to be a very convincing argument. Seems like if people really didn't want their money to be lent out through their savings and checking accounts, they would spend more cash and leave their savings in a safety deposit box close to their homes - where most people rarely wander far away from.
How many people even know that their money in a savings/checking account is made into loans by a bank?
Everybody that I've ever talked to about having a savings/checking account when asked why states either (1) cause it's safer than keeping money at home, (2) It's easier to pay bills by direct deposit and then either writing a check or paying a bill on-line.
When a person opens an account they are never told by the bank that their money is for banks to loan. Is it written as a footnote in fine print somewhere on one of those brochures they hand out during the opening of an account process?
"I used to see a mountain as a mountain.. Thereafter.. when I saw a mountain; lo! it was not a mountain.. yet now of final tranquillity: I see a mountain just as a mountain as I used to.." - Master Yuan; molon labe
Yes. Although, it's misleading to call a loan to a bank a "bank account", a "savings account", or a "checkings account"; or, for that matter, it's also misleading to call borrower a "bank".
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Knight_of_BAAWA:And if a woman didn't want to be raped, she wouldn't wear a miniskirt, right?
It would certainly help if did not say to everyone:
Come and fuck me while I resist!
The dollar is debased every year. Storing your paper dollars in a safety deposit box isn't a practical way to save under a fiat money regime. It's also far more convenient to use a piece of plastic to buy things online, at the store and so on rather having to go into your bank (between 9:30-4:30!) to withdraw money -- it also means you don't have to carry large amounts of cash on your person.
Then there's the moral hazard of deposit guarantees...there's no reason to use a safety deposit box for cash.
Knight_of_BAAWA: Wilmot of Rochester:But is that really such a great deterring factor considering that people spend a great majority of their money in local areas?I don't see the relevance. Wilmot of Rochester:I just don't find that to be a very convincing argument. Seems like if people really didn't want their money to be lent out through their savings and checking accounts, they would spend more cash and leave their savings in a safety deposit box close to their homes - where most people rarely wander far away from.And if a woman didn't want to be raped, she wouldn't wear a miniskirt, right?
The relevance is that you claim people don't simply use safety deposit boxes because of lac of ease to getting to the box, but the fact is that most people live very close to their banks and if they didn't want to have their currency re-lent out, they would use safety deposit boxes that they could store their savings in keeping the rest of their cash on hand or as a reserve to pay credit card bills.
The last comment about rape didn't really make sense.
wilderness: How many people even know that their money in a savings/checking account is made into loans by a bank? Everybody that I've ever talked to about having a savings/checking account when asked why states either (1) cause it's safer than keeping money at home, (2) It's easier to pay bills by direct deposit and then either writing a check or paying a bill on-line. When a person opens an account they are never told by the bank that their money is for banks to loan. Is it written as a footnote in fine print somewhere on one of those brochures they hand out during the opening of an account process?
All good questions that I don't know the answer too. I think that most people choose to use a bank out of convenience and social norm. If we were to suggest, however, that it was out of convenience that people use banks, wouldn't it be safe to say that in a free-market people would probably still use a fractional reserve bank more than a "warehouse" just because it's more convenient to be paid to stash your money in a bank that will re-lend it out than it is to pay to stash your money in a warehouse that will pretty much just sit there when you could have invested in a nice safe instead?
I know that's why my father decided to just by safes instead of getting a deposit box.
Wilmot of Rochester:The relevance is that you claim people don't simply use safety deposit boxes because of lac of ease to getting to the box
Wilmot of Rochester:but the fact is that most people live very close to their banks and if they didn't want to have their currency re-lent out, they would use safety deposit boxes that they could store their savings in keeping the rest of their cash on hand or as a reserve to pay credit card bills.
Knight_of_BAAWA: No, that's not really my claim. My claim is that safety-deposit boxes have one use, demand deposits another, and time deposits still another.
No, that's not really my claim. My claim is that safety-deposit boxes have one use, demand deposits another, and time deposits still another.
First, I'm not going to acknowledge the flaming.
Second, but why do they have that one use? Why, if people were so concerned with it, wouldn't people use a tool to ensure that their money wasn't re-lent out?
My only conclusion is that they aren't and fractional reserve banking works.
Wilmot of Rochester: All good questions that I don't know the answer too. I think that most people choose to use a bank out of convenience and social norm. If we were to suggest, however, that it was out of convenience that people use banks, wouldn't it be safe to say that in a free-market people would probably still use a fractional reserve bank more than a "warehouse" just because it's more convenient to be paid to stash your money in a bank that will re-lend it out than it is to pay to stash your money in a warehouse that will pretty much just sit there when you could have invested in a nice safe instead? I know that's why my father decided to just by safes instead of getting a deposit box.
That's why I never liked a savings or check deposit cause I always thought what's the point. The interest alone creeps in the pennies and the money never stayed in long enough when I was 16 when I first had one, so, I withdrew the money and never had one again til I was married only because to pay bills is easier when the money is in the bank since it's safer to send checks rather than cash through the mail. So it is a matter of convenience. I used to think the same thing, why not have a safe instead.
So being paid to stash money in a bank doesn't happen in significant terms. Unless in CD's or something more than a savings or checking account, and CD's are not on-demand so that seems to be a tangent.
I think a significant point of FRB is the dishonesty. Nobody really knows their money isn't there (meaning all customers of the bank). They expect to get their money on demand. Thus why when the confidence in any bank decreases people worry and runs may ensue. And since this U.S. economy is deeply based on fiat, why so much infrastructure (the actual buildings of the Federal Reserve, FDIC, etc...; all costing money) and other market structures (FDIC, etc...) are in place as huge overhead to try to fill the big fiat hole.
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