Tuesday, 17 May 2005

Cue Card Libertarianism -- Banking

As with trade in goods and services, trade in money (the means of exchanging goods and services) should be free – there should be no government involvement, save that which is consistent with proscribing force and fraud.

All banking should be private, with citizens free to use any means of exchange of their choosing, and any repository (Bank, Building Society, Finance House, mattress, sock, etc) in which to lodge it. Banks should be free to lend as much or as little of their reserves as they choose, on terms agreed to by them and their depositers and borrowers.

In a libertarian New Freeland, not only would the Reserve Bank Act be repealed, but the Reserve Bank itself would be disestablished and prudential regulations abolished.

For further reading, please see Larry Sechrest's Collectivist Banking and Robert P. Murphy's The Mystery of Central Banking, and George Reisman's two articles Profit Inflation by the US Government and The Anatomy of Deflation.

This is part of a continuing series explaining the concepts and terms used by libertarians, originally published in The Free Radical in 1993. The 'Introduction' to the series is here. Tomorrow, 'Bureaucracy.'


  1. This should be under "Conspiracy Theories". I will fisk it on my own bandwidth, but suffice to say the end is nigh for most Austrian Economic theory. Mises org has been totally, hilariously wrong for years, and Reisman's and others New World Order conspiracy theories are riddled with errors that are frankly insulting to those who work in the money markets. This is why most libertarians and objectivists are driving 10 year old Toyotas and I'm driving a Mercedes Kompressor. Tell it to Lew Rockwell.

  2. You have the advantage on me here, Ruth, since I have no idea what this is about: "Reisman's and others New World Order conspiracy theories..."?
    I'm well aware Lew Rockwell is a nutter, but these errors and conspiracy theories you're talking about from Mises and Reisman have me at a loss. I look forward to your fisking, and to being allowed to wax your Mercedes.

    Let me just say to help you with yoru fisking that one of the achievements of Reisman is to reconcile Austrian and neo-classical economics, fixing errors or misunderstandings as he does. See for explanation of this Larry Sechrest's review of Reisman's 'Capitalism,' called oddly enough 'A Synthesis of Austrian and Classical Economics: George Reisman's Capitalism.' You can find it here: http://www.mises.org/journals/scholar/sechrest1.PDF

  3. I think a few people working in the money markets need some insulting.

    Many understand how to exploit the system, and they get this idea that their thinking is beyond reproach.

    You can look at just about any economic theory and see it riddled with errors. It's a contentious field. The trick is to see the bits they get right.

    Some of the top economists worked for IMF for example, and they thought they understood the money markets. Yet the IMF is an excellent example of taking currently accepted theories and completely stuffing up developing economies. People looking at the results of the IMF come to the conclusion that its either a conspiracy theory to manipulate the world markets for the profit of America (who else) or these experts are monumentally stupid.

    Joseph Stiglitz, chief economist and vice president of the World Bank from 1997-2000 had this to say:

    I was often asked how smart--even brilliant--people could have created such bad policies. One reason is that these smart people were not using smart economics...

    ...But bad economics was only a symptom of the real problem: secrecy. Smart people are more likely to do stupid things when they close themselves off from outside criticism and advice. If there's one thing I've learned in government, it's that openness is most essential in those realms where expertise seems to matter most. If the IMF and Treasury had invited greater scrutiny, their folly might have become much clearer, much earlier.

    ...But, with the IMF insisting its policies were beyond reproach--and with no institutional structure to make it pay attention--our criticisms were of little use.

    I had a read of all of your links PC, and I can see a few things they got right. Like Ruth, I also disagree with some of their assertions, but that is probably the only area we might agree upon.

    To my mind, the current financial system (or the financial institutions that exploit the system) have not been particularly kind to us as a world economy, so reading this kind of stuff is good!

    We need a few decent conspiracy theories to get people looking harder at solutions to the broken bits.

    George Soros pointed out "The political process is less effective than the market process in correcting its own excesses (Pg207, Crisis of Global Capitalism) but the reality is the Political process is fairly well intermeshed, and any significant reform is going to be much slower.

    Market adjustments might be quick in coming, but at a great personal cost to many people.

  4. With no Reserve Bank in the picture, who's going to issue the money supply?

    You Libertarians surely don't trust the CENTRAL GOVERNMENT to do this - right?

  5. ".... but suffice to say the end is nigh for most Austrian Economic theory. Mises org has been totally, hilariously wrong for years ..."

    Maybe, but when the 70 year fiat monetary experiment collapses, like it is doing now, the extent of collectivist destruction does not make "being right for years" any solace.

    In monetary matters you must be always right, or the market shall speak forever upon your crap paper promises.

  6. useful diagram:


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