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Fractional Reserve Banking versus Ayn Rand’s Ethics
July 2nd, 2009
A response to those who think the ethics of Ayn Rand’s philosophy, Objectivism, is consistent with fractional reserve banking.
In the first part of this video, Paul McKeever gives the general history of how gold came to be money, how banks came into being, how banks started to lend on a fractional reserve, how and why central banks were formed, and how gold was replaced with paper. In the second part, Paul explains the true nature of inflation, and exactly what it was that Ayn Rand found to be ethically wrong about it.
Duration : 0:40:7
July 2nd, 2009
Yes you are right …
Yes you are right it makes zero sense….but that is how it works. It’s quite amazing when you think about it. Learn more about the fractional reserve system.
July 2nd, 2009
Excellent !!!
Excellent !!!
July 2nd, 2009
Do you understand …
Do you understand the concept of fractional reserve banking?
July 2nd, 2009
Fractional-reserve …
Fractional-reserve banking is based on keeping only a fraction of the deposits in reserve. The rest, the bank loans out. It’d be no problem if they actually entered a contract with the depositer in which he can’t withdraw his money until a certain time passes. This is not the case. They owe an obligation both to the depositer and they’re loaning out the money.
Whenever a bank such as this makes a loan, there’s an increase in the money supply.
July 2nd, 2009
30 miles ?
30 miles ?
July 2nd, 2009
Where did he end up …
Where did he end up going??
July 2nd, 2009
great job! I love …
great job! I love the step through and very clear portrayal and definition of what the banking system is doing to our lives and economies.
The Ayn Rand thing is secondary but still interesting.
The defining of the fractional reserve banking system is very lucid and clear and accurate!
July 2nd, 2009
Which would make a …
Which would make a convincing argument if we drop the context.
Both the person who has been loaned to and the person who deposited the money now own that amount (even though the latter does not hold it directly in his hands), which the latter also has a right to withdraw at any time.
July 2nd, 2009
Yes. Apparently you …
Yes. Apparently you not.
It is literally impossible for someone to loan out what he has not.
July 2nd, 2009
You make zero sense …
You make zero sense. No one can loan out more than they have. It is illegal for banks and anybody else to create coins or banknotes.
July 2nd, 2009
Did we watch the …
Did we watch the same video? By loaning out more than they have, thus decreasing the value of the original deposit.
If I put my money in a bank, it certainly is their obligation not to intentionally decrease its value.
July 2nd, 2009
And how exactly are …
And how exactly are they robbed as long as the banks pay their obligations?
July 2nd, 2009
The people who …
The people who deposit the money.
July 2nd, 2009
What about 1 week …
What about 1 week loan? 1 day? 1 hour? 1 minute. This much time you have to wait for a demand deposit payment.
July 2nd, 2009
Stolen from who?
Stolen from who?
July 2nd, 2009
Growth of the …
Growth of the economy overall. The underlying business model of the fractional reserve banking model is a sound one and therefore good in the sense that it inflates the opportunities available to all people and ultimately their standard of living.
July 2nd, 2009
Whose growth? …
Whose growth? Certainly not the ones’ who get stolen from.
July 2nd, 2009
Should all fines be …
Should all fines be scaled by net worth to make them equally punitive? Should any organization be tax exempt since that creates a similar transfer of wealth by leaving everyone else with a heavier burden?
Fractional reserve banking hastens the pace of growth. This is a positive externality that I believe more than makes up for the inflationary risk. I think income tax should be slightly negative to undermine black markets and the tax burden should fall entirely on consumption and ownership.
July 2nd, 2009
I don’t see how the …
I don’t see how the gold standard has anything to do with fractional reserve banking. Whether currency is better backed by gold or taxing authority seems to beg a different question: “Is there such a thing as a trustworthy government?” I think there is. I don’t think we presently have one. But they are different issues that have nothing to do with fractional reserve banking.
July 2nd, 2009
No. They did it to …
No. They did it to avoid creating an opportunity for arbitrage. You can convert your wealth into any commodity you choose any time you like. If you want to be on the gold standard, there’s nothing stopping you.
July 2nd, 2009
I remember when a …
I remember when a quarter was minted with pure silver. That is gone now replaced by a quarter made from a mixture of other metals . Did the Federal Reserve do this to make it easier to devalue the dollar by taking away our access(real silver in our coin purses) to precious metals?
July 2nd, 2009
“Now obviously, it …
“Now obviously, it would not be immoral to mine out a large amount of new gold, which would have the same effect,” - thats actually incorrect. it would have exactly the opposite effect of pushing out more notes vs gold. putting more gold into the system would increase the value of the notes not decrease them.
July 2nd, 2009
Hey Paul. You are a …
Hey Paul. You are a great teacher.
July 2nd, 2009
This sounds alot …
This sounds alot like Paul Grignon’s ” Money As Debt”. Reguardless, a good video.
July 2nd, 2009
Haha and people …
Haha and people somehow believe that they can factually argue about god.