Fiat circulates because people do not value it

We know from Gresham's law that bad money drives out good from circulation... that if people are able to pay for their purchases with a form of money which is overvalued then that money will flood into circulation. People will hoard the undervalued (or real) money and spend the overvalued (or fake) money into circulation so that they retain what they think is the more valuable form of money. This partly explains why fiat money is the predominant form of money in circulation today. We know that people do not truly value fiat money otherwise it would be hoarded and not circulate so widely. The fact that fiat money is in use... somewhat paradoxically... shows that it is both valued and not valued. (It is less valued than the other currencies.) People value the currencies they do not spend more than they value fiat money. Fiat currencies are valued the least of all the currencies and we know this because they circulate widely in the economy. People do not spend what they value.

Banks can print fiat currencies

Where there is deposit insurance fiat currencies enable banks to inflate the currency. The reason for this is that there is no economic reason for banks to not issue more credit than they have reserves. The lack of deposit insurance in a fiat regime means that banks can't cause inflation... but if there is deposit insurance then fiat currencies enable banks to cause inflation. If we assume that governments will generally prevent a bank run if they can then fiat alone is enough to enable banks to cause inflation. Fiat currencies mean not only the government but banks also can increase the money supply unless the government allows banks to fail which is unlikely. The only way to stop banks printing money (if there is a fiat currency) is for the government to let them fail... which makes fiat currencies very dangerous to the economy since the government is inclined to protect the banks. Fiat currencies are dangerous because the government likes to protect the banks. Fiat currencies enable banks to cause inflation because of deposit insurance.

Counterfeiting is no worse than bank inflation

It is inconsistent that unsound banking (defined by the existence of deposit insurance with no prohibition of fractional-reserve banking) is not illegal. It should be illegal for any institution other than the government to cause inflation and print money... otherwise those who do not have this ability are at an unfair disadvantage. It's not fair if there is a fiat currency and some people (non-banks) are not able to print money as the banks are. The present system is inconsistent and unfair. It's strange that banks are not also prohibited from printing money and that only they are allowed to increase the money supply. Why only them and not others? If there is a reason to prevent counterfeiting then there is also a reason to prohibit unsound banking and make it illegal. If counterfeiting is bad then so too is unsound banking. There is no reason for banks to be an exception to this rule. It's fine to let the banks issue currency provided everyone else can do the same... otherwise there is an inequality. Only if counterfeiting ceases to be a crime is it not also a crime for banks to increase the money supply. If counterfeiting is a crime then so too is fractional-reserve banking in its current form. If counterfeiting is a crime then so too is fractional-reserve banking as it exists today.

Fractional reserve banking is a form of taxation

In many ways we can think of the ability to increase the money supply (if there is a fiat currency) as a form of taxation. If there is a fiat currency then all inflation of that currency acts as a tax because it is a cost to the people who are using that currency... and everyone is using the currency otherwise it would not be an effective fiat currency. Because everyone is forced to use a fiat currency any inflation of that currency is a tax on everyone in the economy. When banks have deposit insurance (and have permission to increase the money supply) then they too are able to force a form of taxation onto the people. Banks can tax people if they have deposit insurance. (And are able to increase the money supply.) Fractional-reserve banking (frb) cannot exist in the free market because it is prevented by bank runs so we can say that frb is always a tax on the people.

Social mobility requires sound money

People can get out of poverty if the currency they use (and earn) retains its value. If there is constant inflation by fractional-reserve banking or some other source then the 'ordinary' person will forever be consigned to poverty. The reason for this is that if inflation is easily possible for some people then the savings of the rest of the population (however they are held) will always be worthless. Money earned quickly loses it value if there is inflation so people cannot establish long-term wealth they can only look after themselves in the short term. This means that only people who are willing to inflate or get into debt are able to make a significant purchase such as a house. Sound money is required for people to be able to get out of poverty. Without sound money people can only ever meet their day-to-day costs and never establish any meaningful form of wealth. Except (in a system of fractional-reserve banking) if they get heavily into debt and manage to pay that off... otherwise social mobility requires sound money.

Intelligent people are anarchists

Deposit insurance means that banks can't fail but in a Capitalist system... particularly if there is a fiat currency it is vital that banks (and all organisations) can fail. If banks cannot fail there will be inflation which is bad for savers and poor people who have no means of storing wealth other than cash. Deposit insurance (and inflation) is bad for poor people which means it should not happen. The government has no legitimacy other than to help poor people but deposit insurance is bad for poor people so the government should not do it. Inflation is one of the main causes of poverty and it is caused by the government. The government claims to help poor people but (in providing deposit insurance) it does the opposite. The existence of deposit insurance shows that government does the opposite of what it claims. If the government is good there would be no deposit insurance. Poverty is largely caused by statists who do not know that inflation is caused by deposit insurance. People who fight poverty cannot be both knowledgeable and statists because it is the state which causes poverty with deposit insurance. People who fight poverty must either be anarchists or stupid. Intelligent people are anarchists.

Frb is is temporary like the government

To be in the mafia is to be in a weak and vulnerable position because your income is derived from violence. Even if there are no direct repercussions you are still vulnerable because your practice is inconsistent. It is inconsistent to use violence to get what you want because you are being authoritarian and not recognising other people as equals. Something which is inconsistent is temporary... only consistent things will survive which means that eventually the mafia will not survive and is temporary. Because the mafia is temporary this means fractional-reserve banking is also temporary because it relies for its existence on deposit insurance which comes from the government. Governments are temporary so fractional-reserve banking is temporary.

Marxist banking will destroy the government

It will be difficult for the government to survive the emergence and appeasement of fractional-reserve banking. Fractional reserve banking will destroy the currency in one of two ways: either the 'private' liabilities will be too large for the government to absorb and there will be a collapse of the banking and financial system. (Which will be hard for the government to survive.) Or the government will absorb the balance sheet of the banks onto its own balance sheet in defiance of the people and again the government will fail. In either case banking (in its present Marxist form) will destroy the government.

Taxation is the problem with banking

The government keeps bailing out the banks. Without the government the banks could fail and the currency would be intact. The government destroys the currency by bailing out the banks.

There should be no deposit insurance

Not only are we taxed but also the government lets 'banks' increase the money supply which means we can't save and the incentive to earn money is reduced. If we are taxed (if there is a government) then there should be no deposit insurance.

The problem with banking is government

Banks can fail if there is no state... it is only because of the state and deposit insurance that banks cannot fail. Banks can only print money because of the state. It is the state which allows banks to cause inflation. In a stateless society banks would not be able to cause inflation.

Blind people are in control of the banking system

Without deposit insurance it is possible for a fiat currency to act as a form of sound money... in so far as it is possible for it not to be inflated. There can be sound money if there is no deposit insurance. There can't be sound money if there is deposit insurance. Those who are critical of the banking system and seek to reform it are advocates of sound money. People who defend the (present) banking system are opposed to sound money. If sound money is normal and sensible (which is consistent with money being a store of value) then to be opposed to bank reform (or blind to the problems of banking) is to be not sensible but insane. Opponents of bank reform fall into one of two categories... those who see that banks 'print money' and do not object to this (a difficult position to defend) and secondly those who do not see this. People who are blind to bank inflation waste the time of those who see it. Truthful people do not waste the time of other people. It is insane to deny what is true even if we are blind and cannot see it. (Being 'blind' is not an excuse.) Even blind people are insane and should defer to (or at least not obstruct) those who can see.

To protect the banks is a form of insanity

The position of those who defend the status quo of banking is that it is natural that banks cannot fail. People who defend banks claim that they should not be allowed to fail... they deny that banks should ever fail even if they make (have made) bad investments. These people are wrong... it is normal that banks are able to fail. There is no reason for banks to be protected and so to protect them is to do something unnecessary and stupid.

Fractional reserve banking is caused by democracy

Fractional reserve banking would not be possible if not for the consent of the voters. The voters endorse deposit insurance which enables banks to inflate the money supply (fractional reserve banks would fail if not for deposit insurance) and so fractional reserve banking (frb) requires democracy. Without democracy there would be no frb.

People will avoid drugs if they are harmful

There is no need to make harmful drugs illegal... if they do harm (more harm than they do good) then people will not want to take them. People can be relied upon to make the best decisions for thmselves. To make drugs illegal is to deny people the opportunity to experience the benefits of taking drugs which the state does not have a right to do. Drugs should be legal because they might be good.

There is an equivalence between inflation and debt

If people don't want to get into debt then the fractional reserve banking system will not cause harm. The harm caused by the fractional reserve banking system is reliant on people being willing to get into debt. If people refuse the offer of debt then the system will collapse (or at least there will be no further expansion) and there will be proxy sound banking. The problem with the banking system is the willingness of people to get into debt.

The government could prevent inflation but doesn't

The government is not concerned about inflation

The government are either upset that the banking system increases the money supply (in which case they would take action to prevent it... which they have not) or they do not care about it. Assuming the government cares about inflation we can deduce that the government do not want (people and) banks to print money. That being the case it would make more sense for the government to either remove deposit insurance or prohibit bank inflation. If the government does not mandate sound banking then it is either inconsistent or unconcerned about inflation. If the government cares about inflation it should mandate sound banking... to be consistent. The absence of sound banking demonstrates that the government is unconcerned about inflation. The government doesn't care about inflation otherwise there would be (only) sound banking.

Mortgages and loans increase the money supply

People who borrow money from banks with deposit insurance... which are not operating with full reserves... are depriving the rest of the population of value unvoluntarily. Borrowing money (if it increases the money supply) is to steal from your neighbours.

Fiat inflation is a violation of natural rights

We have a right to be protected from inflation by the government. If the government imposes taxation and a fiat currency on the population then they have a right for that currency to serve as a store of value. Inflation is a violation of natural rights if there is a fiat currency imposed on the population. Inflation is theft if there is a fiat currency... fiat currencies are different from store credit or any other form of private credit. The government has a responsibility to be vigilant with inflation and the people have a right to be protected from (not subjected to) it. The people have a right not to be subjected to fiat inflation.

The government doesn't think inflation is bad

There is no contradiction within the banking system because there is no reason it would make sense. (There is no reason for it to be logical.) If people (banks) can print money this is not a contradiction because there is no reason for it to be consistent. If a shop lets people steal its produce this is not a contradiction in itself... even if the shop is unaware that people are stealing from it still there is no contradiction. It is only possible for there to be a contradiction if the shop (the government) disagrees with something that is happening. If the shop objects to the theft then there is potentially a contradiction to be resolved. If the shop is fine with people stealing from it this is a stable condition... where everyone is being consistent.

This is the vulnerability of paper money... either banks or the government itself can print it and there is nothing to be done (no valid complaint). Paper money would be less 'bad' if banks cannot print it but even if just the government can print it paper money is still bad. It makes no sense that the government would let the banks print money (it serves neither the government or the people) but that is not an absolute contradiction only a subjective (in reference to the government) contradiction. If it is good to preserve the currency by preventing private counterfeiting then it would seem consistent to also prevent banks from doing so. Only if inflation is not bad (and the currency is not worth preserving) would it make sense to allow banks to print money.

Anarchists can understand the banking system

Only people who are not the government can see how banking works because to understand banking is to reject the state. To understand banking means that you realise the problems of deposit insurance which means (since it is the government which provides deposit insurance) you reject the government. No government-supporter would allow themselves to understand banking... only anarchists understand banking. To understand banking is to be an anarchist.

The government cannot see how banking works

It's not insane to claim that (some) private people (not only the government) can print money. (It's not insane because this is the reality.) It would perhaps be reasonable to assume that only the government can print money since it is valuable and we are given to believe that this is the case... certainly we are not informed of how the banking system works. We can be forgiven for thinking that only the government prints money. Since this is a reasonable assumption the government has a duty to inform its citizens that the reality is different and those that see that money is printed by banks are correct. The government should inform people that it too is of the opinion that banks print money... and does not object. Since it is illogical for the government to tolerate (private) banks printing money we can deduce that the government (like many other people) is blind to how the system works. It is only a small group of monetary reformers who can see how the system works.

It is not logical that banks can print money

There are no contradictions and everything is logical apart from where banking and deposit insurance is concerned. It would not be logical for lending institutions (banks) to be able to increase the money supply since counterfeiting is illegal. (It would only be logical for the government to be able to print money.) Since we expect money to be valuable (and clearly if it can be printed privately it will cease to be so) then it is natural to expect that no one (apart from the government) can print money. Since money is valuable it would be weird for 'banks' to be able to print it... and yet they can which is seemingly illogical. Everything is logical except for money and the banking sector... at the present time in history.

Only full reserve banks should be insured

If it doesn't prohibit bank lending the government should not give banks deposit insurance. The government should extend deposit insurance only to banks which agree not to make loans... if it should extend deposit insurance at all. If there should be deposit insurance it should be only for full reserve banks. Fractional reserve banks should not be given deposit insurance. There should be no insurance for fractional reserve banks.

Deposit insurance is a mistake because of loans

Deposit insurance should be conditional on banks not being allowed to make loans. If banks are insured by the state and can extend credit then they will be able to increase the money supply and cause inflation. We will not have sound banking if banks with deposit insurance can make loans. If banks can make loans they should not be given deposit insurance... the problem with deposit insurance is that banks can make loans.

People can print money because of the government

The problem for the government of deposit insurance is that it enables a combination of the banks and customers to 'print' money. Fiat money is imposed on the population... it is worthless without the threat of taxation but if banks are guaranteed their credit will have the same value as the base money. If banks are given deposit insurance then their credit-creation rights must be restricted otherwise there will be inflation. The government is responsible for the ability of the banks (and their customers) to inflate the currency. The people (banks and their customers) are able to inflate the currency only because of government deposit insurance and the lack of any prohibition on bank lending. If not for government deposit insurance then things would be fine... it is the fault of the government that the people are able to inflate the currency.

No bank has a banking licence

Banks don't have deposit insurance an institution which cannot fail is part of the state and not a bank. Banks are not part of the state. The government (often) describes part of itself as a bank when it is not and cannot be. All banks can fail. There is nothing wrong with banks... the problem is that there are so few of them... genuine banks (without deposit insurance) are illegal since it is illegal to take deposits without a banking licence (and subsequent insurance). There are no banks if deposit insurance is mandatory.

Deposit insurance should be illegal

Fiat currencies enable bank inflation

The combination of deposit insurance and fiat currency is a problem because it means that government promises (no matter how extreme) can be made whole. Deposit insurance without fiat currency is not such a problem... it is a problem if there is a fiat currency. Fiat currencies make deposit insurance possible.

The government should guarantee only utilities

Deposit insurance is not inevitable... not all governments protect the banking sector. It is possible for the government to allow banks to fail. Whilst the government have a perfect right to guarantee the banking sector (if the government is legitimate) it might not be best to do so. The government have a right to make mistakes and deposit insurance is a mistake. There could be a government which does not protect the banks.

The government should not protect the banks

Just because people might lose deposits is no reason for banks to be protected. If we take this to the (logical) extreme we can easily see a bank cynically extending credit (to a knowing customer) in the expectation that the government will protect the credit. If banks (and their customers) know the government will stand for their credit then the currency itself loses value. For a currency to retain value requires that no institutions (including banks) are guaranteed. Even bank failure should not be prevented by the state. Even banks should be allowed to fail as should all private companies. Protecting banks does not help the economy (debt does not need to be subsidised) and so there is no justification for it. Bank credit does not need to be guaranteed by the government... it is better for everyone if banks can fail. There is no problem with letting banks fail and providing insurance only increases the money supply or increases the gap between perceived money and real money. If bank credit is guaranteed it should be printed or it should be recognised that there is a big gap between perceived and real money. Without monetisation there will be a banking default which will cause price deflation... to avoid this situation the government should make it clear that banks can fail... otherwise there will be an assumption that bank credit is money. If bank credit is not money then banks can fail and this is how it should be. There is nothing wrong with banks failing... it is a natural part of life. It's worse for the government if there is deposit insurance. Deposit insurance makes the government unpopular.

There is no need to guarantee the banking sector

Deposit insurance means that banks (if they are guaranteed) cannot fail... this is a problem not only for people who hold cash but for everyone because banks and their customers can acquire all the assets. If fiat currency is used (which by definition is true otherwise deposit insurance is meaningless) then to guarantee the banks means they can print money and get rich. If they are insured the banks can acquire all the assets... which is not good. It's not good if only banks can buy things. It's good if everyone (including non-banks) can buy things.

Only crimes should be prohibited

As far as drug prohibition is concerned we must assume everyone is peaceful and that drug use has no associated violence. (Often the violence that we do see is a result of there being no legal recourse in the trade.) We deal as far as the law is concerned with the drug-taking in isolation and expect that if any violence arises then that behaviour will be dealt with on its own. We are isolating the drug use itself. Since the drug user is (otherwise) peaceful prohibition can only be for the benefit of the victim... but there is no victim by definition. We cannot hurt ourselves. There is no reason to hurt someone who is not hurting you... so there is no reason for prohibition. It makes no sense to punish someone for their own good. There is no reason to prohibit a non-crime. Only crimes should be prohibited.

The worst kind of banking is fractional reserve banking

The stock market measures inflation not growth

Fractional banking is a bit like money laundering

There is an equivalence between government-guaranteed fractional reserve banking and money laundering. With money laundering money acquired by illegal means (either counterfeiting or crime) can be 'washed' through the banking system. With fractional reserve banking we can consider the private citizen to be the person doing the washing for the bank. When the bank makes a loan and increases the money supply it cannot do so without a customer. The bank requires people to take out loans if it is to cause inflation. Without lenders the money supply remains the same.

We cannot do a crime against ourselves

The contradiction of drug prohibition is that it is based on the assumption that we are not always acting in our own best interest. There is no need to ban things for the benefit of the person who would otherwise do the action. We act in our own best interests. Banning things is only justified if we are doing it to protect someone who is not involved and does not have a choice to participate. If people choose to do something to themselves this is not a crime. We are able to hurt ourselves... by definition self-harm is not harm... as far as the law is concerned. We cannot do a crime against ourselves and so prohibition is a false concept. Crimes cannot be perpetrated against ourselves.

Banks aren't punished for counterfeiting

If part of the economy should have deposit insurance (the banks) then everyone should be protected from failure by the state... there is nothing intrinsically special about the banks. To take deposits confers no special authority or importance. The free market is able to provide (and price) security. The problems of deposit insurance (inflation) are not remedied by restricting its scope to only banks. (Giving it to everyone would not be much worse.) If banks should have it then it should be available for everyone.

The state prefers banks to people

The government has a preference for banks over the people. We know this because banks are guaranteed by the state from failure... bank credit is always as good as state credit (because of deposit insurance) but individuals (and non-bank companies) can fail.

People value something that is printed by banks

Fractional reserve banking enables banks to print money out of thin air... primarily because they have deposit insurance and cannot fail. If fiat currency is used then being protected from failure by the state means your institution can print money. This is true not just of banks but for all of the public sector. The difference with banks is that they are vastly insolvent as distinct from other public services which get funded each year from the government by the taxpayer. Because of deposit insurance banks can print money but this privilege is not extended to the rest of the economy. For this reason it seems strange that people would tolerate the bank-printing of money and not demand change. It makes no sense that people would use a bank-inflated currency.

Deposit insurance is a form of theft

Bailouts are robbery... we can accept and even expect the government to sometimes subsidise businesses and people. Otherwise there is little point in having a government. But the bailouts for the banks are for the richest in society not the poorest and for this reason they have no justification. Bailouts can only be valid if the recipients are poor and needy... which is not the case with the bank bailouts and deposit insurance. Since this is true then they can more accurately be described as a form of robbery committed by (a combination of) the government and the banks.

It's not only the government that can print money

Deposit insurance lets private banks print money

Deposit insurance enables private banks to print money out of thin air... deposit insurance is not enough to make a bank public... if the profits (assets) are privately held then the bank is private. Private banks can print (and sell) money because of deposit insurance.