The process of legal reform–say, of tax law, or patent or copyright law–by which the law ebbs and flows, and continually changes, provoking cries of doom and disaster from biased special interest chicken littles, calls to mind an analysis by Llewellyn H. Rockwell, Jr., in his book The Left, the Right, and the State (Auburn, Ala.: Mises Institute, 2008), pp. xiii-xiv (emphasis added):
What is the state? It is the group within society that claims for itself the exclusive right to rule everyone under a special set of laws that permit it to do to others what everyone else is rightly prohibited from doing, namely aggressing against person and property.
Why would any society permit such a gang to enjoy an unchallenged legal privilege? Here is where ideology comes into play. The reality of the state is that it is a looting and killing machine. So why do so many people cheer for its expansion? Indeed, why do we tolerate its existence at all?
The very idea of the state is so implausible on its face that the state must wear an ideological garb as means of compelling popular support. Ancient states had one or two: they would protect you from enemies and/or they were ordained by the gods.
To greater and lesser extents, all modern states still employ these rationales, but the democratic state in the developed world is more complex. It uses a huge range of ideological rationales—parsed out between left and right—that reflect social and cultural priorities of niche groups, even when many of these rationales are contradictory.
The left wants the state to distribute wealth, to bring about equality, to rein in businesses, to give workers a boost, to provide for the poor, to protect the environment. … The right, on the other hand, wants the state to punish evildoers, to boost the family, to subsidize upright ways of living, to create security against foreign enemies, to make the culture cohere, and to go to war to give ourselves a sense of national identity. …
So how are these competing interests resolved? They logroll and call it democracy. The left and right agree to let each other have their way, provided nothing is done to injure the interests of one or the other. The trick is to keep the balance. Who is in power is really about which way the log is rolling. And there you have the modern state in a nutshell.


















From Horwitz’s post “Mises and His (Apparent) Call for 100% Reserves” at “Coordination Problem” (formerly The Austrian Economists).
Steve,
Putting aside what Mises thought, it seems to me clear on libertarian principles that as capitalist acts between consenting adults are not aggression and are thus permissible, fractional reserve banking is fine on libertarian grounds so long as there is no fraud. Do you agree with this?
However, given the immense potential for confusion–customers are told they are “depositors” and they often think their money is “in” the bank; while most of it is lent out and thus they get interest–deposit should be distinguished from a loan. The customer should be apprised that he is receiving a credit instrument. Do you agree?
Any claims that he is “guaranteed” to be able to get his money out at any time are also problematic since a run is at least possible. So the “guarantee” language should not be used; this is especially so if the frbnotes contain a suspension clause. Do you agree?
If so, then the only dispute remaining is a purely economic one. You think frbnotes, credit instruments, can circulate as money; some Rothbardians do not (I am not sure). You think it’s possible to have a stable freebanking system that is able to arrange its affairs so as to avoid runs; some Rothbardians do not (I do not). You think the ability of freebanks to expand the supply of money in response to increased demand for money is economically useful, for “stickiness” and similar “market failure” [or so I perceive this argument] reasons; Rothbardians do not (I do not; it seems to me that there is no stickiness problem that needs a solution; and that the freebankers implicitly and fallaciously equate fiduciary money created out of thin air with wealth).
Do you agree that the economic issues in the last paragraph are the basic crux of disagreement between freebankers and 100% reservers? It seems to me that in a free society freebankers would be free to try to set this up; and we would see what happens. (Yes, I know some of you think we have historical evidence already; but the point is the libertarians ought to have no real dispute here; and the economists can either debate on apriori grounds, or on empirical ones–on the latter, one approach is to just try it and see what happens.)
By the way I gather at least some of you freebankers would prefer a 100% reserve gold standard to the current federal reserve fiat money fractional reserve system; and I know I would prefer your private freebanking fractional reserve system to the current centralized statist version of fractional reserve system.
Posted by: Stephan Kinsella | September 04, 2009 at 11:27 AM