[extropy-chat] Free Banking FAQ

[Hal Finney]

Technotranscendence writes:
> I've updated my "Free Banking FAQ" to such an extent that I now consider
> it no longer under construction.:)  This, of course, does not mean I'll
> never ever revise it.  The result can be found at:
>
> http://uweb1.superlink.net/~neptune/BankFAQ.html
>
>  I would appreciate any comments for improving it.  Also, if you think
> there's some question or information I've left out, please let me know,
> on list or off.

I thought this was good but here are some questions and comments to
consider for future revisions.

You should make it more clear right up front that free banking is
fractional reserve banking.  You say it is known as "fractional reserve
free banking" but unfortunately that is slightly ambiguous and could be
interpreted as meaning that these banks are free of fractional reserves,
i.e. that they maintain 100% reserves.  Since many of those suspicious of
centralized banking also distrust fractional reserve banking, it would
be better to make it clear that free banking discards the government
monopoly but allows fractional reserves (although of course it does
not require them).  Maybe you could just move the last question, about
fractional reserve vs 100% gold reserves, up to nearer the front.

You have some technical terminology, such as speaking of notes trading
"at par".  It's not clear what this means.  You also refer to "notes"
and I'm not sure that the average person would associate this word
with paper money.  "Banknotes" might be less ambiguous.  Of course it
depends on whether your audience is assumed to already be familiar with
financial terminology.

A couple of other questions you could address: What about the problem
that stores would not know which currency to denominate their prices in?
Or what if you don't happen to have the currency in your wallet that a
store wants to receive?

Another point you might make is that we actually have a free banking
system in the international arena.  There is no world government to
enforce a global currency.  Generally each country has its own currency
and its own banking policies, and currency speculators and traders
affect the relative prices.  Free banking would extend this laissez faire
environment to a smaller scale, but we can already get a good idea of how
it would work by witnessing the behavior of international currency flows.

(Of course, proponents of the idea may object to attempts to relate it
to reality since it allows for objective tests of the strength of free
banking!  It's much easier rhetorically to support an untested notion
than one whose strengths and weaknesses are exposed before the public
eye every day.)

Hal