[ExI] Banking, corporations, and rights (Re: Serfdom and libertarian critiques)

[Kelly Anderson]

On Fri, Feb 25, 2011 at 12:45 AM, J. Stanton <js_exi at gnolls.org> wrote:
> Kelly Anderson wrote:
>> The first baby step would be to get rid of the Federal Reserve. That I
>> would be behind today, immediately. I think that is a fairly common
>> stand amongst Libertarians, but I could be wrong.
>
> Absolutely.  But as I state above, the fundamental problem remains: a
> special class of people ("banks") with the special privilege of creating
> money from thin air.

OK. But without the central bank backing the creation of money through
this mechanism, the banks would either  a) be more conservative in
their money multiplier or b) purchase insurance against bank runs. In
either case, removing the central bank reduces the problems related to
fractional reserve banking.

I guess the real problem is understanding the alternatives. There just
isn't enough physical gold to run the economy (unless gold were
$1000000 an ounce or something... which would make the industrial use
of gold prohibitive... which would have its own downsides)

>> I have considered eliminating banks, but my question would be what
>> would you replace them with? There is a necessity for capital
>> investment, and economies of scale in managing capital are important.
>
> The problem isn't banks: it's fractional reserve banking.  The function of a
> "bank" is to keep your money safe, for which you would likely be charged a
> small fee.  If you didn't want to pay that fee, or you wanted to offset it,
> you would likely permit the bank to invest some fraction of your money for
> you on your behalf.

Without fractional reserve banking, the bank would not be able to pay
you interest, so what then is your incentive to invest?

> In other words, your "banking" account would look just like your brokerage
> account currently does.  Stocks, bonds, and money market funds are very
> liquid, but they're not "same as cash".  You can't write checks or use your
> ATM card against investments...only against your cash balance.

OK. I think I understand this.

> This would be far superior to our current system, in which you have no
> choice where your money is invested.  As I mentioned before, all of your
> money in a "checking account" is forced into shares of a hedge fund making
> 30:1 leveraged investments in mortgage-backed securities, and which you are
> forced by "legal tender" laws to accept as if it were real money.

But aren't professionals better equipped to invest money than a bunch
of amateurs? The same arguments that make Democratic Republics better
than pure Democracies seem to apply here. I want to deposit money in a
bank, have a Representative invest the money, and pay me interest. If
I want to do my own investing, then I have an investment account for
that. No?

>> As for business, do you think the CEO of a business should be
>> PERSONALLY responsible for the actions of each of his employees?
>
> Absolutely.  All people should be equal under the law.

Nobody would start a business were this the case. I suppose this is
what you want, but how do you get economies of scale without scalable
corporations?

> Allowing the creation of a virtual person ("corporation") onto which
> liability can be deflected gives officers of the "corporation" special legal
> privileges which the rest of us do not enjoy.  *** The very concept of the
> "corporation" violates the most basic tenet of human rights: equality under
> the law. ***

So does patent law, but for the same reason. Even the strictest
libertarians want some form of patent law (although we could argue all
day about whether software or DNA sequences should be covered by
patent law).

> Consider: We've created a race of virtual beings which are immortal, cannot
> be physically punished, have the money and resources of tens of thousands,
> and which can dissociate and reorganize their own component parts whenever
> and wherever it's convenient.  And then we're surprised that these
> "corporations" run everything...?

I for one welcome our new corporate overlords. ;-)

I see your point of course. I just don't know how we would get the
necessary economic scales to run the economy without this exception.
I'm here to learn, not to argue on points like this... so don't feel
that I'm being disagreeable just to disagree. I just want to
understand how such a system would function.

-Kelly