The kind of man who wants the government to adopt and enforce his ideas is always the kind of man whose ideas are idiotic. – H.L Mencken
Fractional Reserve
Chris Leithner runs Leithner & Associates - a private investment company based in Brisbane. Originally from Canada, Chris holds a Ph.D. from the University of Strathclyde (Glasgow, Scotland). He is also the author of The Evil Princes of Martin Place (free intro chapter here) and The Intelligent Australian Investor. Chris blames poor policies - in particular, the existence of legal tender laws, fractional reserve banking and central banking - as being the GFC's ultimate causes.
Chris Leithner on 612 ABC Brisbane discussing in the first ten minutes: "Quantitative Easing" and what it means; Printing Money out of thin air; Failure of Keynesian Economics; Way to Prosperity: Through savings and production, not debt and consumption; Laws of Economics.
Interest rates go up again, but if we'd saved before going into debt, we wouldn't worry about interest rate movements - so why have we stopped saving and prefer going into debt on credit? Steve Austin is talking with Chris Leithner on 612 ABC Radio.
Commonwealth Bank of Australia Ltd (CBA) has announced a $5.66 billion annual profit for 09-10 and the usual suspects are demonising "free markets" and "capitalism" as the cause. The problem with this critique is that free markets don't exist in the banking system. The reason the Commonwealth Bank makes these massive profits is that government provides them with powers that they would not have in a free market. The first and most obvious is the access they have to the most horrific government agency of them all, the Reserve Bank of Australia. The Reserve Bank creates its own deposits out of thin air. It is able to do this because the government has allowed it to. It then lends out these deposits at an interest rate determined by a group of disturbingly secretive government bureaucrats. Then there is government-ordained fractional reserve banking, the government-ordained currency monopoly and more. The point is, don't be fooled by the zealots. Banks make their big profits because of government, not the market.
Let me present a syllogism. 1. Theft is immoral. 2. Inflation is theft. 3. Fractional reserve banking is inflationary. 4. Central banking is government-guaranteed fractional reserve banking. 5. Immorality leads to judgment. Therefore, we should expect. . . ? Economists, other than Murray Rothbard's disciples, never associate the concept of theft with monetary inflation. They speak of theft in terms of reduced efficiency and increased transactions costs, not morality. When it comes to avoiding morality, they are worse than lawyers. A lawyer might appeal to morality if he had a really weak case. This appeal might persuade a jury. An economist would rather lose the argument than appeal to morality. He regards the shame of invoking morality as personally more inefficient than winning the argument by an appeal to morality. Once you appeal to morality, academic economic theory collapses. Economics was the first science to be self-consciously designed to avoid moral questions.
A cartel is an organization made up of senior managers or their representatives in an industry. |
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