Fractional Reserve Banking, Short Selling, Borrowing and Lending

From: NF
Sent: Monday, January 16, 2017 12:23 AM
To: [email protected]
Subject: Re: Short Selling Stock and Libertarianism
In addition to the libertarian legal problems with short selling in and of itself, would you consider the activity shown in the following video to be criminal where a broker keeps of a fractional reserve of stock?

Would you consider the shorting of stock to be incompatible with libertarianism for the same reason you consider fractional reserve banking to be? When someone borrows and then sells a stock the lender of the stock as well as the buyer of the stock both simultaneously own the same share, just as under fractional reserve banking when multiple people have a claim to the same unit of currency. NF

Dear NF: In FRB, two people own 100% of something. That’s incompatible with private property rights, one of the basic foundations of libertarianism. In none of these other cases is that true. Au contraire, when people borrow and lend stocks there is no simultaneous ownership of anything greater than 100%
On frb, see the following:

Interview, shows common man is ignorant of frb

Public Attitudes to Banking

Bagus, 2003; Bagus, Howden and Block, 2013; Barnett and Block, 2005, 2008, 2009; Batemarco, 2014; Baxendale, 2010; Block versus Posner, 2008; Block and Caplan, 2008; Block and Garschina, 1996; Block and Humphries, 2008; Block and Posner, 2008; Davidson, 2008; Davidson and Block, 2011; Hanke, 2008; Hazlitt, 1979; Hollenbeck, 2013, 2014A, 2014B; Hoppe, 1994; Hoppe, Hulsmann and Block, 1998; Howden, 2013; Huerta de Soto, 1995, 1998, 2001, 2006, 2010; Hulsmann, 1996, 2000, 2002a, 2002b, 2003, 2008; Murphy, 2010; North, 2009; Polleit, 2010; Reisman, 1996, 2009; Rothbard, 1975; 1990, 1991, 1993; Salerno, 2010A, 2010B, 2011; Shostak, 2017A, 2017B.

Bagus, Philipp. 2003, ‘The Commons and the Tragedy of Banking’, November 12,

Bagus, Philipp, David Howden and Walter E. Block. 2013. “Deposits, Loans and Banking: Clarifying the Debate,” American Journal of Economics and Sociology, Volume 72, Issue 3, pages 627–644, July;;

Barnett, William II and Walter E. Block. 2005. “In defense of fiduciary media— a comment; or, what’s wrong with “clown” or play money?” Quarterly Journal of Austrian Economics; Vol. 8, No. 2, Summer, pp. 55-69;

Barnett, William and Walter E. Block. 2008. “Time deposits, dimensions and fraud,” Journal of Business Ethics;;;

Barnett, William and Walter E. Block. 2009. “Financial Intermediaries, the Intertemporal-Carry Trade, and Austrian Business Cycles; or; Crash and Carry: Can Fraudulent Time deposits lead to an Austrian Business Cycle? Yes.” Journal Etica e Politica / Ethics & Politics; Vol. XI, No. 1, pp. 455-469;

Batemarco, Robert. 2014. “Austrians, Fractional Reserves, and the Money Multiplier.” September 2;
Baxendale, Tony. 2010. Free Banking, the Balance Sheet and Contract Law Approach; March 15;

Block, Walter versus Eric Posner. 2008. “Posner vs. Block on fractional reserve banking.” November, 29;;

Block, Walter and Bryan Caplan. 2008. “Walter E. Block versus Bryan Caplan on Fractional Reserve Banking.” Nov 1;

Block, Walter and Kenneth M. Garschina. 1996. “Hayek, Business Cycles and Fractional Reserve Banking: Continuing the De-Homoginization Process,” Review of Austrian Economics, Vol. 9, No. 1, 1995, pp. 77-94;

Block, Walter and John Humphries. 2008. “Humphries vs Block on fractional reserve banking.” November 17;

Davidson, Laura. 2008. “Fractional Reserve Banking Is Indeed Fraudulent,” November 17;

Davidson, Laura and Walter E. Block. 2011. “The Case Against Fiduciary Media: Ethics Is The Key,” The Journal of Business Ethics. Vol. 98, Issue 3, pp. 505-511;;; 10.1007/s10551-010-0590-2

Hanke, Steve. 2008. “Banking Crises: Plus Ça Change…” GlobeAsia, November, pp. 168-169;–Plus%20%C3%87a%20Change,%20November%202008.pdf

Hazlitt, Henry. 1979. “Gold versus Fractional Reserves Part 1 .” The Freeman. May;

Hollenback, Frank. 2013. “Insuring Deposits, Ensuring Insolvency.” July 24;

Hollenback, Frank. 2014A. “Confusing Capitalism with Fractional Reserve Banking.” August 6;

Hollenback, Frank. 2014B. “The Fraud in Fractional Reserve Banking.” November 26;

Hoppe, Hans-Hermann. 1994. “How is Fiat Money Possible? or, The Devolution of Money and Credit,” Review of Austrian Economics, 7(2), pp. 49-74.

Hoppe, Hans-Hermann, with Guido Hulsmann and Walter E. Block. 1998. “Against Fiduciary Media,” Quarterly Journal of Austrian Economics, Vol. 1, No. 1, pp. 19-50,

Howden, David. 2013. “A Simple Math Question for Bankers.” December 28;;

Huerta de Soto, Jesús. 1995. “A Critical Analysis of Central Banks and Fractional-Reserve Free Banking from the Austrian Perspective,” Review of Austrian Economics, 8(2), pp. 25-38.

Huerta de Soto, Jesús. 1998, ‘A Critical Note on Fractional-Reserve Free Banking’, The Quarterly Journal of Austrian Economics 1(4), 25-49.

Huerta de Soto, Jesús. 2001. “A Critical Note on Fractional Reserve Free Banking,” The Quarterly Journal of Austrian Economics, Vol. 1, No. 4, Fall, pp. 34-35

Huerta de Soto, Jesús. 2006. Money, Bank Credit and Economic Cycles (Ludwig von Mises Institute, Auburn AL.)

Huerta de Soto, Jesús. 2010. “Economic Recessions, Banking Reform, and the Future of Capitalism.”

Hülsmann, Jorg Guido. 1996, ‘Free Banking and the Free Bankers’, Review of Austrian Economics 9(1), 3-53.

Hulsmann, Jorg Guido. 2000. “Banks Cannot Create Money”, The Independent Review: A Journal of Political Economy, vol. 5, no. 1, summer, 101—110;

Hulsmann, Jorg Guido. 2002a. “Free Banking and the Free Bankers.” Review of Austrian Economics. Vol. 9, No. 1. pp. 3-53;

Hulsmann, Jorg Guido. 2002b. “Free Banking Fractional Reserves: Reply to Pascal Salin.” Review of Austrian Economics, Vol. 1, No. 3.

Hulsmann, Jorg Guido. 2003. “Has Fractional-Reserve Banking Really Passed the Market Test?,” Independent Review 7/3, Winter, 399-422.

Hülsmann, Jorg Guido. 2008. The Ethics of Money Production Auburn AL: Ludwig von Mises Institute

Murphy, Robert P. 2011. The Fractional-Reserve Banking Question.” June 14;

North, Gary. 2009. “What Is Money? Part 5: Fractional Reserve Banking.” October 10;

Polleit, Thorsten. 2010. “The Faults of Fractional-Reserve Banking.” December 23;

Reisman, George. 1996. Capitalism. Ottawa, Il.: Jameson Books; pp. 954-963

Reisman, George. 2009. “A Pro-Free-Market Program for Economic Recovery,” November 20;

Rothbard, Murray N. [1963] 1975. America’s Great Depression (Sheed and Ward, Kansas City).

Rothbard, Murray N. 1990. What Has Government Done to Our Money?, Auburn, AL: Ludwig von Mises Institute;

Rothbard, Murray N. [1962] 1991. “The Case for a 100 Percent Gold Dollar,” In Search of a Monetary Constitution, Leland B. Yeager, ed., Cambridge, MA: Harvard University Press, pp. 94-136, and Auburn, AL: Ludwig von Mises Institute. See also “The Logic of Action One” pp. 364-384;;

Rothbard, Murray N. [1962] 1993. Man, Economy, and State. Ludwig von Mises Institute, Auburn, AL

Rothbard, Murray N. 1988. The Myth of Free Banking in Scotland, Review of Austrian Economics;

Salerno, Joseph T. Salerno. 2010A. Money, Sound and Unsound. Auburn, Ludwig von Mises Institute

Salerno, Joseph T. 2010B. “White contra Mises on Fiduciary Media,” May 14;

Joseph T. Salerno. 2011. “Dr. Joseph Salerno Explains Everything You Ever Wanted to Know About Money (But Were Afraid to Ask)”, The Daily Bell, July 3;

Dr. Joseph Salerno Explains Everything You Ever Wanted to Know About Money (But Were Afraid to Ask)

Shostak, Frank. 2017A. “Money Creation and the Boom-Bust Cycle.” January 2;

Shostak, Frank. 2017B. “Why Fractional-Reserve Banking Would Be Limited in an Unhampered Market.” January 16;

I am in enthusiastic support of publication of this paper, pretty much as is; well, with a minor revision. This is an important paper and deserves to be published. It is beautifully written, and makes a substantive contribution. The only recommendation I would make is that the author cite more of the literature in support of his thesis. I don’t require that each and every publication on the following list be mentioned by this author, and integrated into his paper, but, at least he should be aware of this literature, and utilize more of it.

II. pro frb:

Horwitz, 2010; Horwitz and Bodenhorn, 1994; McElroy, 2013, 2014; Rozeff, 2010; Sechrest, 1987, 1989a, 1989b, 1991a, 1991b, 1993, 2007; Selgin, 1994, 1998, 2007A, 2007B, 2007C; Selgin and White, 1996; White, 1992, 1995, 1999, 2003, 2007A, 2007B, 2007C

Horwitz, Steven and Howard Bodenhorn. 1994. “A Property Rights Approach to Free Banking,” Journal des Economistes et des Etudes Humaines, 5 (4), December, pp. 505-519.

Horwitz, Steven. 2010. “My Teenage Daughter Gets Fractional Reserve Banking.” January 11;

McElroy, Wendy. 2013. “Fractional-Reserve Banking: Not Fraud, Not Folly.” May 13;

McElroy, Wendy. 2014. “Fractional-Reserve Banking is Not Fraud.” November 13;

Fractional-Reserve Banking is Not Fraud

Rozeff, Michael S. 2010. “Rothbard on Fractional Reserve Banking: A Critique,”
The Independent Review, Vol. 14, No. 4, Spring, pp. 497-512

Sechrest, Larry. 1987. “White’s Free Banking Thesis: A Case of Mistaken Identity,” Review of Austrian Economics, November, Vol. II, 247-57.

Sechrest, Larry. 1989a. Review of George Selgin’s The Theory of Free Banking, Journal of Economics, Vol. XV, 196-98.

Sechrest, Larry. 1989b. “Free Banking vs. Central Banking: A Geometrical Analysis,” South African Journal of Economic and Management Sciences, November, Vol. II, 83-97.

Sechrest, Larry. 1991a. “Free Banking in Scotland: A Dissenting View,” Cato Journal, Winter, Vol. 10, No. 3, 799-808.

Sechrest, Larry. 1991b. “Banking, Central and Free”, pages 145-51, Magill’s Survey of Social Science: Economics, Salem Press.

Sechrest, Larry. 1993. Free Banking: Theory, History, and a Laissez-Faire Model, Westport, Connecticut: Quorum Books.

Sechrest, Larry. 2007. “Free Banking Basics,” The Free Radical, July/August, Vol. 76, 40-41.

Selgin, George. 1994. “Free Banking and Monetary Control.” Economic Journal 104: 1449-59.

Selgin, George. 1998. The Theory of Free Banking: Money Supply under Competitive Note Issue. Totowa, New Jersey: Rowman & Littlefield

Selgin, George. 2000. “Should We Let Banks Create Money?” The Independent Review, v.V, n.1, Summer, pp. 93–100

Selgin, George. 2007A. “Is fractional-reserve banking inflationary?” January 23. Free Market News Network;

Selgin, George. 2007B. “Notes on free banking: fractional reserves and economic development, part I” February 14. Free Market News Network;

Selgin, George. 2007C. “Notes on free banking: fractional reserves and economic development, part II” February 15. Free Market News Network;

Selgin, George A., and White, Lawrence H. 1996. “In Defense of Fiduciary Media – or, We are Not Devo(lutionists), We are Misesians!,” Review of Austrian Economics, Vol. 9, No. 2, pp. 83-107;

White, Lawrence H. 1992. Competition and Currency: Essays on Free Banking and Money. New York: New York University Press

White, Lawrence H. 1995. Free Banking in Britain: Theory, Experience, and Debate, 1800-1845, 2nd ed. London: Institute of Economic Affairs

White, Lawrence H. 1999. The Theory of Monetary Institutions. Oxford: Basil Blackwell

White, Lawrence H. 2003. “Accounting for Fractional-Reserve Banknotes and Deposits,” Independent Review 7/3, Winter, 423-41.

White, Lawrence H. 2007A. “Huerta de Soto’s Case Against Fractional Reserves,” Free-Market News Network (08 Jan)

White, Lawrence H. 2007B. “Huerta de Soto’s View of the History of Banking,” Free-Market News Network (30 Jan)

White, Lawrence H. 2007C. “Huerta de Soto on Attempts to Justify Fractional-Reserve Banking,” Free-Market News Network (05 Feb)

III. Ambivalent. These are of interest but there is some question as to on which side they lie:

Callahan, 2003; van den Hauwe, 2006, 2008; Williams, 1984.

Callahan, Gene. 2003. “The Libertarian Case Against Fractional-Reserve Banking,”, July 22

van den Hauwe, Ludwig. 2006. “The Uneasy Case for Fractional-Reserve Free Banking, Procesos de Mercado, Vol. III, No. 2, pp143-96;

van den Hauwe, Ludwig. 2008, forthcoming. “Credit Expansion, the Prisoner´s Dilemma, and Free Banking as Mechanism Design, Procesos de Mercado,
Williams, Jeffrey C. 1984. “Fractional Reserve Banking in Grain,” Journal of Money Credit and Banking. 16 (4): pp. 488-496

Larry White and I disagree as to how to categorize these, so, at his suggestion, I’m creating this third or “ambivalent” section


2:17 pm on January 20, 2017