[e-gold-list] Re: Gary North Response

[Jim Davidson]

> I didn't understand his point about credit cards.  Northern Rock 
> experienced a perfectly good bank run, in spite of the fact that most of 
> their customers probably have them.

Northern Rock is not a credit card issuer.  Visa, and related
companies have not experienced such a run, and might not, if
Gary's view is correct.  Visa used to be called BankAmericard,
and I suspect still has some relationship to Bank of America.

As well, the major banks seem to think that the existence of the
taxpayers represents their method to avoid default.  Can anyone
recall Continental Illinois?  To a lesser extent, the same is
true for the major corporations, such as Chrysler, for a time
Daimler.

> where there would have been none left without a bailout from the taxpayer.

So, er, Pete, do ya support a bail out from the taxpayer?  Or should
banks go bankrupt and let the creditors take it out on the officers,
directors, and assets of the bank?  If the government cannot tolerate
failure of companies, what signals are there to be used in choosing
a banking strategy?  And what happens when the government fails, such
as by the monetary inflation that arises from taking on more obligations
than the gov't can pay for?

> I also think he's overstating his case with regard to fractional-reserve 
> banking.  Bank customers are not being deceived; the nature of banks is 
> well known, and you don't have to put your money in there.

The term "demand deposit" is fraudulent.

Your idea that "you don't have to put your money in there" is amusing.
So, I could open up a banking institution and offer demand deposits,
right? Wrong.  Not without a license.

Your position in this matter is essentially statist.

> box.  A safe deposit box has a 100% reserve

Not true.  The safe deposit box may be rifled and the assets in
there seized at any time on a court order, the trivial effort to
obtain such being a matter of longstanding injustice.  People who
had gold coins in safe deposit boxes in 1933 were shocked to have
their coins seized by government decree.

When the bank talks about safety deposit boxes, whose safety
do you suppose they mean?  Not yours.  They refer to theirs.

> so you shouldn't be affected 
> by a bank run.

By a run itself, no, but by the effect of the run, which is a
mandatory bank holiday.

> On the other hand, you're probably being too careful, so 
> losing the return you could be making on your money by allowing 
> the bank to invest it.

Invest?  You mean, for passbook savings interest?  Which is,
as I recall, generally less than a 3 month Treasury bill.

Have you seen this page:
 http://caseyresearch.com/displayCcs.php?id=3

"Ironically, for a purportedly 'safe' investment, buying 3-month
T-bills with the fed funds rate now at 2% is a guaranteed money
loser once you take inflation into account.

"And it is actually much worse than many people think: to provide
a more consistent look, John Williams of Shadow Statistics
recalculates CPI the old-fashioned way -- using the U.S.
government’s original formula from 1980 -- before they started
fiddling the numbers to make the economic picture look rosier
than it really is. His Shadow Stats show the actual rate of
inflation in the United States currently running over 11%."

> The real problem with fractional-reserve banking is slightly different, 
> IMO.  Because of the risk that a bank collapse could spread through the 
> system, most countries operate some sort of government guarantee for 
> their banks.  This means that the taxpayer has taken on an enormous 
> potential liability. 

Indeed.  And, since in the uSA, the "validity of the public debt"
may never be questioned, the taxpayers are on the hook for an
essentially infinite amount of obligations.

> In practice, who knows.

I know this much: Northern Rock got theirs.  The British taxpayers
are on the hook for that money.  And other banks with more conservative
practices didn't get to exploit the same opportunities for the same
level of profit, taking fewer risks proving to be a poor choice.

> To protect themselves against this liability, governments regulate banks 
> closely.

No.  That is an unsupportable position.  To limit the market for
banking services for the benefit of the licensed banks, governments
regulate banks.  And, not all that closely.

> your prudence?  This has handed a monopoly to the existing banks.

And how do you feel about that?  You don't seem to express any
unhappiness about it.

> I don't have a problem with floating currencies, as long as governments 
> don't use legal measures against any alternatives that emerge.

But, of course, governments do use legal measures against alternatives.
Have you heard what they are accusing my friend Doug Jackson of?  Have
you looked at the list of allegations in his indictment?  Do you
understand that he has had e-gold use its software to detect and
to interdict crime in ways that the credit card companies refuse to
do, and yet he is being accused of being a loathsome money launderer,
terror financier, credit card theft beneficiary, and child pornography
vendor supporter?  These claims are, of course, horrid, wrong, and
provably false.  Whether he ever gets a day in court to prove as much,
I doubt.  Having been through the wringer several times, I can say that
Americans are a loathsome hateful breed who cheer the enforcers of
injustice and applaud the smashing of human faces with the boots of
tyranny - just look at the ratings for the television show "COPS" for
the last 20 or so years.

>  There is
> no reason not to let the market decide between state and private 
> currencies.

Yes, sir, there is.  There is a reason not to have state currencies,
and that is justice.  The state is unworthy of the trust you seem to
be eager to place in it.  The state is a brutal monopolist and its
currency always chases out better and more honorable currencies, by
hook or by crook.

Regards,

Jim
 http://vertoro.com/

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