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

[Jim Davidson]

> If Northern Rock had issued credit cards, would that have protected
> them against the bank run?  How?

Inquire with Gary North.  Not my theory.

My point is that your exception is irrelevant since they did
not seem to be an issuer.

> I think the government was in a difficult position.

I think the idea that the government ought to be in any
position with respect to the economy is fundamentally
statist, in the sense of good old nationalism, socialism,
communism, anti-propertarianism, etc.

> damaging if the resulting loss of confidence had caused runs at other
> banks.

Consequences for poor strategies within companies and
amongst companies is no excuse for government stealing
from the taxpayers to subsidize bad strategic thinking.

> Is it fraudulent for me to advertise computer services, given that I
>  would be unable to carry out the contract if my house burnt down?

I don't know that you wouldn't.  You could insure your home.

It is fraudulent to accept $1000 and say it is available to
the depositor on demand, then use those reserves to lend out,
say, $4,000 (well within the limits imposed on even mid-size
banks).  What is "available on demand" is not in the bank. So,
it is not actually available, even theoretically.

If you like fractional reserve banking, then you should be a
big enthusiast for Ponzi schemes, right?

> have a problem.  Just advertise safe deposit boxes, and let people
> keep their own cash in them.  You wouldn't need a banking licence for
> that.

You haven't been keeping up with the laws.  I certainly cannot
operate a "financial institution" accepting funds of any sort
without all kinds of licenses and waste-of-time know my customer
idiocy.

The fact is, the e-gold software can find any criminal use of
funds without knowing much about the customer at all.  Obviously,
the credit card companies could choose to license it from
e-gold, but since they aren't required to by law, they won't.

> It's still 100% reserve, though.  100% reserve doesn't protect you 
> against all risks, as some people found when the government seized
> their e-gold accounts.

And political risk insurance in the USA is notoriously high
premium.  Which, I would have thought, Barry and Doug could have
discovered on their own.

> I do see it as a problem, I'm just not sure of the solution.

I am.  Free markets are the solution.

> Removing the state guarantee could well make the economy unstable,
> with a small downturn turning into a slump as multiple banks fail.

There is always difficulty with transitions.  On the other hand,
allowing the state to grow and grow until it takes over everything
ends up with the 74 million dead under the Soviet Union, or the
40 million or so dead (war plus exterminations) under Nazi Germany,
or the 80 million dead under Mao, etc.  I guess it depends on your
taste for pain and economic difficulty, versus your taste for mass
murder.

> Presumably you're not suggesting that the government should ban
> interest- bearing accounts

I'm not suggesting that the government should do anything. It
should do rather a lot less.  I'm saying that in the absence of
government, without a state license, the demand depositor could
sue in a common law court or through a pure contract mediation
or arbitration provision  for redress against a company that
claimed to have demand deposits and had lent out the funds.

> Yes -- legal measures which are opposed by me, as I said.

Swell.

> I'm not that keen to trust the government, but some people are. 

Some people are, indeed, eager to have the government be everything,
own everything, and kill anyone who opposes the state.

> Shouldn't they be free to do so, by using a state currency, provided
> the government doesn't skew the market in its own favour?

No, they should not.  They should not have that option. It
is unjust.

What you are saying is morally equivalent to saying, "Shouldn't
the German people have had the option to support the Nazi regime?"

Or, "Shouldn't the American people have had the option to
support the racist, Progressive, interventionist Wilson
regime?"

The whole point of state currencies is that they are used to
eliminate the free market in currencies.  People should not
have the option to coerce other people economically, any more
than they should have the option to coerce them physically.

To use a state currency because there is no meaningful
alternative is to survive in a bad situation.  To say that
you must be free to impose state currencies on others because
you have faith in this limited state that won't skew markets,
and because you just want to have state currency around for
all the great things it does in the world (inflate, distort
markets, impose on alternatives, result in wage and price
controls, generate balance of payments problems with foreign
trade partners, etc.) is to say that you must be free to
strip others of their freedom.

Which is bizarre and preposterous.

Regards,

Jim
 http://indomitus.net/

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