Yesterday Brad Jansen alerted me to this post on Congressman Paul's website, in which Paul approvingly summarizes–not for the first time of course–Murray Rothbard's take on fractional-reserve banking. I responded with a comment, only to learn from Brad today that my comment had disappeared along with others (mostly laudatory) that had been posted on Paul's page.
It may be that the comments were deleted inadvertently; and if they were deleted on purpose this was almost certainly done by someone on Paul's staff, rather than by Paul himself, perhaps without Paul even being aware of it. The disappearance of the comments soon after I submitted my critical remarks is nevertheless disconcerting. (NB: Please see the postscript below for a follow-up.)
Fortunately Brad had in the meantime posted my comment on the Facebook Free banking page, saving it from utter oblivion, and allowing me to post it again here, minus a couple typos:
It is unfortunate that Congressman Paul has chosen to accept Rothbard's characterization of fractional reserve banking, thereby wedding his call for monetary freedom with an extremely mistaken idea of what such freedom would entail in practice. In fact bank "deposits" have been recognized both in practice and in common law since early modern times to consist of debt claims to money (coin, back then), ownership of which was in fact transferred, along with possession of the coins, first to the banker and then to the banker's borrower-customers. The original depositors retained a right to reclaim an equivalent sum of coin, sometimes on demand, and the banker's only obligation was to have sufficient coin on hand to meet any such demands, the normal penalty for failure to do which was failure. The contrary Rothbard view that bankers must be stealing whenever they lend part of their "deposits" is the sheerest poppycock, legally, historically, and economically, and has been exposed as such in numerous forums. That many persons, who apparently lack real knowledge of these subjects subscribe to it doesn't make it any less false.
Those who may be inclined to dismiss what I'm saying as the remarks of an apologist for central banking or inflation or (for that matter) theft should know that like Congressman Paul I favor monetary laissez faire, and have long done so, and as such believe that the sort of "warehouse" banks Rothbard prefers should be perfectly legal. But I also know that where true freedom in banking has prevailed, as it has on numerous historical occasions, such warehouse banks (which aren't really banks at all, by any standard definition) have never succeeded, their potential clients having generally preferred to patronize fractional reserve banks, despite the extra risks involved, for the sake of avoiding storage fees whilst gaining interest and free payment-related services.
Rothbard, in contrast, would ban "acts of fractional-reserve banking among consenting adults," and so, apparently, would Congressman Paul. Whatever such a ban might accomplish, it certainly can't be squared with monetary laissez faire, or for that matter with plain old personal freedom.
Although the first priority of every believer in monetary freedom must be to combat bogus arguments for monetary central planning, we cannot do this effectively unless we are just as relentless in exposing the 100-percent reserve movement for the moronic cult that it is, to keep its clownish convictions from giving the entire movement for monetary freedom, if not free market economics more generally, a bad name.
Postscript: Immediately after publishing the above, I learned from Larry White that my comment was back up on Ron Paul's cite. So it appears the deletion was inadvertent after all, which is a big relief, since I consider myself a Ron Paul fan.
Needless to say, my beliefs concerning the 100-percent reserve perspective remain quite unaffected by this good news.