quinta-feira, 14 de maio de 2009

Teoria Monetária: 100% de Reservas versus "Free Banking"

Para quem se interessar pelo assunto que mais controversia gera entre "austriacos" e quiser seguir a discussão que gerou (atá agora) 164 comentários onde tenho tido o prazer de participar, assinando como Carlos Novais, e com a participação de George Selgin e Lawrence H. White, ambos no lado "Free Banking" (na verdade as duas maiores autoridades académicas no assunto), pode encontrar na sequência de um post de George Selgin no Mises Institute: Interview on Free Banking.

O que está em questão é saber da possibilidade legal e económica, em liberdade económica de emissão de moeda e livre circulação, da existência de depósitos à ordem e emissão de notas com 100% de reservas ou com fixação livre por parte dos emitentes - situação a que provavelmente um dia chegaremos dada a tendência natural do presente regime intervencionista (como outros no passado) de colapsar ou o que seria melhor, a consciência da irracionalidade e de risco sistémico bem evidente nas crises cíclicas permitir a introdução da concorrência na emissão e circulação de moeda.

Coloco aqui os meus sucessivos comentários, a minha linha de argumentação corresponde a uma tese que eu espero vir a ser capaz de produzir num texto mais elaborado com a ajuda de Luis Aguiar Santos.


Posted also in "Larry Sechrest's Free Banking: Live Blog Prelude"

In honest and free competition Free-Banking: "Good Money drives out Bad money", and that means... 100% Reserves because:

- "Free banking" to be honest require that banks that issue notes and accept deposits of a commodity (let´s say gold and silver) to be absolutely clear about the service and contract provided.
- "100% Reserve Bank" could say something like: "This note is a receipt of a gold coin deposit" or "Your balance in you demand deposit current account is covered 100% by gold deposits"
- Bank "20% partial reserve" should say: "this note or balance in demand deposit is a claim/IOU of gold coins covered at demand by at least 20% of gold"

So, the free banking argument is valid in the sense taht each issuer is perfectly clear about the contract established.

The thing that the "free banking" argument misses is that:

- notes/deposits from diferent issuers will not be in anyway fungible
- in a free market with an honest Free-Banking, Good Money will drive out Bad Money... just imagine an arbitrage between asking credit in a partial reserve bank (that wil expand it´s money supply wiht the new credit) and "buying" notes/deposits in a 100% reserve bank.

The partial reserve bank will trade at discount sooner or later.

The discount will also appear if you think yourself making a deposit of 100 gold coins that you are adding to your hoarding. In a partial reserve bank, in the moment that you deposit 100 coins, you are receiving notes/deposits that will be exchanged for sure at discount.


1. Honest free banking requires that each partial reserve bank states clearly what the note/deposit issued means (ex: "This is not a 100% reserve bank. A minimum of 20% reserves will be deposit").

2. Notes issued by partial reserve banks will trade at discount because it´s possible to ask for loans (which will increase the partial reserve bank money supply) and buy a 100% reserve notes.

It seems that the defenders of "free banking" are willling to exchange theirs 100% reserve banks notes for "partial reserve notes" at par value... until....some one realizes that there is a risk in its partial reserve notes

At some point the discount must appear, the extra interest in deposits in partial reserve banks are a premium for its risk loosing power purchase and even default , not a "out of thin air" advantage against 100% reserve banks deposits.

3. It´s funny to realize that a "partial reserve bank" could use "100% reserve banks notes" as part of it´s reserve.


A speculator could even ask for loans in a partial reserve bank and immediately call for the physical gold.

I suppose a partial reserve bank would want to control this possibility in some way.

And it is difficult to imagine that someone is willing to deposit physical gold in a partial reserve bank, knowing that maybe the free banking guys are right and no one will ask for a discount.
i think that the historical examples of at par exchange value to physical gold and silver are subject to critical review of things like clear disclaiming of the partial reserve banks.

(I have exchanged comments with historians here in Portugal where it seems different notes from different issuers were exchanged at different discounts but this is something to be confirmed).

As i said, a partial reserve bank could use 100% reserve note, but the other way around it is not possble. So...?

I am sure that people (or sofisticated speculators) would realize the difference on bank runs in one kind of bank and another.


Credit risk in 100% reserve banks does not have an impact in demand deposits.

Demand deposits are suposed to be equivalent to ... full hoarding. Only time deposits would be at risk.

PS: actually a 100% reserve bank must carry more than 100% reserves because of the time deposits that expiry and turns to demand deposits.


I think one thing is certain in the current "consumer protection" legislation environment:

Pure receipts of gold deposit (100% RB) and "promisse of payment" (FRB) are different contracts and the client of one or another must be warned.

FRB defenders claims that promisse of payment and pure receipts will both be valued at par value.

100% RB defenders must prove that it is possible to arbitrage the risk, making loans in FRB notes (supply of promisse of payment is increased) and buying pure deposit certificates at par value (so the FRB says)... till for instance a last loan is made and the arbitrager ask for immediate redemption in physical cold, reducing the reserves ... till the market begins to ask for a discount for the FRB.


We can at least discuss at what level of reserves would today, in a age of information, cause a discount.

Would 5% of reserves notes (or promisses of payment) with public information be the same as 50% reserve notes?

Would the discount never happear beggining in 100% and ending in 0%?

Would not the process of risk arbitrage described make it appear sonner than latter?

What i am saying is that i agree with Free Banking, let them live. Let them put in the notes issued and in the deposit contracts the precise terms.and publishing what amount of reserves are held, making it clear the difference between physical and 100%RB notes and such FR promisses of payment.

And let´s buy all the physical gold at par value (if any) with money lent from a FRB (Free Bankers will sell it).


About George Selgin saying: "Even a pure gold system allows some scope for ABCT"

Two types of inflation:

- pure (let´s call it "pure") inflation that enters the economy through direct spending
- inflation through credit expansion

My opinion is that the first one causes prices to go up but not "pure" ABCT in the sense of serious direct misallocation between investment and previous and voluntary savings, although also interferes with relative prices and economic calculation

The second one is the root of ABCT.

The first one is caused by gold discoveries and at the present by printing money to pay for deficits (even if from buying public debt).

The second is the real ABCT problem because investment is funded by expansion of credit form pure money creation distorting interest rates and pressuring asset prices more than "consumer" prices.


FRB Notes and deposits are honest if proper disclosure and with that i think the term "note" and "deposit" is not apropriate for FRB, but "promisses of payment" and "credit current account" (or something like that).

Only 100% RB should be able to use the ter "note" and "demand deposit".

If the market would ask for a discount or not between "promisses of payment" or not is the real discussion that is worthy.

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