The Sociology of the Mises Institute Cult

The Mises Institute has a long history of silencing those who dare to criticize their sacred cows. Obviously, they get upset when people point out the blatant homophobia and racism of some of their members. That much should not be surprising; if I was a bigot or associated with bigots, I would't want that knowledge publicized too widely either.

What is surprising, to me at least, is that they even get offended if you point out their idiotic position on fractional reserve banking. I blogged about this way back when I attended one of their summer seminars four years ago. Walter Block responded to my very reasonable and pointed questions with either obfuscation or silence. He did not have an answer to give me because there is not one; fractional reserve banking clearly isn't fraud if the purchaser of the currency and those who receive it as payment for goods or services are made aware of the risk involved.

Take a look at this thread to see what I mean. Bob Murphy casually mentions that he doesn't agree with the Rothbardian view on fractional reserve banking. Jeffrey Tucker responds:

This is such a nice blog. Why ruin it with a discussion of FRB?

In other words, keep your mouth shut, Bob, if you want to remain on good terms inside our little cult. Don't rock the boat. Don't question our obviously false, embarrassing, and inconsistent position on such a basic issue of economics and libertarian theory as fractional reserve banking.

Gene Callahan, another ex-cult member who, like me, has since parted ways, writes:

The anti-FRB position is so obviously full of holes that Jeff prefers it not to be discussed at all. He would do the same thing on the Mises List -- as soon as this discussion would come up, he would stop it, and say, "This issue is to deep to be settled on a mailing list." But discussion was allowed on other issues just as deep.

They are gradually turning into a cult, if they have not become one already. Which is kind of ironic, given Rothbard's diagnosis of Ayn Rand's inner circle.

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sigh

Micha, I know you are above this sort of claptrap. You know that too, so why do you write this silly sort of thing?

I am not above calling your

I am not above calling your cult out on its fear of and intent to silence dissent wherever it arises. I'm glad Rothbard wasn't afraid of calling Rand out on her inconsistencies and cultishness. Too bad his own followers didn't learn the lesson.

yeah, the fractional reserve thing is BS

While I don't feel qualified to say much about Austrian Econ, the Rothbardian/Austrian position that fractional reserve banking is immoral is clearly bullshit. Not only is it moral if all parties agree to it, but I claim that in a free market for money, fractional reserve will outcompete full reserve, and only a few people will use full reserve currencies. Everyone else will take earning some interest and a smidgeon of risk.

I think this is a good issue to use as a litmus test. Anyone who says it is immoral, and has been exposed to the brief argument why (which many haven't) is a cultist.

I say this as someone who believes that on a lot of issues (including some that Micha has raised) there is plenty of room for debate. But this is not one of them.

I think this is a good issue

I think this is a good issue to use as a litmus test. Anyone who says it is immoral, and has been exposed to the brief argument why (which many haven't) is a cultist.

I believe the FRB is not inherently immmoral. Most of the time, if a (mistaken) Rothbardian is exposed to the correct argument he will back up to two strategies
- It's not the way it happened (irrelevant)
- No one would patronize such ridiculous institutions (irrelevant as well)
then they will forget this moment and go back to blame the principles of FRB.

I've always been strongly in favor of free banking, however, I gave it some thoughts lately, and there are tricky things to consider. Money is a very particular form of ownership because it is fungible, it makes it very problematic to explain loan mechanisms in term of property rights and thus to have a coherent construction of fractional reserve banking from a Rothbardian point of view. A contractualist like Walter Blocks on the other hand should immedialtely accept the possibility of legitimate FRB, I believe he does not do so for fear of alienating people at the LvMI.

Most of the time, if a

Most of the time, if a (mistaken) Rothbardian is exposed to the correct argument he will back up to two strategies
- It's not the way it happened (irrelevant)
- No one would patronize such ridiculous institutions (irrelevant as well)
then they will forget this moment and go back to blame the principles of FRB.

Yup, this is exactly the response I got from Block. And the sad part is, Block seems like one of the good guys. But on this issue he has clearly swallowed the kool-aid.

I believe he does not do so for fear of alienating people at the LvMI.

My thoughts exactly. And as much as I respect him, Roderick Long is also pretty hush-hush on the bigoted statements that come out of the mouths of LvMI people for the same reason, saying that he "strongly disagrees" with them but not willing to call bigoted statements for what they are.

I'm pretty sure full reserve

I'm pretty sure full reserve banking would have been lawful throughout most of US history, and there was no unfair government-subsidized competition until the 1930's. As far as I know, full reserve banking was never very popular in the competitive market place.

Two things to consider

Two things to consider here.

  • No right of free entry in the field. Banking was a chartered activity at state level. To put it bluntly, banking was a privilege.
  • And just because of that, and because the local congressmen were often founders and shareholders of banks, and because banks were creditors (and the biggest ones) of the states, they (the banks) could get away without fulfilling their contractual obligations. Namely, redeemability of their notes. Sometimes with tacit, sometimes with explicit support of local state authorities. The infamous and fraudulent bank holidays

I'm opposed to FRB I wouldn't

I'm opposed to FRB I wouldn't say I'm a cultist I've had no contact with anyone from the misus institute, but then again that's what a cultist would say. I don't see why they're cultist just because they disagree with you on an issue, maybe they don't want to debate it because they've got other things to worry about, however perhaps you are right and there is a flaw in the logic, and they avoid the issue.

I've looked at it with an open mind and personally I'm still opposed as far as I see it its a mass ponzi scheme scheme, if it goes tits up at-least 90% of account holders are screwed probably more, considering the exponential nature of the thing,or the tax payers who may well be forced into bailing them out.

if all account holders were made aware of FRB and the risks before depositing it would be a risk that we all know the consequences of. id say a majority people are unaware of FRB, if not its a large minority. I know I wasn't till a few years ago, I accept the fact that if an individual is aware of the risk its not fraud, it doesn't make it a good idea however and many are in-fact ignorant of it.

id say it was a terrible idea it discourages saving, especially saving in the banking system which aught be used for investment and creates unnecessary risk. although I would say that wouldn't I.

Cult?

So if we like or dislike a topic while being list moderators, we're starting a cult?

Absurd, to put it in mild words.

And regarding racism and homophobia: some of us ex students of Mises University and young academics related to the LVMI are clearly mixed racially and some have differente sexual preferences. We would have "felt" anything in the like by now, which we haven't.

Plus the post falls short of even an attempt of a sociological analysis.

Attacks need to be better designed, or they will fail epically, as this one does.

So if we like or dislike a

So if we like or dislike a topic while being list moderators, we're starting a cult?

I was not on the list in question; I merely mentioned it as it reinforces what I saw as Jeffrey Tucker's cultish behavior in that comment thread, asking that certain forbidden topics not be discussed on someone else's blog. That screams: cult, cult, cult. Pretty embarrassing, no?

And regarding racism and homophobia: some of us ex students of Mises University and young academics related to the LVMI are clearly mixed racially and some have differente sexual preferences.

So Hoppe is good at being cordial at LvMI related events (although apparently not so much at his day job at UNLV). This is like the excuse, "But some of my friends are gay/black/whatever." That doesn't excuse bigoted statements or make them poof into nonexistence. It might matter if we were evaluating Hoppe as a person, but I am more interested in evaluating his ideas. And his ideas are ugly.

Plus the post falls short of even an attempt of a sociological analysis.

Blog titles are often humorous references to pieces of shared culture. Follow the link I gave at the end of my original post if you are not familiar with the reference.

conclusion doesn't follow

How have you demonstrated the following conclusion?: "They are gradually turning into a cult, if they have not become one already."

This does not follow from any of the evidence that you offered. Does a joke in a blog comment really warrant the sort of name-calling you engage in here? You are painting with a broad brush, it seems.

Does a joke in a blog

Does a joke in a blog comment really warrant the sort of name-calling you engage in here?

What was the joke? "Hush, hush, let's not discuss forbidden topics - don't question the man behind the curtain" - is this funny to you?

Just like the cult of DR?

Micha, I met you once, at a Mises event -- the only event at LvMI I've ever attended. It wouldn't be fair to judge you based upon this one week encounter.

So my question is, in your visit to the institute, in what way did you find the faculty cultish? I don't think they are and even wrote it here: http://movementarian.com/2004/12/18/an-open-letter-to-critics-of-the-ludwig-von-mises-institute/

Furthermore, in all of the posts I have ever written for the organization, not once did anyone ever contact me to have me remove or edit any of what I wrote. Nor have they ever chastised me for comments on my own personal blog or other sites I write for.

Or am I part of the cult too?

And what other examples do you have of "silencing" internal critics?

Note: for the record, I don't get paid to do anything for any of the sites. Nor do I belong to any mailing list.

"Just like the cult of

"Just like the cult of DR?"

Woot!

It is pretty ironic

It is pretty ironic considering all of the criticism I get from my fellow DistributedRepublicans. (Which I appreciate!)

So my question is, in your

So my question is, in your visit to the institute, in what way did you find the faculty cultish?

Hoppe's speech insulting the Chicago School was pretty cultish, calling them "worse then communists," and falsely insinuating that the Coase theorem logically justifies rape. And Block's refusal to answer FRB-related questions with anything other than obfuscation was also pretty cultish.

Furthermore, in all of the posts I have ever written for the organization, not once did anyone ever contact me to have me remove or edit any of what I wrote.

Let's note that this happens all the time on LewRockwell.com, both with blog posts and articles hosted. When certain articles "cause a lot of comment", or certain authors get a little too obvious in their racism, they get dumped down the memory hole (in Bob Wallace's case, good riddance - Lew did the right thing in that case, but one must wonder what sort of company he keeps to make such action necessary in the first place).

Nor have they ever chastised me for comments on my own personal blog or other sites I write for.

And how often do you challenge the party line, vocably and visibly?

I enjoyed my time at the LvM

I enjoyed my time at the LvM Institute and I feel that it made me a better student of Economics. However, I found the following things to be cultish:

1)The wholesale rejecting of Economic thought outside of the Austrian tradition. This includes some of the most influential and brilliant economic works of all time. Keynes and Friedman are "wrong" and even sometimes "evil". "Chicago school" and "Keynesian" are used as epithets. Serious scholars don't sneer at everyone that disagrees with them.

2)Students felt they were learning Economic "truth". They often asked each other "how did you first hear of Mises?". They spoke of converting people to Austrianism. All of this is the language of religion, not scholarship.

I have met Austrian students who have read book-length critiques of Keynes by Austrian authors but not anything by Keynes himself. This reminds me of my religious youth when my religion told me what other religions believed and why they were wrong, but we were never provided any material from the other religions themselves. Likewise they had similar literature to describe and denounce our beliefs.

I have met Austrian students

I have met Austrian students who have read book-length critiques of Keynes by Austrian authors but not anything by Keynes himself. This reminds me of my religious youth when my religion told me what other religions believed and why they were wrong, but we were never provided any material from the other religions themselves. Likewise they had similar literature to describe and denounce our beliefs.

I had an identical experience with the orthodox Objectivists at my university. They had all sorts of terrible things to say about Kant and other philosophers, never having read any philosophy other than what was filtered to them through ARIan-approved secondary sources. It screamed cult, cult, cult, and I noticed the same trend among the more dogmatic Austrians.

also, the reason

By the way, the reason I often discourage "debate" about fractional reserve is that, for some reason, this topic draws people who develop quick and extreme positions on this issue without having read a single bit of banking history or theory. There is a vast literature on this topic with many good points on both sides. I've spent untold hours getting all of this online. I find it discouraging that so many pontificate on the topic without bothering to read any of this. It really is an insult to scholarship, and, as I say, I find it depressing to see such displays. I guess you could say that it bothers me when people make fools of themselves.

People make fools of

People make fools of themselves all the time on all sorts of topics, and yet we normally don't feel the need to close the discussion on, say, retributive theories of punishment or how to privatize the roads, despite many people not having read all of the relevant literature prior to discussing those topics. I've actively searched out answers to this question, from no less than Walter Block (who I have much respect for), and he could not give me a serious response, or even direct me to someone who could. That signals to me that he doesn't have an answer, and that he doesn't know of one.

The only "insult to scholarship" here is your cultish institute's fear of open discussion.

I guess you could say that it bothers me when people make fools of themselves.

Yes, and that's what I found so disappointing about the FRB-is-fraud position - it clearly is wrong and ludicrous, but otherwise honest people can't admit it. They would rather make fools of themselves then risk alienating the cult.

FRB -- Fraud and Economics

Patri, my own view (e.g. this entry on the Mises blog) is that assuming adequate disclosure is given, FRB is not fraudulent. But I agree with the Misesian economic case against FRB. Moreover, I think that FRB is arguably fraudulent in most incarnations unless disclosure is made very plain and clear to people--which FRB advocates resist. They don't want to have to plainly label the nature of their system, because, I believe, they fear it would indeed crumble like a house of cards.

In any event, it is not "cultish" to have a difference of opinion than you on the fraudulent nature of FRB. It is rooted in the Austrians' (economically correct) understanding of the nature of FRB and why it can't work. Basically they (not unreasonably) assume that since FRB cannot work, if it IS working, it must be as a result of some fraud. This is not an entirely unreasonable assumption to make.

In any event, it is not

In any event, it is not "cultish" to have a difference of opinion than you on the fraudulent nature of FRB.

No, but it is cultish to discourage even discussing the issue, out of fear that people will realize how ridiculous the FRB-is-fraud position is.

Basically they (not unreasonably) assume that since FRB cannot work, if it IS working, it must be as a result of some fraud.

This is not the argument as it is given. It is not merely an assumption or prediction, but the assertion that FRB is fraud, and necessarily so.

Austrian thought is very

Austrian thought is very insular. Because they reject the methodology of other schools of Economics, they also reject most of the conclusions of non-Austrian Economics over the last 80 years.

Austrians have some good ideas, but they lack the intellectual robustness that comes from duking it out with disagreeing scholars and adopting the best ideas from other economic traditions. Austrian thought has evolved only slowly since the days of Mises. Few of his conclusions have been questioned or overturned, or even expanded upon.

The culture inside the Ludwig von Mises Institute reinforces orthodoxy. I trace this tendency back to their deductive methodology. To them, Economics is like Mathematics and there can only be one right answer. Any conclusions that disagree with them must be "false". Other schools follow a hybrid empirical/deductive approach which allows them to judge an idea "partially right". This means that they tend to be much more open and dynamic than the Misesians.

It is sad that the Austrians have become so insulated from the rest of the Economics world because they do have some interesting ideas that deserve serious research. In particular, I think a closer examination of their ideas concerning credit bubbles is warranted. I would like to see them engage the Economics world outside of the LvM Institute with their ideas more often.

There are some exceptions to the insularity. William Garrison seems to be more open to methodological heterodoxy than his peers. Walter Block has indulged in some very un-Austrian work creating national indexes of Economic freedom. Hayek's spectacular, respected, and wide-reaching work remains an avenue for Austrian students to connect with the mainstream. There are pockets of debate and openness here and there. These areas of engagement will influence the Economics world much more than another review of "Human Action".

Great analysis, and spot on

Great analysis, and spot on with the source partially stemming from methodology. There is good work being done by Austrian economists - people like Pete Boettke - outside of the LvMI and free from the insular orthodoxy of the cult. These sorts of Austrians are willing to adopt the best ideas from other economic traditions, and in turn have those other economic traditions adopt the best ideas from Austrians. Milton Friedman said it best: there is no such thing as Austrian economics - only good economics and bad economics.

I agree. Irrationality with the gold standard too.

Economically I consider myself an Austrian, but I also have some issues with the LvMI and some of the Austrian insistencies. First and foremost, while I am by no means an expert on the topic and I need to do more research on it, I'm baffled by their focus on the gold standard. From what I understand, the gold standard has CAUSED most of the major ecnomic recessions and depressions because countries on it have their wealth expand beyond the value of the commodity, causing massive deflation that causes the economy to collapse because of prices already built into the system. There's a brilliant guy named Kaz Vorpal on Facebook (who also considers himself an economic Austrian) who has blogged extensively on this very topic, and I have not heard a single intelligent rebuttal to his view on the gold standard (same as mine mentioned above). Mainly people just end up yelling at him and getting mad. Kinda reminds me of the irrational FRB discussions with Block and Tucker you mentioned above. What we DO need is a free market in money, i.e. no wealth-limiting "standard" like the gold standard. In "What has Government Done to Our Money?", Murray Rothbard brilliantly argues why we need a free market in currency. He focuses very little on the gold standard, so I"m really baffled why all the Austrians' talk about the gold standard so much when their focus should really be a free market in currency.

Also, I am not an expert on FRB, but I don't see how it's theft if someone signs a contract that stipulates this. If there's no stipulation of this, then yeah. But if not, I don't see what all the commotion about FRB is.

I will add, though, that even though Hans Hermann-Hoppe has made some quasi-homophobic statements and perhaps a few of the LvMI dudes have said some quasi-racist things doesn't mean the entire institute and its fans are followers of that. I consider myself, essentially, an economic Austrian and I openly term myself an ally to the GLBT community. But otherwise, excellent blog post and I look forward to hearing your opinion on the gold standard.

--Zach Bibeault

So Where's the Gold?

I should remind you that we are living through a similar crisis to the ones blamed on the gold standard before and we're not on gold. We do still have fractional reserve and fiat currency though. Which was the case with most of the other situations that were blamed on the gold standard.

I don't consider situations like the Spanish rape of the Americas to count against commodity based money. Why? Because it isn't a free market system. It's a system of pillage.

Recession versus Depression

Yes, we are now suffering the first economic depression since the gold standard ended.

For sixty years, we suffered the recessions of a centrally managed, fiat currency. Which is bad, but not nearly as bad as the repeated economic depressions we suffered from 1871-1938 on gold.

Check out http://butnowyouknow.wordpress.com/history-of-economic-downturns-in-the-us/ for a list (in progress) of economic downturns. Note that the gold-caused depressions lasted a minimum of two years, while the fiat-caused recessions lasted a maximum of two years.

What we need is a free market in currency, not a government monopoly gold standard, which is what we had, and what we'd have if it happened again.

We need all entities to be free to issue their own currency, and the marketplace to determine what actually works. Big Brotherment affixing the dollar to gold would not work any better now, than before.

Gold Not Responsible for Crisis

"From what I understand, the gold standard has CAUSED most of the major ecnomic recessions and depressions because countries on it have their wealth expand beyond the value of the commodity, causing massive deflation that causes the economy to collapse because of prices already built into the system."

This is an incorrect interpretation of historical events. It confuses productivity driven deflation with fractional reserve deflation. In fact prior to the Great Depression it was the paper money advocates who were generally considered kooks because of all the historical instances of paper money destroying countries.

The Austrians aren't for "the gold standard". They are for a free money system and don't care if you use sea shells. The advocated gold because of certain characteristics it has. They are not against a bimetallic system of gold and silver. Basically whatever the market settles on is good for them.

Also, I am not an expert on FRB, but I don't see how it's theft if someone signs a contract that stipulates this.

See my comments in context here:

"On 100% gold reserve banking I think you do not understand Rothbard as has been pointed out.

You are making what sounds like a reasonable argument but I think there is a flaw.

Sometimes deceptions can be open and still be deceptions. There are well known cases where people are exceptionally bad at predicting the odds of certain things happening.

Do you think that Ponzi schemes should be legal, just so long as the parties involved agree to the deception?

I think it is prima facie evidence of the incompentence of the signator to a contract if they were to sign a ponzi scheme contract.

Likewise a pyramid scheme. One might fully understand the contract and know that you were an early adopter and therefore less likely to be screwed. However, the very fact you think this is evidence that you are counting on finding additional people to join the scheme who are incompentent to understand the swindle.

I believe that fractional reserve banking is one of the most sophisticated swindles going on. It is extremely hard to understand why it is a con game. It is none-the-less a con game.

How exactly do you plan to make sure the recievers of banknotes in payment for their goods are fully aware of the consequences of the con?

Are you going to print something like this in fine print on the notes:

"This bank note entitles the holder to only half the face value printed. There is a great possibily that this note is being used to bid up the price of your good by 100% without full intent to pay you for that good. The full repercussions of this arraingement and the economic theory backing it is printed herein. Blah, blah, blah. Do you fully understand these conditions. If so fill in one of the blank lines below with your signature indicating that you are willing to take zero dollars in payment or perhaps wait as much as fifteen years for full payment."

Another possibility is to make it the law that only the fractional reserve amount can be printed as the face value of the note, and that by law that reserve amount be kept available, with open books and mandatory banking insurance required for fractional reserve banks.

Thus the note might have a face value of say ...

"Reserve Note for One Ounce of Gold". and say "Bearer entitled to one ounce of gold that is being held in reserve. You may be entitled to up to 100% more than the face value of this note, but the bank may, at it's descretion fail to pay you this additional amount. Depending on economic conditions and the condition of the bank there is even the possibility you will not receive the face value of this note. Please sign this note below indicating that you understand these conditions. Blah, blah, blah. ..."

Now you could certainly do this, and it may outcompete metallic coin, but I very much doubt it."

Appreciate the response.

Thanks for the quick response. This is something I plan to continue researching. I'm sure you're right.

Fiat Money Inflation In France

Here's a book titled, "Fiat Money Inflation in France" that I recommend to people so they can see the parallels with what is happening now. They were not on a gold standard. It's a quick and interesting read at 66 pages. Mises has an article on the book for a more in depth summary.

When you read history books about these events they are always chock full of interpretation of events in the light of the beliefs of the authors, often historians, and often utter ignoramouses when it comes to good economics. The above book is an example of a writer who knows some good economics.

I have not read the "Gold Standard Illusion" but you can preview it on line. Here is a quote:

"Internationally, the gold standard transmitted the shocks from national economies throughout the international monetary system. The French contribution to this deflationary crisis was substantial. From June 1928, when the franc returned to gold, to June 1932, which marked the bottom of the slump for most countries, French gold reserves increased by 55 billion frans, rising from 11.6 percent to 28.3 percent of official world monetary gold reserves. On recent account claims that French policy causes the Great Depression, and holds Prime Minister Raymond Poincaré and Bank of France Governor Émile Moreau personally responsible for the global deflation."

An interpretation of events is already built into the first sentence of the above. I'm not sure who's opinion it is but it has build into it interpretation based on theory, and in this case incorrect theory.

Was it "the gold standard" that "transmitted the shocks"? We are no longer on the gold standard and yet we have just experienced a transmission of shocks. That should make anyone wonder whether the true cause of the problems at the time were the French, or gold. Perhaps it was something else that was around at the time, fractional reserve banking.

Today we have this dangerous substance safely locked up in vaults by the government in vast quantities where it can no longer cause all this insidious harm. We have outlawed it's use as money. Yet, somehow, as if by magic, it is still able to cause the exact same symptoms. I fear the only solution is to rocket the stuff into outer space and drop it into the sun. But then, what if this only serves to increase it's evil power? What then?

On the flip side and simultaneously the anti-gold economists argue the stuff has no intrinsic value and certainly no value as a medium of exchange. Thus holding a contrary position on its "power". Well to that, I say, "Then remove legal tender law, and sell all the gold in Fort Knox to us crazies at rock bottom prices."

Do some serious research and I'll listen to you

There is plenty of debate about FRB, and plenty of differing opinions.
for example:
http://mises.org/journals/qjae/pdf/qjae1_3_7.pdf

the QJAE, the per review journal of Mises Institute, is willing to publish it. So, instead of whinning, maybe one should do some serious academic work and submit it for publishment.

Ad Hominem

Playing the ad hominem game is popular these days, but it still fails to answer the question. I'm not a part of the Mises Institute, but I lean towards Libertarian Republicanism. Suppose that several of the members of the Institute are homophobes or even racists: does that affect their understanding of economics? I know--it would, in a way, since they would have a vested interest in smaller federal government spending, etc. Now, suppose that there are (female) feminists and minorities in the Mises Institute, which, without fail there are, would that affect their understanding of economics? Perhaps--because they would be interested in fairness, etc. Now, suppose there are white males in the crowd who are also equity feminists and support racial equalities: does that affect their understanding of economics? Sure, in a way, since enlightened positions usually presuppose a certain socioeconomic background and education.

Now, suppose that there are racist Marxists in the Mises Institute.....well, you see, there aren't. There never could be Marxist Mises Institute supporters, even though there could be racists in the group. The question is one of economic theory, not racial theory or gender bias. Political Correctness is getting a little out of hand, and if someone disagrees with you, the government, or anyone else, perhaps you should engage them intellectually, and not through faux-morality. If different demographics see truth in the Austrian School's premises, it's not because they're all racists or sexists. It's because they agree with its economic policies.

Hitler was a nationalist socialist, but I would be a fool to lump George Orwell in with the Nazis just because he happened to be a socialist.

Racism?

Stop the difamation of Libertarianism...
I'm venezuelan (and mestizo). I went to the intitute some years ago. There I met indians, iranian-americans , ecuatorians, people from denmark, from guatemala, from ecuador, african-americans, (smelly) europeans a whole bunch of "white"-americans. No racism that I could perceive. Everybody got along just fine!

I see dead racists - Micha

Micha sees racists the way that Haley Osment saw dead people in The Sixth Sense, everywhere and even where they are not. Hell he already has you pegged as one. Guilt by association. Don't worry about it. No one takes him seriously. He's got the moral compass of a weathervane. One rusted to it's post in a fixed position.

Fractional Reserve Banking - Defining "Fraud"

"Fraud" is a legal term and is usually defined thus: "n. the intentional use of deceit, a trick or some dishonest means to deprive another of his/her/its money, property or a legal right." So, in other words, a financial exchange is "fraudulent" if and only if one party uses deception in order to steal another party's wealth. But what exactly is "deception"? This is debatable, but "deception" is usually understood to refer to "simulation" (feigning something that is false or nonexistent) and/or "dissimulation" (concealment of something that is true or extant).

Rothbard argued that if one party (a bank client) makes an exchange with another (a banker) of cash for fiduciary media (money substitutes with fractional cash backing, such as checking accounts at banks or "checkbook money"), then this exchange is necessarily "fraudulent". I am personally convinced that Rothbard's use of the word "fraudulent" was inaccurate. Sticking to the definitions shown above, for Rothbard to be right that such an exchange is "fraudulent", one would need to show that a banker who exchanges his bank's "checkbook money" for a client's cash has the intention of stealing the client's wealth. Most bankers, however, usually intend to increase their own wealth and the wealth of their clients and do not anticipate a bank run or bankruptcy. This is the only way for bankers to ensure long-term business success. Nevertheless, such an intention is certainly not impossible.

However, the other crucial question is whether or not the exchange of "checkbook money" for cash might be "deceptive". To affirm the claim that it is "deceptive", one would need to demonstrate that the banker is employing either "simulation" or "dissimulation" in his exchange of checkbook money for cash. Here I would submit that if the banker somehow attempts to convince the client that the checkbook money is backed with 100% cash reserves when it is not (simulation), or fails to inform the client (dissimulation) verbally or in the account opening contract of the true legal nature of the checkbook money (i.e. that it represents a claim on cash that is not fully backed by cash and that it will be converted into a fractional claim on the bank's assets in the event of bankruptcy), then the exchange can be logically labeled "deceptive". To confirm that such exchanges in the US are "deceptive", one would need to do empirical work to find out how many bank account holders are aware of the true nature of the checkbook money in their possession. My hunch would be that most bank account holders are convinced that their checkbook money is fully backed by cash, although it is not. If this is true, then most cash-for-checkbook-money exchanges may be considered "deceptive", but not necessarily "fraudulent". I strongly recommend everyone interested in this topic to read "The Theory of Money and Credit" by Mises, who in contrast to Rothbard, did not label such transactions "fraudulent" or "deceptive".