hi mr syreeni if you take a look at the paper, I cover the situations you refer to, namely free market competition of banks & why it is not very workable. its true I am taking the parasite analogy quite far & few are likely to take it very seriously. I dont really expect anyone to pay much attn to the paper in the short run (humans are like that..).
re: your response, the problem is that banking is not a free market activity in the sense that depositors demand government bailouts if their funds are lost due to too much of a gamble on the reserves by banks. i.e. everyone pays. this can take international scale proportions with e.g. world bank or IMF. (re stiglitz accusations) not to rain on the libertarian parade, but imho this is one area that free market competition does not seem to work. it just seems to turn into competition for corruption, re: history of "wildcat banks" in the US. I disagree that "inadequate propagation of information about risks" has much to do with the problem at all. the public puts money in a bank not as a speculative activity but typically as a deposit for safekeeping. another problem, as I show in the paper, a bank that debases its own currency into a larger system is actually leveraging against all money holders in the economy, even those who do not involve themselves with that bank. "gresham's law" which I give some mathematical formulas for. as for fractional reserve banking, I dont think bankers actually understand the "econophysics" of it. mathematical analysis has never really been done from the angle I pursue. >On Mon, 18 Mar 2002 [EMAIL PROTECTED] wrote: > >>http://econwpa.wustl.edu/eprints/mac/papers/0203/0203005.abs >> >>would be interested in any feedback. due to the contents, am also >>attempting to maximize its exposure, please help me spread the word. > >Somehow I can't escape the feeling that you're taking the parasite analogy >a bit too seriously. Especially in the context of fractional-reserve >banking -- the problems I see with that system boil down to: > > -government licencing of banking operations, limiting competition and > efficiency > -the shedding of risks to central banks or inadequate knowledge of the > risks on behalf of the depositors, inviting malinvestment > -inadequate propagation of information on actual risks when loans are > reinvested as deposits, again a cause for malinvestment > >If depositors are fully aware of the risks they're taking, and actually >have to carry them, I see no reason why deposits couldn't be seen as a >straight-forward extension of other means of investment. In such >conditions, I'd say fractional-reserve free banking is *quite* possible, >and certainly shouldn't be equated with parasitism. Rather, it seems more >like an eminently usable hybrid of private investment and insurance. > >Sampo Syreeni, aka decoy - mailto:[EMAIL PROTECTED], tel:+358-50-5756111 >student/math+cs/helsinki university, http://www.iki.fi/~decoy/front >openpgp: 050985C2/025E D175 ABE5 027C 9494 EEB0 E090 8BA9 0509 85C2
