Jamesian Philosophy Refreshed

I’m an anarcho-capitalist, so I’m not the right person to ask about the particulars of money laundering policy by a nation state, though I do sometimes try to think “within the box” of statist assumptions. In the Hastert matter, there are different layers of operating assumptions behind this indictment. As Mrs Falbo said, “When you ‘assume’ something, you make an ass out of u and me.” Forewarned, I proceed. One might, at the outmost layer of our box,  question why there are banks in the modern (post-Renaissance) sense in the first place, and whether they’re a blessing or a curse. Socialists of many varieties think banks are evil, many Moslems think any institution that charges interest on loans is evil, but I’ll set them both aside. What I’m somewhat more interested in is the argument about the “fractional reserve” nature of banking. Modern banks hold customer deposits and promise to give the customers this money back on demand.  But of course they aren’t holding it...

So, continuing yesterday's discussion: what do Austrians say about MMFs? Let us be clear about the analogy Krugman draws between MMFs and banks. The term "fractional reserve" just means that the bank doesn't have all the money in the vault. Yes, there are a lot of checks floating around that represent the amount of money the bank is responsible to pay on demand and, yes, in the event of a bank run  this is a dangerous situation.  The bank only has some small fraction of the money in reserve. Hence the term. So: what do Austrians say about that? Is this a case where their hard money views come into conflict with their laissez-faire views, and where they ought in consistency with the former to demand that the government close these dangerous fractional reserve institutions down as so many embezzlers? Well, there are different approaches within this broad school of thought. But the general line of thought is well stated by Detlev S. Schlichter, in his recent book...

  Nobel Prize winning economist Paul Krugman, pictured here, whose writings for the mainstream press have made him easily the most visible Keynesian of our day, issued a challenge to Austrian economists recently. For those of you who may be new to such discussions, I'll explain the jargon. The Austrian school is the tradition of Hayek and Von Mises, [and for the record, Hayek too received a Nobel Prize], a school built on a subjective understanding of economc value, that is, the view that something has value because one or more individuals want it -- regardless of, say, how much labor or how impressive a technology was necessary to create it. Also integral to the "Austrian" school are distinctive views about economic calculation, the demand for hard or honest money, the bases of interest rates, and certain meta-theoretical ideas as to how economics ought to be studied. What especially sticks in Krugman's craw, though, is the Austrian view of the business cycl...