The Austrian Economics Wiki - User contributions [en]

Books on hyperinflation

2011-06-15T16:07:04Z

89.128.216.95: br

List of books on hyperinflation and hard money:

*[[La banqueroute de law]] by Edgar Faure
*[[Fiat Money Inflation in France]] Andrew Dickson White
*[[The Hyperinflation Survival Guide]] Gerald Swanson
*[[The Age of Inflation]] Hans F. Sennholz
*[[When Money Dies]]: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany by: Adam Fergusson
*[[Gold Wars]] by Ferdinand Lips
*[[Pieces of Eight]] : The Monetary Powers and Disabilities of the United States Constitution by Edwin Vieira
*[[The Creature from Jekyll Island]]: A Second Look at the Federal Reserve by G. Edward Griffin
*[[What Has Government Done to Our Money?]] by M.N. Rothbard
*[[The Case Against the Fed]] by M.N. Rothbard
*[[End the Fed]] by Ron Paul
*[[Forty Centuries of Wage and Price Controls]] by Robert Schuettinger

Books on hyperinflation

2011-06-15T16:06:33Z

89.128.216.95: books on hyperinflation list

List of books on hyperinflation and hard money:

[[La banqueroute de law]] by Edgar Faure
[[Fiat Money Inflation in France]] Andrew Dickson White
[[The Hyperinflation Survival Guide]] Gerald Swanson
[[The Age of Inflation]] Hans F. Sennholz
[[When Money Dies]]: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany by: Adam Fergusson
[[Gold Wars]] by Ferdinand Lips
[[Pieces of Eight]] : The Monetary Powers and Disabilities of the United States Constitution by Edwin Vieira
[[The Creature from Jekyll Island]]: A Second Look at the Federal Reserve by G. Edward Griffin
[[What Has Government Done to Our Money?]] by M.N. Rothbard
[[The Case Against the Fed]] by M.N. Rothbard
[[End the Fed]] by Ron Paul
[[Forty Centuries of Wage and Price Controls]] by Robert Schuettinger

Fiat Money Inflation in France

2011-06-15T16:01:46Z

89.128.216.95: book stub

[[Fiat Money Inflation in France]] (1933) by Andrew Dickson White is a book on the introduction of fiat money to France during the French Revolution, through the use of "Assignats". these were originally debt instruments but where soon transformed into paper money for circulation.

GoldMoney

2011-05-12T16:48:38Z

89.128.216.95:

[[GoldMoney]] is a [[Digital Gold Currency]] (DGC) and precious metal [[bailment]] service founded in 2001 by [[James Turk]]. Its purpose is to allow customers to save in gold and also to pay in [[gold]].

As of April 2011 it holds over US$2.1 billion of precious metals & currencies owned by 18,352 customers.

The [[GoldMoney Foundation]] is a non-profit institution dedicated to the advocacy of [[sound money]] and the remonetization of precious metals.

== External links ==
*[http://goldmoney.com Official website]
*[http://www.linkedin.com/groups?about=&gid=2673600 GoldMoney Linkedin group]

GoldMoney

2011-05-12T16:48:08Z

89.128.216.95: sound money

[[GoldMoney]] is a [[Digital Gold Currency]] (DGC) and precious metal [[bailment]] service founded in 2001 by [[James Turk]]. Its purpose is to allow customers to save in gold and also to pay in [[gold]].

As of April 2011 it holds over US$2.1 billion of precious metals & currencies owned by 18,352 customers.

The [[GoldMoney Foundation]] is a non-profit institution dedicated to the advocacy of [[sound money]] and the remonetization of precious metals.

== External links ==
*[http://goldmoney.com Official website]
* [http://www.linkedin.com/groups?about=&gid=2673600 GoldMoney Linkedin group]

Bitcoin

2011-05-12T16:46:19Z

89.128.216.95: /* See also */

[[File:Bitcoinlogo.png|thumb|300px|right|Bitcoin logo.]]
{{Infobox
| Box title = Software
| Row 1 title= name
| Row 1 info= Bitcoin
| Row 2 title=developer
| Row 2 info= Satoshi Nakamoto
| Row 3 title=latest release version
| Row 3 info = 0.3.12
| Row 4 title=latest release date
| Row 4 info= "2010/09/07"
| Row 5 title=programming language
| Row 5 info = [[Wikipedia:C++]]
| Row 6 title=operating system
| Row 6 info = Windows, Linux, Mac OS X
| Row 7 title=status
| Row 7 info = Beta
| Row 8 title=genre
| Row 8 info= [[Wikipedia:Electronic money|Electronic money]]
| Row 9 title=license
| Row 9 info = [[Wikipedia:MIT License|MIT License]]
| Row 10 title=website
| Row 10 info = [http://www.bitcoin.org/ "www.bitcoin.org"]
}}
{{Infobox
|Box title=Currency
| Row 1 title = currency name
| Row 1 info = Bitcoin
| Row 2 title = using countries
|Row 2 info = ''Internet-based (global)''
| Row 3 title=symbol
| Row 3 info = BTC
| Row 4 title=issuing authority
| Row 4 info= Bitcoin network
| Row 5 title =issuing authority website
| Row 5 info www.bitcoin.org
}}
'''Bitcoin''' is an [[open source]] [[Wikipedia:peer-to-peer|peer-to-peer]] [[Wikipedia:electronic cash|electronic cash]] system developed by Satoshi Nakamoto. The system is decentralized with no central server or trusted parties.<ref name="hartford">
{{cite news
|title=Is It Time For Digital-Only Dollars?
|first=Phil
|last=Maymin
|date=2010-07-08
|newspaper=Hartford Advocate
|url=http://www.hartfordadvocate.com/commentary/is-it-time-for-digital-only-dollars-2
|accessdate=2010-07-23
}}</ref> Bitcoin relies on [[Wikipedia:cryptographic|cryptographic]] principles to create unique, unreproducible, and divisible tokens of value. Users hold the [[Wikipedia:Key (cryptography)|cryptographic keys]] to their own money and transact directly with each other, with the help of the network to check for [[Wikipedia:double-spending|double-spending]].<ref name="infoworld_2010">
{{cite news
|date=2010-05-24
|title=Open source innovation on the cutting edge
|first=Neil
|last=McAllister
|newspaper=InfoWorld
|url=http://www.infoworld.com/d/open-source/open-source-innovation-the-cutting-edge-582?page=0,2
|accessdate=2010-07-23
}}</ref>

==Technical basis==
[[File:Hash_tree.png|thumb|300px|right|Bitcoin uses an ever-growing [[Wikipedia:hash tree]] to store, linearize, and verify transactions.]]

Bitcoin is an implementation of Wei Dai's b-money proposal on [[Wikipedia:Cypherpunks|Cypherpunks]] in 1998 and Nick Szabo's Bitgold proposal.<ref>[http://www.bitcoin.org/smf/index.php?topic=342.msg4508#msg4508 Bitcoin author on external references]</ref> The principles of the system are described in the Bitcoin White Paper.<ref name=Whitepaper>[http://www.bitcoin.org/sites/default/files/bitcoin.pdf Bitcoin White Paper]</ref>

A user on the network has one or several cryptographic identifiers ([[Wikipedia:ECDSA|ECDSA]] keypairs), which represent their [[Wikipedia:wallet|wallet]]. The public key counterpart of this wallet is called an ''address''. The private key, stored only on the user's computer, is used to authorize payments from the user. The wallet or address contain no information about their owner, so they are effectively anonymous.<ref>{{cite news |author=Nathan Willis |date=2010-11-10 |title=Bitcoin: Virtual money created by CPU cycles |publisher=[[Wikipedia:LWN.net]] |url=http://lwn.net/SubscriberLink/414452/ef58a58a62148050/ }}</ref>

Each coin of the Bitcoin system has its owner's [[Wikipedia:public key|public key]] on it. The owner can transfer it further by adding the recipient's public key on it, signing it with his private key and broadcasting the transaction to the network. This way, each coin contains its cryptographic ownership history from the creator of the coin to its current owner.

To prevent users from double-spending their coins (signing the same coin for many recipients), transactions are [[Wikipedia:timestamp|timestamped]] by the network with a [[Wikipedia:proof-of-work system|proof-of-work system]]. The network collects and records new transactions into a chain of blocks. Nodes of the network are constantly racing to complete these blocks by finding a value, that summed up with the block and the hash of the previous block, produces an [[Wikipedia:SHA-256|SHA-256]] hash containing a certain amount of leading zero bits. The average work required by this operation can be calculated and used to timestamp the block's transactions, so that they cannot be invalidated by later double-spending.

The incentive to use CPU time for running the system is that new coins are created and assigned to the node that manages to complete the new block first. This method of coin creation "was designed to be a digital analogue to gold and silver mining"<ref>[http://www.lewrockwell.com/orig6/luongo7.1.1.html LewRockwell.com article: The FED’s Real Monetary Problem]</ref>. Once a node successfully creates a block, it broadcasts the block to the network. Other nodes receive the block, perform a proof-of-work check, and add it to their chain if it is valid. As more transactions occur, blocks are created and added ad infinitum. The longest proof-of-work block chain is acknowledged to be the oldest and most reliable account of the transaction history.

This mechanism is claimed<ref name=Whitepaper /> to be virtually tamper-proof. For an attacker to manipulate the record, he must outpace all of the other nodes on the network to produce the longest proof-of-work. This becomes exponentially more difficult as time passes, because such "tampered" chains would continuously be rejected by nodes attempting to build a valid chain.

Bitcoin is a completely peer-to-peer network, and every node is able to enter or leave the network at will. When a node joins the network, the longest proof-of-work is automatically accepted as the most reliable one.

==Economic aspects==
The average rate of Bitcoin production is tapered such that over time the total number of Bitcoins will approach 21,000,000. After this point, no further Bitcoin production is possible. In this [[Wikipedia:deflation|deflationary]] environment and in situations where large numbers of Bitcoins are either lost or destroyed, the electronic divisibility of Bitcoins is argued to be conducive to downward price adjustments with no practical limitations in the actual storage or transport of Bitcoin value.<ref name=Divisiblity>[http://www.bitcoin.org/smf/index.php?topic=44.0 Divisibility of Bitcoins]</ref> Rather than relying on the incentive of newly created Bitcoins to package transactions, nodes in this period will likely depend more heavily on their ability to competitively collect transaction fees to process Bitcoin transactions into blocks.<ref>[http://www.bitcoin.org/smf/index.php?topic=165.0 Incentive to Collect Transactions]</ref>

==Monetary and financial benefits==
Given the decentralized nature of Bitcoin and the hard coding of monetary rules within the software, various monetary and financial benefits to potential users exist<ref name=FAQ>[http://www.bitcoin.org/faq Bitcoin FAQ]</ref>:

* Direct transfer of monetary value via the internet without a trusted middleman or financial processor.
* Third parties cannot prevent or control transactions.
* Transactions are practically free.
* Bitcoin value is unconnected to possible instability caused by fractional reserve banking and poor central bank policy (see [[Austrian business cycle theory]]).
* Corrupted transactions created by hacked or modified clients are rejected by honest clients.
* The limited inflation of the Bitcoin system’s money supply is distributed evenly by CPU power throughout the network and programmatically created at a rate known to all parties in advance. Inflation cannot therefore be centrally manipulated to effect redistribution of Bitcoin value from general users.
* Given the predetermined rate of Bitcoin creation, the system is further protected against wild swings in supply due to externalities sometimes seen with traditional commodity currencies (see [[Wikipedia:History_of_the_rupee#The_fall_of_the_Rupee|Fall of the Rupee]] due to large discoveries of silver reserves in the New World).
* Bitcoins are potentially divisible to eight decimal points.<ref name=Divisiblity /> There are therefore no practical limitations to downward price adjustments in a deflationary environment.

According to the author, the design also supports a variety of possible transaction types that have yet to be implemented within the currently available client. These include [[Wikipedia:escrow|escrow]] transactions, [[Wikipedia:surety bond|surety bond]] contracts, third party [[Wikipedia:arbitration|arbitration]], and multi-party signatures.<ref>[http://www.bitcoin.org/smf/index.php?topic=195.msg1611#msg1611 Predicate Transactions]</ref>

==Acceptance==

As of august 2010 there are roughly 30 sites accepting payment via Bitcoin<ref name=AcceptingSites>[http://www.bitcoin.org/trade List of sites accepting Bitcoin]</ref>, spanning areas such as [[Wikipedia:VOIP|digital telephony]] services<ref>[http://forum.link2voip.com/viewtopic.php?f=1&t=1088 Link2VoIP (www.link2voip.com) accepts Bitcoin as payment.]</ref>, [[Wikipedia:currency trading]] systems<ref>[http://www.bitcoin.org/smf/index.php?topic=20.msg747#msg747 Bitcoin Trading System.]</ref><ref>{{cite web|url=http://www.bitcointo.com/|title=Bitcointo, a Bitcoin to physical goods conversion service}}</ref>, online games<ref>{{cite web|url=http://www.atitd.com/|title=A Tale in the Desert IV accepts Bitcoin as payment}}</ref><ref>{{cite web|url=http://www.sirarthur.net/bitcasino|title=BitCoin Casino}}</ref><ref>{{cite web|url=http://www.thefarwilds.com/|title=The Far Wilds, online game accepting Bitcoin as payment}}</ref>, physical goods<ref>{{cite web|url=http://qextracts.ecrater.com/|title=Quiggle extracts, online apothecary accepting bitcoins as payment}}</ref><ref>{{cite web|url=http://www.theoddshot.com.au/|title=The Odd Shot, a print photography business accepting bitcoins as payment}}</ref>, advertising services<ref>{{cite web|url=http://www.bitads.tk/|title=Bitads, advertising system accepting Bitcoins as payment}}</ref><ref>{{cite web|url=http://www.bitlist.tk/|title=Bitlist, advertising system accepting Bitcoins as payment}}</ref>, auction systems<ref>{{cite web|title=BiddingPond.com, a Bitcoin-powered auction system|url=http://www.biddingpond.com/}}</ref>, web hosting<ref>{{cite web|url=http://www.privacyshark.com/|title=Privacy Shark, anonymous Bitcoin-based domain name and DNS hosting services}}</ref>, computer security auditing<ref>{{cite web|url=http://binarysecurity.webs.com/|title=Binary Security, Bitcoin only web application security auditing services}}</ref> and other online services. Also [EFF] accepts donations in bitcoins.

==See also==
*[[GoldMoney]]
*[[Wikipedia:Anonymous internet banking|Anonymous internet banking]]
*[[Wikipedia:Crypto-anarchy|Crypto-anarchy]]
*[[Wikipedia:eCache|eCache]]
*[[Wikipedia:HashCash|HashCash]]
*[[Wikipedia:Pecunix|Pecunix]]
*[[Wikipedia:Ripple monetary system|Ripple monetary system]]
*[[Wikipedia:Yodelbank|Yodelbank]]

==References==
{{Reflist|1}}

==Links==
*[http://www.bitcoin.org/ Official website]
*[https://www.bitcoin.org/wiki/doku.php Bitcoin wiki]
* [http://sourceforge.net/projects/bitcoin/ Bitcoin at sourceforge]
*[http://news.slashdot.org/story/10/07/11/1747245/Bitcoin-Releases-Version-03 news.slashdot.org]
*[http://p2pfoundation.ning.com/profiles/blogs/bitcoin-open-source-p2p-ecash p2pfoundation.net]
*''[http://modeledbehavior.com/2010/06/30/bitcoin-and-the-wild-west/ Bitcoin and the Wild West]'', Modeled Behaviour blog.
*[http://dailypaul.com/node/139776 dailypaul.com]
*[http://www.reddit.com/domain/bitcoin.org/ reddit.com]
*[http://habrahabr.ru/blogs/crypto/99100/ Russian blog]
*[http://www.linux.org.ru/news/opensource/5113340 linux.org.ru]

[[Category:Money]]

Gold standard

2011-05-12T16:44:37Z

89.128.216.95:

Under the '''gold standard''' every unit of money (dollar, pound, etc) represents a definite weight of gold.<ref name="Mises_defined">Ludwig von Mises. [http://mises.org/humanaction/chap17sec9.asp "The Specific Value of Money"], online version of [[Human Action]], referenced 2010-05-23.</ref>

==History==

===The coming of the gold standard===
The demonetization of [[silver]] and the establishment of [[gold]] monometallism was the outcome of deliberate government interference with monetary matters. It was not the intention of the governments to establish the '''gold standard'''. They aimed at a double standard, to substitute a rigid, government-decreed exchange ratio between gold and silver for the fluctuating market ratios between the independently coexistent gold and silver coins. These attempts failed lamentably. It was this failure that generated the gold standard. The emergence of the gold standard was the manifestation of a crushing defeat of the governments and their cherished doctrines.

In the 17th century, the rates at which the English government tariffed the coins overvalued the [[Wikipedia:Guinea (British coin)|guinea]] with regard to silver and thus made the silver coins disappear. Only those silver coins that were much worn by usage or in any other way defaced or reduced in weight remained in current use; it did not pay to export and to sell them on the bullion market. Thus England got the gold standard against the intention of its government. Only much later the laws made the ''de facto'' gold standard a ''de jure'' standard. The government abandoned further attempts to pump silver standard coins into the market and minted silver only as subsidiary coins. Their exchange value depended not on their silver content, but on the fact that they could be exchanged at every instant, without delay and without cost, at their full face value against gold. They were de facto silver printed notes, claims against a definite amount of gold.<ref name="Mises_standard">Ludwig von Mises. [http://mises.org/humanaction/chap17sec19.asp "19. The Gold Standard "], online version of [[Human Action]], referenced 2010-05-23.</ref>

Gold was legal tender in Great Britain since 1821 (when the Bank of England resumed redemption of its notes<ref name="Bank_Gold">Bank of England. [http://www.bankofengland.co.uk/education/museum/walkthrough/1821.htm "1821: End of the Restriction Period"], Bank of England Museum, referenced 2010-05-23.</ref>) and the de facto currency in the US since [[Wikipedia:Coinage Act of 1834|1834]]. Australia and Canada followed 20 years later. The breakthrough for gold and the era of the classic gold standard began after the war between [[Wikipedia:Franco-Prussian War|France and Germany]] (1870-1871). The German government received war damages of 5 billion francs in gold and made it fiat currency instead of silver, that was losing popularity at the time. The Prussian Bank ('Preusische Bank') was turned into a central bank ('[[Wikipedia:Reichsbank|Reichsbank]]'). Its notes became legal tender in 1909, following the example of the British system.

There were several reasons for using gold. Great Britain, with the largest capital market in the world, was using it. Several major lands using silver (Russia, Austria) have suspended payments by the time. Finally, silver has less purchasing power than gold, making its weight for large transfers rather problematic. Practically all western lands and many of their colonies have followed suit.<ref name="Hulsmann_Gold_standard" /> The bimetallic standard of France and in the other countries of the [[Wikipedia:Latin Monetary Union|Latin Monetary Union]] resulted in the emergence of ''de facto'' gold monometallism as well.<ref name="Mises_standard" />

===Types of gold standard===
Under the '''classical gold standard''', each [[central bank]] was responsible for making sure that its notes could be redeemed into gold. The central banks of Great Britain, France, Germany, Switzerland, and Belgium (and later of the U.S.) kept their entire reserves in gold. These reserves were supposed to be large enough for them to survive emergency situations.

But commercial banks usually kept most of their reserves in the form of central banknotes and only held extremely low gold reserves for emergency situations. In some countries, this practice predated the classical gold standard by quite a few decades. For example, it was already the practice of the English country banks in the first half of the nineteenth century. They kept [[Bank of England]] notes as part of their reserves and, in times of great strain on their gold reserves, often redeemed their own notes, not into gold, but into notes of the Bank.

Many central banks adopted exactly the same scheme. The central banks of Russia, [[Austria-Hungary]], Japan, the Netherlands, and of the Scandinavian countries, as well as the central banks of British dominions such as South Africa and Australia redeemed their own notes not only in gold, but also in notes of the more important foreign central banks. Countries such as India, the Philippines, and various Latin American countries held their reserves exclusively under the form of foreign gold-denominated banknotes. The pooling of gold reserves in a few reliable central banks allows a larger inflation of the worldwide note supply than would otherwise have been possible. The pitfall is that it places the entire responsibility of keeping sufficiently large reserves on a small number of "virtuous" fractional-reserve banks. They have a reason to accept this burden, however, because it gives them political power over the other banks, especially in times of crises.

The '''gold-exchange standard''' elevated this practice of coordinated inflation into a principle of international monetary relations. The American [[Federal Reserve System|Fed]] and the [[Bank of England]] would be the central banks of the entire world (with a few exceptions, notably France). These central banks would inflate relatively slowly; but would be repaid in terms of political power. All other national central banks should keep a more or less large part of their reserves in the form of U.S. dollar notes and British pound notes and could inflate much more.

Designed from the beginning to facilitate inflation, the unstable system lasted only six years (1925-31). The [[Great Depression]] of 1929 caused a rise of protectionist policies and foreign exchange controls, that choked the international currency trade. The Bank of England could not renew its gold reserves and suspended its payments, followed by other banks. From then on currencies fluctuated freely, which lasted until the end of World War II.<ref name="Hulsmann_Gold_standard">Jörg Guido Hülsmann. [http://www.mises.org/books/moneyproduction.pdf "The Ethics of Money Production"] (pdf), online version, Chapter 16. International Banking Systems, 1871–1971, p.214-216, referenced 2010-05-23.</ref>

Under the '''gold bullion standard''', the currency was no longer redeemable in coins; it could only be redeemed in large, highly valuable, gold bars. This, in effect, limited gold redemption to a handful of specialists in foreign trade. No longer a true gold standard, the governments can still proclaim their adherence to gold. The European "gold standards" of the 1920s were pseudo-standards of this type.<ref name="Rothbard_bullion">Murray N. Rothbard. [http://mises.org/money/3s10.asp "What Has Government Done to Our Money?"], online version, Going off the Gold Standard, referenced 2010-05-25.</ref> For example, in 1925-1931 the Bank of England was on the bullion standard and would sell gold bars only in the minimum amount of 400 fine (pure) [[Wikipedia:Troy ounce|ounces]].<ref name="Officer_bullion">Lawrence H. Officer, University of Illinois at Chicago. [http://eh.net/encyclopedia/article/officer.gold.standard "Gold Standard"], Encyclopedia of Economic and Business History, referenced 2010-05-26.</ref>

=== The Gold Standard Vs Free Market Money ===

Most of the times when people who are in favour of a gold standard use the term 'Gold standard' they are in fact referring to the system of free market money, Or simply allowing people to choose whatever currency they to use for trade. The main reason the term gold standard is used as shorthand is due to gold being used throughout history as the most popular commodity that people use as currencies when they are free to choose.

==External links==
* [[Wikipedia:Gold standard|Gold standard]] on Wikipedia
* [http://www.econlib.org/library/Enc/GoldStandard.html Gold standard] at the Concise Encyclopedia of Economics
* [http://eh.net/encyclopedia/article/officer.gold.standard Gold standard] on the Encyclopedia of Economic and Business History, with numerous countries and dates on the gold standard

==References==
{{Reflist}}

== See also ==

*[[GoldMoney]]
*[[Ludwig von Mises]]
*[[Money creation]]
*[[Monetary reform]]
*[[Murray Rothbard]]

[[Category:Money]]

Gold standard

2011-05-12T16:43:36Z

89.128.216.95: see also

Under the '''gold standard''' every unit of money (dollar, pound, etc) represents a definite weight of gold.<ref name="Mises_defined">Ludwig von Mises. [http://mises.org/humanaction/chap17sec9.asp "The Specific Value of Money"], online version of [[Human Action]], referenced 2010-05-23.</ref>

==History==

===The coming of the gold standard===
The demonetization of [[silver]] and the establishment of [[gold]] monometallism was the outcome of deliberate government interference with monetary matters. It was not the intention of the governments to establish the '''gold standard'''. They aimed at a double standard, to substitute a rigid, government-decreed exchange ratio between gold and silver for the fluctuating market ratios between the independently coexistent gold and silver coins. These attempts failed lamentably. It was this failure that generated the gold standard. The emergence of the gold standard was the manifestation of a crushing defeat of the governments and their cherished doctrines.

In the 17th century, the rates at which the English government tariffed the coins overvalued the [[Wikipedia:Guinea (British coin)|guinea]] with regard to silver and thus made the silver coins disappear. Only those silver coins that were much worn by usage or in any other way defaced or reduced in weight remained in current use; it did not pay to export and to sell them on the bullion market. Thus England got the gold standard against the intention of its government. Only much later the laws made the ''de facto'' gold standard a ''de jure'' standard. The government abandoned further attempts to pump silver standard coins into the market and minted silver only as subsidiary coins. Their exchange value depended not on their silver content, but on the fact that they could be exchanged at every instant, without delay and without cost, at their full face value against gold. They were de facto silver printed notes, claims against a definite amount of gold.<ref name="Mises_standard">Ludwig von Mises. [http://mises.org/humanaction/chap17sec19.asp "19. The Gold Standard "], online version of [[Human Action]], referenced 2010-05-23.</ref>

Gold was legal tender in Great Britain since 1821 (when the Bank of England resumed redemption of its notes<ref name="Bank_Gold">Bank of England. [http://www.bankofengland.co.uk/education/museum/walkthrough/1821.htm "1821: End of the Restriction Period"], Bank of England Museum, referenced 2010-05-23.</ref>) and the de facto currency in the US since [[Wikipedia:Coinage Act of 1834|1834]]. Australia and Canada followed 20 years later. The breakthrough for gold and the era of the classic gold standard began after the war between [[Wikipedia:Franco-Prussian War|France and Germany]] (1870-1871). The German government received war damages of 5 billion francs in gold and made it fiat currency instead of silver, that was losing popularity at the time. The Prussian Bank ('Preusische Bank') was turned into a central bank ('[[Wikipedia:Reichsbank|Reichsbank]]'). Its notes became legal tender in 1909, following the example of the British system.

There were several reasons for using gold. Great Britain, with the largest capital market in the world, was using it. Several major lands using silver (Russia, Austria) have suspended payments by the time. Finally, silver has less purchasing power than gold, making its weight for large transfers rather problematic. Practically all western lands and many of their colonies have followed suit.<ref name="Hulsmann_Gold_standard" /> The bimetallic standard of France and in the other countries of the [[Wikipedia:Latin Monetary Union|Latin Monetary Union]] resulted in the emergence of ''de facto'' gold monometallism as well.<ref name="Mises_standard" />

===Types of gold standard===
Under the '''classical gold standard''', each [[central bank]] was responsible for making sure that its notes could be redeemed into gold. The central banks of Great Britain, France, Germany, Switzerland, and Belgium (and later of the U.S.) kept their entire reserves in gold. These reserves were supposed to be large enough for them to survive emergency situations.

But commercial banks usually kept most of their reserves in the form of central banknotes and only held extremely low gold reserves for emergency situations. In some countries, this practice predated the classical gold standard by quite a few decades. For example, it was already the practice of the English country banks in the first half of the nineteenth century. They kept [[Bank of England]] notes as part of their reserves and, in times of great strain on their gold reserves, often redeemed their own notes, not into gold, but into notes of the Bank.

Many central banks adopted exactly the same scheme. The central banks of Russia, [[Austria-Hungary]], Japan, the Netherlands, and of the Scandinavian countries, as well as the central banks of British dominions such as South Africa and Australia redeemed their own notes not only in gold, but also in notes of the more important foreign central banks. Countries such as India, the Philippines, and various Latin American countries held their reserves exclusively under the form of foreign gold-denominated banknotes. The pooling of gold reserves in a few reliable central banks allows a larger inflation of the worldwide note supply than would otherwise have been possible. The pitfall is that it places the entire responsibility of keeping sufficiently large reserves on a small number of "virtuous" fractional-reserve banks. They have a reason to accept this burden, however, because it gives them political power over the other banks, especially in times of crises.

The '''gold-exchange standard''' elevated this practice of coordinated inflation into a principle of international monetary relations. The American [[Federal Reserve System|Fed]] and the [[Bank of England]] would be the central banks of the entire world (with a few exceptions, notably France). These central banks would inflate relatively slowly; but would be repaid in terms of political power. All other national central banks should keep a more or less large part of their reserves in the form of U.S. dollar notes and British pound notes and could inflate much more.

Designed from the beginning to facilitate inflation, the unstable system lasted only six years (1925-31). The [[Great Depression]] of 1929 caused a rise of protectionist policies and foreign exchange controls, that choked the international currency trade. The Bank of England could not renew its gold reserves and suspended its payments, followed by other banks. From then on currencies fluctuated freely, which lasted until the end of World War II.<ref name="Hulsmann_Gold_standard">Jörg Guido Hülsmann. [http://www.mises.org/books/moneyproduction.pdf "The Ethics of Money Production"] (pdf), online version, Chapter 16. International Banking Systems, 1871–1971, p.214-216, referenced 2010-05-23.</ref>

Under the '''gold bullion standard''', the currency was no longer redeemable in coins; it could only be redeemed in large, highly valuable, gold bars. This, in effect, limited gold redemption to a handful of specialists in foreign trade. No longer a true gold standard, the governments can still proclaim their adherence to gold. The European "gold standards" of the 1920s were pseudo-standards of this type.<ref name="Rothbard_bullion">Murray N. Rothbard. [http://mises.org/money/3s10.asp "What Has Government Done to Our Money?"], online version, Going off the Gold Standard, referenced 2010-05-25.</ref> For example, in 1925-1931 the Bank of England was on the bullion standard and would sell gold bars only in the minimum amount of 400 fine (pure) [[Wikipedia:Troy ounce|ounces]].<ref name="Officer_bullion">Lawrence H. Officer, University of Illinois at Chicago. [http://eh.net/encyclopedia/article/officer.gold.standard "Gold Standard"], Encyclopedia of Economic and Business History, referenced 2010-05-26.</ref>

=== The Gold Standard Vs Free Market Money ===

Most of the times when people who are in favour of a gold standard use the term 'Gold standard' they are in fact referring to the system of free market money, Or simply allowing people to choose whatever currency they to use for trade. The main reason the term gold standard is used as shorthand is due to gold being used throughout history as the most popular commodity that people use as currencies when they are free to choose.

==References==
{{Reflist}}

== See also ==
<div style="column-count:3;-moz-column-count:3;-webkit-column-count:3">
*[[GoldMoney]]
*[[Ludwig von Mises]]
*[[Money creation]]
*[[Monetary reform]]
*[[Murray Rothbard]]

==External links==
* [[Wikipedia:Gold standard|Gold standard]] on Wikipedia
* [http://www.econlib.org/library/Enc/GoldStandard.html Gold standard] at the Concise Encyclopedia of Economics
* [http://eh.net/encyclopedia/article/officer.gold.standard Gold standard] on the Encyclopedia of Economic and Business History, with numerous countries and dates on the gold standard

[[Category:Money]]

Full reserve banking

2011-05-12T16:42:54Z

89.128.216.95: /* See also */

'''Full-reserve banking''' is a [[bank]]ing practice in which the full amount of each [[Deposit account|depositor's]] funds are kept in [[bank reserves|reserve]] (as [[cash]] or other highly liquid assets) when each depositor has the legal right to withdraw them. In other words, deposits available for immediate withdrawal would not be [[Loan|lent out]] for extended periods but rather would be retained by the bank to allow the depositor immediate access to the funds. Only [[certificates of deposit]] (or [[term deposit]]s) would be used for normal lending activity. Full-reserve banking was practiced historically by the [[Bank of Amsterdam]] and some other early banks but was displaced by [[fractional reserve banking]] after 1800.<ref>[http://www.mises.org/books/desoto.pdf ''Money, Bank Credit, and Economic Cycles''], Jesus Huerta de Soto, First English edition (2006), pp. 98-114</ref> Proposals for the restoration of full-reserve banking have been made,<ref>[http://www.mises.org/books/desoto.pdf ''Money, Bank Credit, and Economic Cycles''], Jesus Huerta de Soto, First English edition (2006)</ref> but are generally ignored or dismissed by [[mainstream economics|mainstream economists]], who believe that the costs of such a change would outweigh any benefits.<ref>{{cite web|url=http://www.richmondfed.org/publications/research/region_focus/2009/winter/full_interview.cfm |title=Interview: George Selgin |accessdate=2009-10-29 |last=Slivinski |first=Stephen |publisher=The Federal Reserve Bank of Richmond }}</ref>

==Debate over full-reserve banking==

The debate over the benefits and costs of full-reserve banking trace back over centuries.<ref>[http://www.mises.org/books/desoto.pdf ''Money, Bank Credit, and Economic Cycles''], Jesus Huerta de Soto, First English edition (2006)</ref> During the [[Great Depression]], a number of [[Chicago economists]] suggested [[monetary reform]]s, which included some calling for the ending of [[fractional-reserve banking]] in two 1933 memoranda that came to be known as the "[[Chicago plan]]". After an apparent recovery in the mid-1930s, America was again in [[Recession of 1937-1938|recession]] and in 1939 a number of economists circulated a draft proposal entitled ''[[A Program for Monetary Reform]]'' calling once more for an end to [[fractional-reserve banking]].

With the advent of the [[Financial crisis of 2007-2010]], some [[monetary reform]] advocates are again calling for an end to fractional-reserve banking and a return to full-reserve banking. One proposal is being put forward by [[Stephen Zarlenga]] and the [[American Monetary Institute]]; this is known as the ''American Monetary and Financial Security Act''.<ref>{{Citation
| last = Zarlenga
| first = Stephen
| title = Presenting the American Monetary Act
| publisher = American Monertary Institute
| year = 2009
| month = July 18
| url = http://www.monetary.org/amacolorpamphlet.pdf}}</ref>

[[Mainstream economists]] seldom discuss the merits of full-reserve banking. However, [[monetarist]] and [[Nobel Memorial Prize in Economic Sciences|Nobel Prize]] winning economist, [[Milton Friedman]] once supported a 100% reserve requirement for checking accounts.<ref>{{Citation
| last = Solow
| first = Robert M.
| title = Financial crises, contagion, and the lender of last resort
| publisher = Oxford University Press
| date = March 28, 2002
| chapter = On the Lender of Last Resort
| page = 203
| chapterurl = http://books.google.com/books?id=2486Jp8TjEcC&pg=PA201&dq=financial+crises,+contagion,+and+the+lender+of+last+resort&source=gbs_toc_r&cad=9#v=onepage&q&f=false
| isbn = 978-0199247219}}</ref> And, well known for his advocacy of similar reforms, economist [[Laurence Kotlikoff]] has also called for an end to fractional-reserve banking.<ref>{{Citation
| last = Kotlikoff
| first = Laurence J.
| last2 = Leamer
| first2 = Edward
| title = A Banking System We Can Trust
| journal = Forbes.com
| date = April 23, 2009
| url = http://people.bu.edu/kotlikoff/newweb/Abankingsystemwecantrust_4_2009.pdf
| accessdate = September 14, 2010}}</ref> In April 2009, Kotlikoff and Professor Edward Leamer called for the implementation of Limited Purpose Banking, which would turn banks away from fractional-reserve banking activities and permit them only to conduct "pure" financial intermediation, in a manner similar to pooled mutual funds.<ref>{{Citation
| last = Kotlikoff
| first = Laurence J.
| last2 = Leamer
| first2 = Edward
| title = A Banking System We Can Trust
| journal = Forbes.com
| date = April 23, 2009
| url = http://people.bu.edu/kotlikoff/newweb/Abankingsystemwecantrust_4_2009.pdf
| accessdate = September 14, 2010}}. Quote: 'If such mutual funds sound revolutionary, they're not. Funds of this kind have been around for centuries. They go by the name "tontines," or systems of "pari-mutuel betting." Limited Purpose Banking would enhance liquidity, since all funds would trade in the market even if their underlying assets are illiquid. It would permit the extension of as much credit as the public--which is the ultimate source of credit--wishes to provide by buying mutual funds that purchase household and business loans. And it would force banks to charge fees and pay their employees based on their mutual fund performances as determined by the market. What LPB will eliminate is insider rating, free riding on FDIC insurance, self-custody arrangements, no-doc loans, institutionalized gambling, me-now compensation plans, financial malfeasance and the possibility of future financial collapse. In other words, it would be a system we can trust.'</ref>

Most recently, in late 2010, two British MP's, Douglas Carswell and Steven Baker, sought to introduce legislation into the British Parliament that would allow depositors to decide if their money should be lent out and for what period.<ref>[http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8004540/The-radical-reform-that-would-end-boom-and-bust-in-banking.html ''The Radical Reform in Banking''], Toby Baxendale, ''Daily Telegraph'', 15 Sept 2010</ref> If this legislative reform were to pass, British depositors would have the option to elect to save their money in full-reserve bank accounts.

Active debate regarding the merits of full reserve banking have occurred amongst [[Austrian economists]] for decades, and Austrians such as [[Murray Rothbard|Murray N. Rothbard]] and Jörg Guido Hülsmann support full-reserve banking and hold that fractional-reserve banking is immoral, inherently "fraudulent and inflationary" and is a form of legalized [[embezzlement]] that is analogous to a government-supported [[Ponzi scheme]].<ref>{{Citation
| last = Engelhardt
| first = Lucas M.
| title = 100% Reserves Now
| journal = Mises Daily
| date = December 8, 2008
| url = http://mises.org/daily/3237
| accessdate = September 14, 2010}}</ref><ref>{{Citation
| last = Rothbard
| first = Murray N.
| title = The Case for a 100 Percent Gold Dollar
| journal = Mises Daily
| date = May 23, 2005
| url = http://mises.org/daily/1829
| accessdate = September 14, 2010}}</ref><ref>{{Citation
| last = Rothbard
| first = Murray N.
| title = The Mystery of Banking
| publisher = Ludwig von Mises Institute
| url = http://www.mises.org/Books/mysteryofbanking.pdf
| accessdate = September 14, 2010
| isbn = 978-1-933550-28-2}}</ref><ref>{{Citation
| last = Hülsmann
| first = Jörg Guido
| title = Free Banking and the Free Bankers
| journal = The Review of Austrian Economics
| volume = 9
| issue = 1
| publisher = Ludwig von Mises Institute
| year = 1996
| url = http://mises.org/journals/rae/pdf/RAE9_1_1.pdf
| accessdate = September 14, 2010}}</ref><ref>{{Citation
| last = Hülsmann
| first = Jörg Guido
| title = Has fractional-reserve banking really passed the market test?
| publisher = Independent Review
| date = January 1, 2003
| url = http://www.accessmylibrary.com/coms2/summary_0286-2737288_ITM
| accessdate = September 14, 2010}}</ref>

==The case for full reserve ==

This would eliminate (or at least greatly reduce) the financial risks associated with [[bank run]]s, as the bank would have all the [[money]] in reserve needed to pay depositors - regardless whether depositors actually claimed their money.<ref>[http://www.mises.org/Books/mysteryofbanking.pdf ''The Mystery of Banking''], Murray Rothbard</ref><ref>[http://mises.org/story/1829 The Case for a 100% Gold Dollar], Murray Rothbard</ref><ref name=FBFB>[http://mises.org/journals/rae/pdf/RAE9_1_1.pdf Free Banking and the Free Bankers], Jörg Guido Hülsmann, Quarterly Journal of Austrian Economics (Vol. 9, No. 1)</ref>

Proponents argue that this form of banking would also eliminate the need for a [[lender of last resort]] (such as a [[central bank]]), which is normally needed to support the banking system in times of [[systemic risk]] or [[financial contagion]], as these financial risks would not exist in a full-reserve banking environment.<ref>[http://mises.org/journals/qjae/pdf/qjae1_3_8.pdf Free Banking and Fractional Reserve Banking], Jörg Guido Hülsmann, Quarterly Journal of Austrian Economics (Vol. 1, No. 3)</ref> This simply requires that the resources available to the banks issuing credit money and demand deposits would be sufficient to convert ''all'' currency at once if so required. It was a central component in [[Social Credit]] proposals.<ref>[http://www.theuniversityconcourse.com/VIII,1,9-30-2002/Heydorn.htm Social credit a distributist reform of the financial system] by Oliver Heydorn</ref>

Were the [[United States]] to adopt full-reserve, all currency would be created by the federal government, and as a result all [[seigniorage]] revenue would also accrue to the federal government.<ref> [http://worthpublishers.com/html/staticcontent/nonstandard/include/0716771616/Krugman2e_Econ_Ch30.pdf], Paul Krugman, Robin Wells, Macroeconomics 2nd Ed. Worth Publishers, Page 808 </ref> This is in contrast to the current US system, where a large proportion of the currency supply is in the form of demand deposits created by private banks.<ref> Krugman, pg 802</ref> When the Federal Reserve creates currency and uses it to buy treasury bills, it collects seigniorage revenue in the form of interest payments which it then returns to the United States<ref>[http://www.gao.gov/new.items/d04283.pdf] GAO Report 04-283, Page 2</ref> (for example, in 2002 the United States earned $24.495 billion in this manner).<ref>GAO Report, pg 14</ref> When a private bank creates currency, the government cannot collect any seigniorage from it. Since the Federal Reserve has a target for the size of the currency stock, any currency created by private banks is currency that is not created by the Fed and thus constitutes lost seigniorage.<ref>[http://worthpublishers.com/html/staticcontent/nonstandard/include/0716771616/Krugman2e_Econ_Ch30.pdf] Paul Krugman, Robin Wells, Macroeconomics 2nd Ed. Worth Publishers, Page 816</ref> Some consider this an illegitimate "privatization" of what should be a public good, with these profits being retained by the government to finance essential social services and capital works.<ref name="books.google.com">{{cite book |last= Brown |first= Ellen H. |title= Web of Debt |url= http://books.google.com/?id=ILMGrEC524UC |accessdate= 2007-12-15 |year= 2007 |publisher= Third Millennium Press |location= Baton Rouge, Louisiana |isbn= 0979560802 }}</ref><ref name="death">{{cite book |last= Rowbotham |first= Michael |title= The Grip of Death: A Study of Modern Money, Debt Slavery and Destructive Economics | year= 1998 |publisher= Jon Carpenter Publishing |isbn= 9781897766408 }}</ref><ref name="monetary.org">[http://www.monetary.org/lostscienceofmoney.html Stephen A. Zarlenga, ''The Lost Science of Money'' AMI (2002)]</ref>

It is argued by these economists that, in contrast to fractional-reserve banking, full-reserve banking ''guarantees'' a stable money supply, which ensures that the [[means of exchange]] is not debased over time. This improves the efficiency of the [[price mechanism]], promotes saving and the deferral of consumption, provides much greater confidence in the financial system and in the integrity of all commercial transactions and therefore encourages sustainable, non-speculative, productive investment.<ref>[http://mises.org/story/3237 100% Reserves Now], Lucas M. Engelhardt</ref><ref>[http://mises.org/story/1829 The Case for a 100% Gold Dollar], Murray Rothbard</ref><ref name=FBFB>[http://mises.org/journals/rae/pdf/RAE9_1_1.pdf Free Banking and the Free Bankers], Jörg Guido Hülsmann, Quarterly Journal of Austrian Economics (Vol. 9, No. 1)</ref><ref>[http://www.mises.org/Books/mysteryofbanking.pdf ''The Mystery of Banking''], Murray Rothbard</ref>

Advocates of full-reserve banking do not necessarily advocate that the government lay down regulations stipulating a full-reserve system. In fact, some economists, such as [[Murray Rothbard]] (of the [[Austrian School]]) believe that government intervention sustains fractional-reserve banking, as governments have formalized the practice by making it legal and supporting it through the creation of central banks. Murray Rothbard argues that in doing this they have prevented periodic bank runs and other natural checks that would otherwise be placed on banks by astute customers, anti-fractional-reserve consumer groups, and other such organizations. Rothbard expresses this concern, and argues the case for 100% gold or silver-backed money, in his book ''[[What Has Government Done to Our Money?]]'' and other published works.<ref>[http://www.mises.org/Books/mysteryofbanking.pdf ''The Mystery of Banking''], Murray Rothbard</ref>

== Criticism==
The most common criticism of full-reserve banking, and by contrast, argument for fractional reserve banking, is the need for [[financial intermediation]] and capital formation. [[F. A. Hayek]] accepted that bank credit and fractional reserve banking — even if they contributed to business cycles — were necessary as "the price we pay for a speed of development exceeding" that which would otherwise be possible, and that "financial institutions have never been prohibited from holding fractional reserves."<ref>http://mises.org/journals/rae/pdf/RAE9_1_3.pdf Walter Block and Kenneth A. Garschina, "Hayek, Business Cycles and Fractional Reserve Banking: Continuing the De-Homogenization Process", Review of Austrian Economics, 1996.</ref> Austrian monetary theorist [[George Selgin]] has argued: "Those self-styled Austrian economists, mostly followers of [[Murray Rothbard]], who insist on fractional-reserve banking's fraudulent nature or inherent instability are, frankly, making poor arguments. I don't think the evidence supports their view, and that they overlook overwhelming proof of the benefits that fractional reserve banking has brought in the way of economic development by fostering investment."<ref>{{cite web|url=http://www.richmondfed.org/publications/research/region_focus/2009/winter/full_interview.cfm |title=Interview: George Selgin |accessdate=2009-10-29 |last=Slivinski |first=Stephen |publisher=The Federal Reserve Bank of Richmond }}</ref>

Under full-reserve banking, deposits available for immediate withdrawal would sit idle ready for depositors to claim they money, while entrepreneurs went without this potentially usable capital.<ref> {{cite web|url=http://www.karlwhelan.com/Teaching/International%20Monetary/part3.pdf |title=International Monetary Economics: Banks and Financial Intermediation |accessdate=2009-10-29 |last=Whelan |first=Karl |date=2009-01-29 |format=PDF |publisher=School of Economics, [[University College Dublin]] }} {{Dead link|date=September 2010|bot=H3llBot}}</ref> This would be likely to significantly reduce the capital available to borrowers and therefore reduce total spending and aggregate demand in the economy.

Full-reserve banking would also, by definition, lead to severe reductions in the growth of the [[money supply]] and liquidity. Transitioning to a full-reserve banking system would therefore be likely to cause significant economic dislocation and possibly a severe [[credit crunch]].

[[Pascal Salin]], former professor at the Université Paris-Dauphine and former [[Mont Pelerin Society]] president, opposes such regulation of banking and disputes Murray Rothbard's characterization of fractional-reserve banking as a simple form of recursive [[embezzlement]]. He argues that a situation of perfect certainty doesn't exist even in a full-reserve banking system. He also argues that in a perfectly free banking system any customer must be free to choose the kind of notes and the system of payments for services he prefers since optimality cannot be defined independent of the wants of the individual.<ref>[http://mises.org/journals/qjae/pdf/qjae1_3_7.pdf Free Banking and Fractional Reserves: A Comment], Pascal Salin</ref>

=== Criticisms of full-reserve banking combined with a gold standard ===

[[Central bank]]s currently control the growth of the [[money supply]]. Full-reserve banking removes the need for setting prudential or reserve requirements, as the effective reserve fraction is one. Some supporters of full-reserve banking also support a gold standard. The combination of the two would eliminate the need for open market purchases and related policy tools by central banks, as the money supply would be fixed by the amount of the metallic commodity in circulation; the value of money would also be tied to the value of one commodity. This creates additional implications that do not necessarily apply to all full-reserve banking proposals, as it would render the [[central bank]]'s functions largely redundant.

Among criticisms of a full-reserve banking system combined with [[commodity money]] (e.g. a [[gold standard]]) is that it implicitly means that there is no government-controlled "[[monetary policy]]" ''at all''. Critics also argue that full-reserves, commodity money system leaves the economy with an inelastic money supply, not able to be manipulated by a central bank. Proponents argue that the lack of a government-manipulated money supply (the lack of a "monetary policy") and the presence of a sound currency (as opposed to an "elastic" one) are ''advantages'', not disadvantages. More subtly, since full-reserve banking combined with commodity money means that during periods of high [[demand for money]], the prices of other goods must fall, the broader real economy may bear adjustment costs that are (in principle) no different from those it would bear during periods of moderate inflation (that is, if the cost of adjusting to absolute prices is low or negligible, moderate inflation should be no more problematic than moderate deflation).<ref>[http://books.google.com/books?id=DFv6OzeBWpQC&pg=PP3&dq=steven+horwitz++banking&sig=VZasp_8pGVvpQsFKMI3W9yp4AlM#PPA231,M1 Microfoundations and Macroeconomics: An Austrian Perspective], Steven Horwitz, pp. 223-232.</ref> However, this subsequent deflationary effect is likely to have deleterious consequences if some prices are [[Sticky (economics)|stickier]] than others; in particular, [[wages]] are often significantly stickier than other prices. Most mainstream academic economists believe that given wage stickiness, the adjustment costs of deflation are significantly higher than an equivalent inflation.<ref> {{cite web|url=http://econlog.econlib.org/archives/2009/10/additive_shocks.html |title=Additive Shocks |accessdate=2009-10-29 |last=Caplan |first=Bryan |date=2009-10-28 |work=EconLog |publisher=Library of Economics and Liberty }}</ref>

== Current examples ==

There are currently no examples of full reserve banking with an established history of operation. However, a variety of organisations aspire to provide full-reserve banking or claim to do so.

===Islamic banking===

In theory, [[Islamic banking]] is often synonymous with full-reserve banking, with banks achieving a 100% reserve ratio.<ref name=TFP>[http://faculty.capebretonu.ca/mchoudhu/money.htm A MONETARY SYSTEM WITH 100-PER CENT RESERVE REQUIREMENT AND THE GOLD STANDARD: THEORY, FACT AND POLICY]</ref><ref>{{cite journal |last=Siegfried |first=NA |year=2001 |month=April |title=Concepts of Paper Money in Islamic Legal Thought |journal=Arab Law Quarterly |volume=16 |issue=4 |pages=319–332 |issn=0268-0556 |url=http://www.springerlink.com/content/9ky3cbkr791256vq/ |accessdate=2006-10-16 |doi=10.1163/A:1013840123393 |format={{Dead link|date=June 2008}} – <sup>[http://scholar.google.co.uk/scholar?hl=en&lr=&q=author%3ASiegfried+intitle%3AConcepts+of+Paper+Money+in+Islamic+Legal+Thought&as_publication=Arab+Law+Quarterly&as_ylo=2001&as_yhi=2001&btnG=Search Scholar search]</sup>}}</ref> In practice, however, this is not the case, and no examples of 100 per cent reserve banking are observed. According to [[Islami Bank]] Bangladesh: <ref name="urlConcept and ideology :: Issues and problems of Islamic banking">{{cite web |url=http://web.archive.org/web/20070716151628/http://www.islamibankbd.com/page/ih_12.htm |title=Concept and ideology :: Issues and problems of Islamic banking |format= |work= |accessdate=}}</ref>
{{quote|The fractional reserve system versus 100% reserves would have different policy implications. Under the former system, banks would have the ability to draw profits on funds that they have exerted no productive effort. Such earning is against the original spirit of Islamic banking. One solution may lie in the nationalization of commercial banks, which has already occurred in most of these countries. As regards the latter, we have a fair amount of theoretical insight from the western literature but do not have any valuable empirical observations on the operations of 100% reserves even in countries that have adopted Islamic banking. These Islamic banks are still operating under fractional reserve system. Hence, the operation of monetary policy under 100% reserves system needs further research.}}

===Digital gold or silver===

Since 1996, a form of [[private currency]] called [[digital gold currency]] has been in circulation. Many of these currency providers claim to act like full-reserve "[[private bank]]s" with a one-to-one ratio of the currency they issue and the hard asset, usually [[gold]] or [[silver]], that they store as reserves. The most prominent examples are [[GoldMoney]] and [[e-gold]], with the latter encountering various issues.<ref>[http://www.thestandard.com/news/2008/07/22/internet-currency-firm-pleads-guilty-money-laundering Internet currency firm pleads guilty to money laundering]</ref> Also available are physical gold exchangers and storage providers, such as [[BullionVault]].

Some [[monetary reform]]ers believe a new free market will emerge in money production and distribution, as the [[Internet]] allows renewed decentralisation and competition in this area, eroding the [[central government]]'s and bankers' old [[monopoly]] control of the [[means of exchange]].<ref>[http://www.lewrockwell.com/podcast/?p=episode&name=2009-02-01_095_not_losing_your_head.mp3 ''Not Losing Your Head''], Speech by Lew Rockwell</ref><ref>[http://www.mises.org/store/Free-Market-Monetary-System-A-P553.aspx?AFID=14 ''Free Market Money System''] by F.A. Hayek</ref> Some monetary reformers believe that in a genuine free market, where government did not impose a monopoly currency on the populace, a predominantly full-reserve banking system, backed by a [[gold standard]] or [[silver standard]] monetary system, would arise spontaneously out of the [[free market]].<ref>[http://www.mises.org/books/Theory_Money_Credit/Contents.aspx The Theory of Money and Credit], Ludwig von Mises</ref>

== See also ==
<div style="column-count:3;-moz-column-count:3;-webkit-column-count:3">
*[[Gold standard]]
*[[GoldMoney]]
*[[Irving Fisher]]
*[[Ludwig von Mises]]
*[[Money creation]]
*[[Monetary reform]]
*[[Murray Rothbard]]
*[[Reserve requirement]]
*[[Seignorage]]
*[[Silver standard]]
</div>

==References==
{{Reflist|colwidth=30em}}

== External links ==
*[http://www.mises.org/Books/mysteryofbanking.pdf ''The Mystery of Banking''], Murray Rothbard
*[http://www.mises.org/books/desoto.pdf ''Money, Bank Credit and Economic Cycles''], [[Jesus Huerta de Soto|Huerta de Soto, J.]] (2006), Ludwig von Mises Institute
*[http://mises.org/books/moneyproduction.pdf ''The Ethics of Money Production''], [[Jörg Guido Hülsmann]] (2008), Ludwig von Mises Institute
*[http://mises.org/journals/qjae/pdf/qjae1_3_7.pdf Free Banking and Fractional Reserves: a Comment] ([[Pascal Salin]])
*[http://www.apvision.com.pk/company.html Alternatives to Conventional Banking Products By Maryam Ayaz]
*[http://www.mises.org/journals/scholar/salin.pdf In Defence of Fractional Reserve Banking] (Pascal Salin)
*[http://elib.suub.uni-bremen.de/diss/docs/E-Diss1237_Dis_Money_upside_down.pdf Money upside down]
*[http://www.seek2know.net/pdf.html Transforming Money]
*[http://mars.superlink.net/~neptune/BankFAQ.html Free Banking FAQ]
*[http://www.monetary.org/greeningthedollar.ppt Greening the Dollar] Reclaiming our democratic Values Through Monetary Reform

[[Category:Banking]]
[[Category:Money]]

GoldMoney

2011-05-12T16:40:11Z

89.128.216.95:

[[GoldMoney]] is a [[Digital Gold Currency]] (DGC) and precious metal [[bailment]] service founded in 2001 by [[James Turk]]. Its purpose is to allow customers to save in gold and also to pay in [[gold]].

As of April 2011 it holds over US$2.1 billion of precious metals & currencies owned by 18,352 customers.

The [[GoldMoney Foundation]] is a non-profit institution dedicated to the advocacy of sound money and the remonetization of precious metals.

== External links ==
*[http://goldmoney.com Official website]
* [http://www.linkedin.com/groups?about=&gid=2673600 GoldMoney Linkedin group]

GoldMoney

2011-05-12T16:31:40Z

89.128.216.95: jt

[[GoldMoney]] is a [[Digital Gold Currency]] (DGC) and precious metal [[bailment]] service founded in 2001 by [[James Turk]]. It's purpose is to allow customers to save in gold and also to pay in [[gold]].

As of April 2011 it holds over US$2.1 billion of precious metals & currencies owned by 18,352 customers.

The [[GoldMoney Foundation]] is a non-profit institution dedicated to the advocacy of sound money and the remonetization of precious metals.

== External links ==
*[http://goldmoney.com Official website]
* [http://www.linkedin.com/groups?about=&gid=2673600 GoldMoney Linkedin group]

GoldMoney

2011-05-12T16:30:18Z

89.128.216.95: /* External links */

[[GoldMoney]] is a [[Digital Gold Currency]] (DGC) and precious metal [[bailment]] service founded in 2001 by James Turk. It's purpose is to allow customers to save in gold and also to pay in [[gold]].

As of April 2011 it holds over US$2.1 billion of precious metals & currencies owned by 18,352 customers.

The [[GoldMoney Foundation]] is a non-profit institution dedicated to the advocacy of sound money and the remonetization of precious metals.

== External links ==
*[http://goldmoney.com Official website]
* [http://www.linkedin.com/groups?about=&gid=2673600 GoldMoney Linkedin group]

GoldMoney

2011-05-12T16:28:55Z

89.128.216.95: link

GoldMoney

2011-05-12T16:28:01Z

89.128.216.95: links

GoldMoney

2011-05-12T16:27:31Z

89.128.216.95: goldmoney stub

[[GoldMoney]] is a [[Digital Gold Currency]] (DGC) and precious metal bailment service founded in 2001 by James Turk. It's purpose is to allow customers to save in gold and also to pay in gold.

As of April 2011 it holds over US$2.1 billion of precious metals & currencies owned by 18,352 customers.

The [[GoldMoney Foundation]] is a non-profit institution dedicated to the advocacy of sound money and the remonetization of precious metals.