Tuesday, March 10, 2009

AFAQ--Uninformed Anarchist

On a blog called Anarchist Writers someone, apparently an anarchist writer, with the pseudonym "afaq" (which seems to stand for "anarchist frequently asked questions"--I guess anarchist writers lack the guts to use their own names) displays some anarchistic ignorance. Afaq, an anarchist* who believes that state violence should suppress private economic activity, writes:

"A 100% reserve system is not a reformed or true banking system. It is the abolition of the banking system. Without fractional reserves, banks cannot make any loans of any kind as they would not be in a position to give their clients their savings if they have made loans. Only someone completely ignorant of a real capitalist economy could make such a suggestion and, unsurprisingly, this position is held by members of the "Austrian" school (particularly its minimum state wing)."

Despite afaq's crude name calling, afaq appears not to have heard of savings banks. Perhaps a reading of Murray Rothbard's Mystery of Banking would inform this confused soul of the difference between full and fractional reserve banking, and of the evolution of fractional reserve banking after the beginnings of capitalism through goldsmiths' fraudulent issuance of notes on non-existent gold. Moreover, several states illegalized fractional reserve banking in the nineteenth century, and capitalism did not suffer.

Only someone ignorant of how banking works and of economic history would be unaware that fractional reserve banking is not full reserve banking. Fractional reserve banking exists where loans are made without reserves, as is done by the US banking system, where loans are 2 to 10 or more times greater than the monetary base or reserves. Eliminating fractional reserve banking means requiring banks to have reserves in order to lend them, not preventing them from lending reserves. Any student of elementary economics learns this, but it is clearly beyond afaq's knowledge, which does not prevent afaq from expounding pointlessly and confusedly on numerous topics about which afaq is ignorant.

It is characteristic of the left to call others ignorant when they themselves lack the most elementary familiarity with a subject.

*Characteristically, the left adopts nomenclature that is opposite to its meaning. "Progressives" advocate ideas that are four centuries old and were characteristic of mercantilists. Their ideas are guaranteed to stop progress. "Radicals" advocate communist ideas that are appropriate to feudalism, were well known two thousand years ago, and whose adoption would but re-enforce the root of current big government corruption. "Liberals" advocate anti-liberalism and statism. And of course, "anarchists" like afaq advocate governmental suppression of freedom.

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