Quote from: caveden on March 18, 2013, 11:22:49 AM

Quote from: JoelKatz on March 18, 2013, 10:26:49 AM

The contract is saying that you can request a withdrawal at any time. It is totally obvious that the bank can't process a withdrawal if they don't have the money. They could add that clause to the contract, but there would be no point -- everyone understands that already.

I'm sorry, but the contract must explicitly define such things. I'm among the minority group of libertarians that disagree that fractional reserves are inherently fraudulent - they certainly don't need to be. But the terms should all be explicit, otherwise it's indeed a fraud.

That's a good way to make lawyers rich, but it doesn't actually do anything.

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"Implicit contracts" are only tolerable for really obvious things, where no reasonable person would think otherwise (classic example: you invite me for a ride on your boat: there's an implicit agreement that you'll bring me back to the shore, and not order me to leave your property in the middle of the sea)

It's not a bank's job to give its customers an education. If they don't understand how banks work, odds are they don't really want to know and I don't see it being reasonable for a bank to try to educate them. I can't imagine how adding a few more paragraphs of legalese explaining how fractional reserve banking works to their agreements would make any difference and I think it's kind of odd to imagine it would.

In any event, it's not a secret. It's understood by anyone who takes the time to learn it. So it's not fraud. The bank doesn't seek to profit from anyone's lack of understanding how fractional reserve banking works. Nobody would act any differently if they knew and the only people who don't know are those who don't wish to and don't care.

Quote from: jago25_98 on March 18, 2013, 11:02:32 AM

That's a good point. Hard to say what the consensus is amongst average people. Some get it but... I'm not so sure that most get it even now? I'd like to see a survey to see what average people understand.

What would you suggest? A mandatory eight hour finance course and a passing grade on the final to open a bank account? Or a few more paragraphs of legalese nobody would read? The fact is, we have fractional reserve banking because it makes sense and it's what people want. Yes, there are lots of dirty secrets, but you can expose them all and very few people would care. (That's not to say that the system's not badly broken. But the fix isn't banks that lock your money in their vault and charge you a storage fee.)