The Instigator
harrytruman
Con (against)
Losing
0 Points
The Contender
Meropenem777
Pro (for)
Winning
11 Points

Banking System

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Post Voting Period
The voting period for this debate has ended.
after 2 votes the winner is...
Meropenem777
Voting Style: Open Point System: 7 Point
Started: 10/24/2015 Category: Economics
Updated: 1 year ago Status: Post Voting Period
Viewed: 779 times Debate No: 81497
Debate Rounds (3)
Comments (7)
Votes (2)

 

harrytruman

Con

I will be arguing that our banking system needs some serious reform.
Fraction Reserve Banking:
This is my entire point, a fraction reserve bank is a bank wherein the bank only has to keep a fraction of its deposited, right now it is 3%, this means that if you have 100$ in the bank, the bank can spend 97$ and only keep 3$, they can alternatively take your 100$, and write 3,333$ in checks, and use that 100 as reserve, they can also use checks as reserve, this means that if you have 1,000$ in the bank, it is most likely "backed" by 30$ in checks from another bank, which is backed by 90" in the other bank, so if you have money in the bank, they most likely only have a few cents to secure your money.
Meropenem777

Pro

This is sort of my first debate in the economics category so please excuse me as I am not as familiar with some terminology. (Although, I am currently doing one with games concerning Steam as a monopoly).

So, I thought doing this debate would be a good opportunity for me to become generally more familiar with these concepts by doing research!
I also did this debate because I did not want to do 5 rounds of two similar debates you posted.
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Now, your main argument is basically how our "banking system needs some serious reform" and how fractional-reserve banking is generally a mistake. Well then, I obviously will be arguing how it does not need "some serious reform" and for fractional-reserve banking. Perhaps it needs certain reforms to an extent, but not as "serious" as changing one of our primary structures for banking.

I have done some research prior to accepting this debate, and fractional-reserve banking was for the most part, received positively throughout the texts. I have also researched on alternatives such as 100% reserve banking, and that seemed to have not receive as much backing by economic authorities.

The main benefits of fractional-reserve banking:

Allows banks to act as "financial intermediaries"(Wikipedia).
-Convenient for borrowers and savers/ a line of credit is issued to "qualified" clients/ Convenience in matching deposits with loans.

Allows banks to provide relatively long-term loans to borrowers while providing immediate liquidity to depositors (Wikipedia).
-Convenient for both parties/ depositors are assured to get their deposits back for the most part.

These benefits far outweigh the negatives that are suggested by the perhaps subjective cries of critics of a system they view similar to fraud.

I also discovered how " in most countries, the central bank (or other monetary authority) regulates bank credit creation, imposing reserve requirements and capital adequacy ratios", meaning that it can " limit the amount of money creation that occurs in the commercial banking system, and helps to ensure that banks are solvent and have enough funds to meet demand for withdrawals"(Wikipedia).So, a bank is usually backed by a separate larger reserve, either by a government or a central bank that help banks that are running out of reserves. Therefore, most nations' bank systems do take your argument's point into account, since there is usually a substantial"limit" to how much they can spend in relation to their reserves.

Fractional-reserve banking also has a preventative measure in the event of a bank's inability to pay depositors. Deposit insurance is insurance for depositors that if their money is irretrievable from a bank, then they are covered by deposit insurance institutions usually run by corporations or governments.

The main point addressed in my argument is that the current system already has fairly substantial policies that supplements the problem that you are citing in your preliminary arugment.

I am betting you have more you want to say, so I will leave out more points that I was thinking of addressing until after I hear more of your argument.


Sources Utilized:

-https://en.wikipedia.org...
Debate Round No. 1
harrytruman

Con

Your argument:
Fraction Reserve Banking allows banks to make more money on loans and to make bigger return for depositors.
My Argument:
This is not true, banks commonly only have a maximum of 1% interest, which is not even enough to account for the Federal Reserves 2% interest policy.
Your Argument:
Fraction Reserve Banking allows for long term loans, and quick return for depositors.
My Argument:
It may allow for long term loans, but it does not allow for quick return for depositors, in fact it has no other affect to the depositor but that the bank has spent 97% of his money.
Your Argument:
Don't worry about spending other people's money, uncle Sam and the taxpayers will cover it.
Meropenem777

Pro

I did not want to start rebuttals too early, though it seems you desired to anyway.

All you really did with your recent input, was morph my argument into something irrelevant and have yet to refute my points with substantial evidence.

1. "This is not true, banks commonly only have a maximum of 1% interest, which is not even enough to account for the Federal Reserves 2% interest policy." I will consider that as irrelevant information until sources are provided to prove the validity of those values.

2. "but it does not allow for quick return for depositors, in fact it has no other affect to the depositor but that the bank has spent 97% of his money." You are simply WRONG on this. If that was even likely to be a true statement, which I doubt it is, then that would mean my parents, my friends, and myself cannot immediately draw out a certain amount of money from our deposits. The economy would not even likely be functioning as it is right now. The fact is, is that "immediate liquidity" is currently being granted to depositers, so you have yet to refute this point.

3. "uncle Sam and the taxpayers will cover it." Again, you are just morphing my argument and pointing fingers. Your argument is similar to the ones of those critics with arguably subjective viewpoints that I mentioned. What your are trying to refer to in this phrase, is merely a"preventative measure" for people to get there money back in the event of a bank's "inability" to provide for depositors. When deposit insurance is issued to depositors, that virtually means a bank has already gone bankrupt and not any time before that.

My main argument is that fractional-reserve banking is an effective method for our current banking system, and that argument remains with my points given earlier. Banks will seek not to default on their obligations, otherwise they would have to go bankrupt. They will do so by means of usually taking from their central bank. As I said, central banks in many countries maintain a policy of having a "limit" for the amount of money created in the commercial banking system, and so this helps to ensure that banks are able to pay off depositors when they want to withdrawal money.


"...each (bank) will be inclined to routinely return claims, such as checks or banknotes, received from rival banks. The uncertain flow of such interbank “clearings” generates a demand for reserves for settlement, which...will vary with the volume of outstanding bank liabilities, even if bank customers never bother to withdraw gold. Although optimal reserve ratios are unlikely to remain perfectly constant over time, and may decline gradually as more efficient settlement procedures are discovered, for the most part the rate of inflation under an established and mature fractional reserve arrangement is unlikely to differ substantially from the rate that would prevail under 100-percent reserves (Selgin)".
-This is a quote from an article written by a Phd. economics professor, and so is a very credible statement against 100-percent reserves as an alternative as well as disscusing the "limit" banks have to adhere to or also known as, prioritized reserve ratios.


You say our banking system needs reform, but what are the alternatives that actually work better than fractional-reserve banking? What are these OTHER reforms that are just as (or more, but unlikely) capable as the policies today, that you speak of? You have yet to provide a decent argument in the context of what you had said to be your main discussion, that our banks need "serious reform" whereas I have found plenty that discusses just how effective our banking system currently is.

Sources:

-http://capitalismmagazine.com...

- https://en.wikipedia.org...;
Debate Round No. 2
harrytruman

Con

I was hustling you;
Point 1;
2% inflation rate, not interest rate,
http://m.YouTube.com...
Point 2;
Why then are we only allowed to withdrawal a certain amount in a day, if the bank truly can return deposited, why are they afraid of people coming for their rightfully owned cash? If they had the cash on hand like they are supposed to, or if their reserve rate was enough to cover people's deposited, then they would have no problem with giving people their money.
Point 3;
And yet the banks accept trillions in free money from the Federal reserve, even though they are billionaires, it's called "insurance fraud", how are the guys with billions dead broke, the answer is; they aren't, all their cash is hidden on Bermuda, then they get free tax payers dollars from congress, and free inflation payers dollars from the Federal Reserve, regardless of whether or not they have the cash.
Point 4;
The answer is very simple; don't spend other people's money, the banks can hold people's money, and not spend it, very simple, say the bank wants to make a loan, they can loan their own private cash out, on course this would not gain interest for depositors, but the banks don't do that anyway.
Meropenem777

Pro

"I was hustling you", oh burn!!! BURN!!!! You got me man, you so got me. I was so fooled by this player (SARCASM).

Honestly? Really?
You really think you got me somehow? That thought is so FULL OF IT. I can't even describe how irrelevant that is to this debate too.

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I am going to tell you why your fundamental claims are wrong:

Your claims are not credible since they lack substantial support from sources and key evidence.
-You tried to post a link for your %s but its only a link that directs the person clicking it to the youtube homepage which is very irrelevant indeed to my opponent's points.

"why are they afraid of people coming for their rightfully owned cash?", this is an irrelevant notion that they are afraid in the context of this debate, since the BoP is on Con to prove that in some way, it affects a bank's credibility.

"all their cash is hidden on Bermuda", this cannot be confirmed in this debate without sufficient backing of sources provided by Con.
Yes, people can sometimes be blamed for starting a bank run crises by over spending a bank's reserve, but this is very unlikely to happen for most banks because of the regulations I had listed earlier, and especially with this that I found recently: The Federal Reserve Act. It is a policy that "requires that banks keep a certain percentage of their money in (their)reserve,"(howstuffworks). This is highly likely to prevent embezzlement. Even if his points concerning embezzlement were likely, does that mean that the system itself is faulty? Not at all, with the points I have given so far, it shows how the system is economically efficient regardless of the people behind the scenes.

Oh yeah, and your alternative would arguably lead to frequently more problems because of the costs of such a system and the inconveniences for many. "Financial intermediation" as I mentioned earlier, is a necessity for people who need money to achieve something, and if it is not provided then the financial system overall would destabilize and cause more frequent financial crises.

You likely did not do any research on this, but had you done any proper research, your arguments could have been much better because this is certainly a fairly controversial issue among economists.

Sources:
-http://money.howstuffworks.com...
Debate Round No. 3
7 comments have been posted on this debate. Showing 1 through 7 records.
Posted by harrytruman 1 year ago
harrytruman
It allows congress to "borrow money on the credit of the united states", but yes, it does say that; "No State shall... coin money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts"
Posted by cdwlighting 1 year ago
cdwlighting
I agree with harrytruman here... But for the reason that fractional reserve banking is fraudulent.

The bank claims you can have your money back any time you want. But, they limit how much per day you can have. Why, because they lent out your deposit and through pyramiding have multiplied it by a factor of 9.

Another issue I have with Fractional Reserve Banking, can be explained with an example (borrowed from G. Edward Griffith's Create from Jekyll Island). If you go to a poker game, and every agrees that the buy in is 100, and your exchange chips for you cash, the implied agreement is that your money is always available in the box. If the hosts brother comes and asks to borrow 100 dollars, and the host does the amount of money in the box is reduced by $100. Fine if the hosts brother pays the money off before the game ends. But what if everyone wants to leave early, now there isn't enough cash to cover the chips. This is what is meant by a RUN on the bank. In a world without Federal Reserve and strong competition, insolvent banks would fail. American Tax payers would not get fleeced to save a bank from bad decisions. Lots not even talk about Inflation, which is as G. Edward Griffith puts it a hidden tax of the most unfair kind. To truman as you have tried twice to get a debate about the federal reserve, all you have to do is look at the dollar today compared to 1913, a dollar in 1913 is worth 250 dollars today. Which means everything is 250 times more expensive. This is exactly what the constitution was trying to avoid. We need an amendment to the Constitution that BANS government Debt, and the issues of debt as money.
Posted by Meropenem777 1 year ago
Meropenem777
Ah, I think I have an idea. Ive seen some people make debates just with topics they want to debate on. So im just going to post the links to the debates I want people to vote on in a debate offer.
Posted by Meropenem777 1 year ago
Meropenem777
Alright, I understand, but this debate is pretty far in the debate logs, so now I have to actually ASK people TO VOTE on this debate in order for me or harry to receive a win.
Posted by whiteflame 1 year ago
whiteflame
...I'm a voting moderator. If I did that for every single debate on which I take down votes, I'd be voting more than 5 times a night.
Posted by Meropenem777 1 year ago
Meropenem777
v You could have at least voted on this debate if your going to tear someone else's vote down -_-
Posted by whiteflame 1 year ago
whiteflame
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>Reported vote: I-DrankYourMilkShake// Mod action: Removed<

6 points to Pro (Conduct, Arguments, Sources). Reasons for voting decision: Pro actually used resources as oppose to con. Pro had more arguments that seemed convincing as oppose to con. Con seemed to be teasing Pro in the last round.

[*Reason for removal*] (1) Sources: these require more than just pointing out that one side used sources while the other didn't. The voter has to explain how those sources enhanced that side's argument. (2) Conduct: requires more extensive justification. Merely stating that one side engages in a bit of teasing is not clear " the debater needs to have substantially exceeded what's reasonable. (3) The voter must explain why one side's arguments were more convincing, not merely assert that they are.
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2 votes have been placed for this debate. Showing 1 through 2 records.
Vote Placed by UtherPenguin 1 year ago
UtherPenguin
harrytrumanMeropenem777Tied
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Total points awarded:05 
Reasons for voting decision: Pro used more sources in his initial argument, while Con lacked sources in his initial argument. So source points to pro. Both sides were equally respectful so conduct remains a tie. However, I feel as though Pro gave more evidence towards his position, Cons argument (as the previous voter pointed out) seemed to have been more based on opinion than evidence. Anyway, good debate.
Vote Placed by Bosoxfaninla 1 year ago
Bosoxfaninla
harrytrumanMeropenem777Tied
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Total points awarded:06 
Reasons for voting decision: ***Con: Decent opening argument giving great insight on the issue, how ever I would have liked to see you go into more depth as to why the evidence proves your argument, rather than just stating facts. As for your rebuttals you merrily restated your position and summarized pros argument, not giving any evidence to prove your point. Your rebuttals seemed more opinion based than factual based. You need to provide evidence!!! Pro even called you out for it. In the future use a more structured system for debates and PROVIDE EVIDENCE!!! ***PRO: I loved how you instantly opened your argument noting the topic was on "serious reform" instead of reform in general, and you used it for your own favor. I would have liked to have seen a bit more analysis on evidence provided, but it's alright. I also would have liked to see more statistical evidence, but nevertheless good job on the opening argument. Great rebuttals, addressing every point and requesting evidence for unsupported claim.