Care to explain this statement
Sure.
absent fractional reserve banking
Why would I explain it absent fractional reserve banking?
M1 includes currency in circulation and demand deposits.
You deposit 10 $20s in the bank. The banks loans out 9 $20s and keeps one in reserve. The money supply is your checking account ($200) plus the $180 that is in circulation. The money supply grows by $180 whether your $20s are gold coins, gold certificates or FRNs.
which while legal today, is quite obviously fraudulent?
Please explain how accepting deposits and making loans from those deposits is "obviously fraudulent".
Thanks.
M1 includes currency in circulation and demand deposits.
You deposit 10 $20s in the bank. The banks loans out 9 $20s and keeps one in reserve. The money supply is your checking account ($200) plus the $180 that is in circulation. The money supply grows by $180 whether your $20s are gold coins, gold certificates or FRNs.
So after the original bank loans out 9 of my 20s, I change my mind and wish to withdraw 5 of the 10 I deposited. The bank only has one of those 20s in its vault. It cannot possibly give me what it has promised.
Now, if I deposited the 10 20s into a CD where I specifically fore go access to my money for a specified time, then things are very different. Those funds may certainly be lent out and the difference between the rate paid on the CD and the interest charged on the loan if the bankers profit.
The difference is that in the first instance, the bank promises to redeem upon demand that which it no longer has. But in the second, I willingly give up my claim on the funds for a specified time, with substantial penalty for early withdrawal.