Kinsella on Liberty Podcast: Episode 463.

Update: See also KOL338 | Human Action Podcast Ep. 308 with Jeff Deist: Rothbard on Punishment, Property, and Contract and this Grok analysis of various problems with smart contracts including the fact that most loans are unsecured.

A followup discussion with André Simoni of Brazil about some questions he had about applying my/Rothbard’s title-transfer. See also KOL457 | Sheldon Richman & IP; Andre from Brazil re Contract Theory, Student Loan Interest Payments, Bankruptcy, Vagueness, Usury.

Grok Shownotes: 0:00–29:42] In this episode of the Kinsella on Liberty podcast (KOL463), Stephan Kinsella engages in a follow-up discussion with André Simoni from Brazil, building on their prior conversation with Sheldon Richman (KOL457). The dialogue begins with André revisiting his concerns about usury, fractional-reserve banking, and the nature of loan contracts, proposing a libertarian limit on interest rates to prevent exploitative lending practices that could lead to effective enslavement. He argues that modern financial systems, including fractional-reserve banking and fiat currency, are interconnected mechanisms designed to promote unsustainable economic activity, drawing insights from Doug French’s book Walk Away. Kinsella challenges André’s framing, particularly his view of loan contracts as bilateral exchanges, asserting instead that they are unilateral title transfers under Rothbard’s title-transfer theory of contract. The discussion delves into the impracticality of “smart contracts” and escrow-based performance bonds, highlighting the inherent uncertainties in contractual damages and future obligations.

[29:43–1:39:34] The conversation shifts to a deeper exploration of risk, inalienability, and the moral hazards embedded in modern banking systems. André connects usury and fractional-reserve banking, arguing that banks exploit depositors and borrowers by offloading risk while profiting as intermediaries, creating a system akin to a Ponzi scheme propped up by state interventions like deposit insurance. Kinsella agrees that the current system is corrupt but emphasizes that in a free market with full disclosure, such practices would be unsustainable due to economic realities and the inability to insure against systemic risks. They discuss the legitimacy of loan contracts, with André expressing concern about contracts that shift excessive risk to borrowers, potentially violating inalienability principles. The episode concludes with a discussion on corporations and limited liability, with André suggesting that corporate structures exacerbate risk-shifting, while Kinsella defends the contractual basis of corporations, referencing his prior discussions with Jeff Barr (KOL414, KOL418). Links to further resources and a promise to continue the dialogue are provided.

 

Youtube Transcript and Detailed Grok Summary below.

https://youtu.be/8AfTdeiDJD0

Links:

Mercadente, The Illiberal Nature of Limited Liability: A Libertarian Critique

Recent Grok conversation

Libertarian Answer Man: Legal Entities and Corporations in a Free Society (Feb. 29, 2024)

Libertarian Answer Man: Corporations, Trusts, HOAs, and Private Law Codes in a Private Law Society (Nov. 11, 2023)

KOL414 | Corporations, Limited Liability, and the Title Transfer Theory of Contract, with Jeff Barr: Part I

KOL418 | Corporations, Limited Liability, and the Title Transfer Theory of Contract, with Jeff Barr: Part II

On Coinbase, Bitcoin, Fractional-Reserve Banking, and Irregular Deposits

UK Proposal for Banking Reform: Fractional-Reserve Banking versus Deposits and Loans

Musings on Fractional-Reserve Banking in a Bitcoin Age; Physicalist Shock Absorber Metaphors

The Great Fractional Reserve/Freebanking Debate

Jesús Huerta de Soto, Money, Bank Credit, and Economic Cycles

Stephan Kinsella, “The Title-Transfer Theory of Contract,” Papinian Press Working Paper #1 (Sep. 7, 2024)