I don't think he is arguing against fungibility. In fact, he compared stocks and cash under the assumption of fungibility.

I think he is arguing against the idea of applying fractional reserves to brokers.

Yeah, that's what I thought the argument was until this bit -

> Same if you bought a stock, and your broker suddenly decides to steal it without your knowledge, and loan it out in order to sell it in the hopes of earning money if its value drops (i.e. short the stock). Clearly you'd want to know if your property is being loanded out, because it means that you're incurring risk, no matter if you're compensated for it through interest or not.

I can't find any other interpretation for this logic and terminology other than a rally against fungibility.

That has nothing to do with legal fungibility, and everything to do with property rights, and the conditions at which most people expect to buy a stock (licensing notwithstanding). Fungibility is merely how easily the medium is broken into smaller parts that may be exchange for convenience, and not the regulated use of third parties, unless you're really talking about liquidity. The latter can easily be solved with waivers or contractual agreements (such as an opt in). As far as I know most brokers already do that, but the implication is that some don't or are somehow able to sidestep such regulation.

>Fungibility is merely how easily the medium is broken into smaller parts that may be exchange for convenience

No, fungibility is whether an asset (ie. individual assets within a particular class of asset) is interchangeable with one another.

It means when you deposit banknotes into your bank, whether the bank has to give you the same banknotes with the same serial number, or whether they can give you equivalent instruments to satisfy their obligation to you. What they owe you aren't the banknotes, but instead the money.

Also note when you deposit money into a bank, it's not treated the same way as if you put banknotes in a safe deposit box. The way you made your argument on stock brokers is as if it is, and fundamentally misrepresents this relationship. They don't owe you 'your' shares, they owe you a number of shares. Your shares become their asset, in exchange for their liability to you. You don't get to control what they do with their assets.

That's also the reason you don't get to control what the bank does with 'your' money you hold with them, because legally, it's their money with an obligation to pay you when requested. Hence the central bank steps in to regulate and guarantee fractional reserve banking in order to prevent bank runs.

> Fungibility is whether an asset (ie. individual assets within a particular class of asset) is interchangeable with one another.

Of course. This is synonymous with my own explanation. However your take is that it means that after you've made it interchangeable, then the bank or exchange somehow automatically gets more rights over it. That just isn't the case. Unless there's an express prior agreement, it's also morally wrong.

Cash is fungible, but it's unclear whether stocks should be fungible in the same way.

Our financial markets are built on the idea that the assets being traded (in each individual market) are effectively fungible. It's the underpinnings of the whole structure of finance.

Companies are allowed to issue non-fungible shares.

Eg it's common in some tech companies to give the founders super-voting stock that reverts to normal stock on sale.

Yes, but assets that are traded within a particular financial market is fungible.

When you buy a share from the open market, they are not going to guarantee a particular share with a particular serial number you specify, they will only provide a number of that particular class of share of the company.

Well, only fungible shares lend themselves to be traded on financial markets.

Most companies decide to make their shares fungible, because they want them to be readily tradable.

But there's no one forcing anyone here. Companies and investors could agree to shares with particular serial numbers.

It's just so much more convenient to have fungible shares, that this is where all the capital goes.