Unanswered Quibbles with Fractional Reserve Free Banking

Libertarian Papers 3:18 (2011)
  Copy   BIBTEX

Abstract

In this article we reply to George Selgin’s counterarguments to our article “Fractional Reserve Free Banking: Some Quibbles”. Selgin regards holding cash as saving while we focus on the real savings necessary to maintain investment projects. Real savings are unconsumed real income. Variations in real savings are not necessarily equal to variations in cash holdings. We show that a coordinated credit expansion in a fractional reserve free banking system is possible and that precautionary reserves consequently do not pose a necessary limit. We discuss various instances in which a FRFB system may expand credit without a prior increase in real savings. These facets all demonstrate why a fractional reserve banking system – even a free banking one – is inherently unstable, and incentivized to impose a stabilizing central bank. We find that at the root of our disagreements with Selgin lies a different approach to monetary theory. Selgin subscribes to the aggregative equation of exchange, which impedes him from seeing the microeconomic problems that the stabilization of “MV” by a FRFB system causes

Links

PhilArchive



    Upload a copy of this work     Papers currently archived: 90,616

External links

Setup an account with your affiliations in order to access resources via your University's proxy server

Through your library

Similar books and articles

7. OBen & Neill - unknown
Are banking crises free‐market phenomena?George Selgin - 1994 - Critical Review: A Journal of Politics and Society 8 (4):591-608.
The Continuing Continuum Problem of Deposits and Loans.Philipp Bagus & David Howden - 2012 - Journal of Business Ethics 106 (3):295-300.
Some ethical dilemmas of modern banking.David Howden Philipp Bagus - 2013 - Business Ethics, the Environment and Responsibility 22 (3):235-245.
Some ethical dilemmas of modern banking.Philipp Bagus & David Howden - 2013 - Business Ethics, the Environment and Responsibility 22 (3):235-245.
The free banking challenge to central banks.Charles A. E. Goodhart - 1994 - Critical Review: A Journal of Politics and Society 8 (3):411-425.
Fractional Reserve Banking, Client Collaboration, and Fraud.Malavika Nair - 2015 - Journal of Business Ethics 130 (1):85-92.
Legal tender laws and fractional-reserve banking.Jörg Guido Hülsmann - 2004 - Journal of Libertarian Studies 18 (3):33œ55.

Analytics

Added to PP
2015-02-04

Downloads
8 (#1,138,679)

6 months
2 (#670,035)

Historical graph of downloads
How can I increase my downloads?

Citations of this work

Causes and Consequences of Inflation.Philipp Bagus, David Howden & Amadeus Gabriel - 2014 - Business and Society Review 119 (4):497-517.

Add more citations

References found in this work

No references found.

Add more references