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Journal of Business Ethics

, Volume 104, Issue 2, pp 219–221 | Cite as

A Comment on Barnett and Block on Time Deposit and Bagus and Howden on Loan Maturity Mismatching

  • Nicolás Cachanosky
Article

Abstract

In Time Deposits, Dimension, and Fraud (2009), William Barnett and Walter Block argue that by borrowing short and lending long there is an over issuance of property rights. Their article, however, does not fully extend the consequences of their contribution. Once this is done, it becomes clearer that their argument suits a great impediment to banking, becoming a possible reason to support rather than to oppose fractional reserve banking. Bagus and Howden (J Bus Ethics 90(3):399–406, 2009) comment on Barnett and Block (J Bus Ethics 88(4):711–716, 2009), the authors claim that while maintaining the illegitimacy of fractional reserve deposits, borrowing short and lending long it is actually not illegitimate. An extension on Bagus and Howden (2009) will show that their line of argumentation can be applied as a defense of fractional reserve banking as well.

Keywords

Time deposits Fractional reserve banking 100 percent reserve requirement Maturity mismatching 

References

  1. Bagus, P., & Howden, D. (2009). The legitimacy of loan maturity mismatching: A risky, but not fraudulent, undertaking. Journal of Business Ethics, 90(3), 399–406.CrossRefGoogle Scholar
  2. Barnett II, W., & Block, W. E. (2009). Time deposits, dimensions, and fraud. Journal of Business Ethics, 88(4), 711–716.CrossRefGoogle Scholar
  3. Barnett II, W., & Block, W. E. (2010). Rejoinder to Bagus and Howden on borrowing short and lending long. Journal of Business Ethics. doi: 10.1007/s10551-010-0677-9.
  4. Huerta de Soto, J. (1998). Money, bank credit, and economic cycles (2006). Auburn: The Ludwig von Mises Institute.Google Scholar
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Copyright information

© Springer Science+Business Media B.V. 2011

Authors and Affiliations

  1. 1.Department of EconomicsSuffolk UniversityBostonUSA

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