I owe a debt of obligation to my fellow Cobdenites for kickstarting a debate about money and banking amongst the UK Austrian community. As a participant in that debate – both on this blog and on the Cobden Centre mailing list – I decided to write up a working paper on the sound money debate. I’m delighted that it has now been published, and those with institutional access can find it here (PDF).
The abstract is:
This article contributes to a recent debate between Barnett and Block (J Bus Ethics 88(4): 711–716,2009), Bagus and Howden (J Bus Ethics 90(3): 399–406, 2009), Barnett and Block (J Bus Ethics 100: 299–238, 2011), Cachanosky (J Bus Ethics 104: 219–221, 2011) and Bagus and Howden (J Bus Ethics 106: 295–300, 2012a) regarding the conceptual distinction between demand deposits and time deposits. It is argued that from an economic perspective there is nothing inherently fraudulent or illegitimate about deposit accounts that are available ‘on demand’, but that this relies on certain contractual provisions. Particular attention is drawn to option clauses and withdrawal clauses, which “solve” the problems raised by Barnett and Block, and Bagus and Howden. Previous authors have also neglected the asset side of banks balance sheets, and this is shown to further justify the legitimacy of fractional reserve banking.
If you don’t have access, please email me and I’ll be glad to send you a copy.