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Home | Mises Library | Against Monetary Disequilibrium Theory and Fractional Reserve Free Banking

Against Monetary Disequilibrium Theory and Fractional Reserve Free Banking

The Quarterly Journal of Austrian Economics

Tags Financial MarketsMoney and BanksMoney and Banking

07/30/2014Laura Davidson

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Volume 15, No. 2 (Summer 2012)

The theory of monetary disequilibrium, as espoused by Selgin (1988), White (1989), Horwitz (2000), and others, has been used to justify the issuance of fiduciary media under a system of fractional reserve “free” banking. The present paper examines this monetary disequilibrium theory and concludes that it contains numerous errors and logical fallacies. The foundational economic argument in favor of fractional reserve banking is invalid.

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Contact Laura Davidson

Laura Davidson is an independent scholar. She has been a presenter at the Austrian Economic Research Conference, and has authored a number of articles that have been published in peer-reviewed journals. In 2013, she was awarded the Lawrence A. Fertig Prize for the paper that best advances economic science in the Austrian tradition. She is a graduate of Oxford University.

See full bio for a list of publications.

 

Cite This Article

Davidson, Laura. "Against Monetary Disequilibrium Theory and Fractional Reserve Free Banking." The Quarterly Journal of Austrian Economics 15, No. 2 (Summer 2012): 195–220.