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Against Monetary Disequilibrium Theory and Fractional Reserve Free Banking

  • The Quarterly Journal of Austrian Economics
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Tags Financial MarketsMoney and BanksMoney and Banking

07/30/2014Laura Davidson

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.

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.

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