Full Reserve Banking

Index

Complied by Roger Bissell

100 percent reserve banking, 11n3, 14, 20n10, 74n40, 86, 101–102. See also credit expansion; entrepreneurial error; full-reserve banking; fractional-reserve banking; interest rate: and discount rate; maturity mismatching; uncertainty

aggregate demand, 19, 66n33, 135

Ahamed, Liaquat, 89

Anderson, Benjamin M., 62

arbitrage, 84, 111–12, 85n46

assets, 12, 30, 45–46, 62, 99, 124, 124n67, 130, 133

financial, 51–53, 53n28, 55n30, 56–58, 60–61, 79n42, 82, 82n44, 123n67, 126, 128, 137

investment, 82n44

productive, 41

real, 51–52, 137

Austrian economics, 7–8, 11n3, 36, 39, 49, 63n33, 71, 90, 94, 103, 113, 116, 119, 128, 136, 138–39.

See also macroeconomic schools

banking school view. See also real bills theory

also known as commercial loan theory of banking or real bills theory, 10n2

Feketian banking school, 84, 139

neo-banking school, 7, 11n3, 138–39

Rallo’s real bills theory as variant, 10, 49, 133, 139

traditional or classical banking school, 7–10, 10n2, 12, 21, 23, 42, 72n39, 84, 85, 85n46, 90, 95, 95–96n54, 96

Bank of England, 42

Barnett, William II “Bill”, 23n13, 119, 128

bitcoin, 25

Block, Walter, 23n13, 52, 112n61, 119, 128

Böhm-Bawerk, Eugen von, 29, 50-51, 51n27, 105

business (boom-and-bust) cycle, Austrian, 8, 11, 11n3, 34, 71, 84, 101, 103, 107, 111, 113, 115–16, 128, 140

Cachanosky, Nicolás, 89n51

Cantillon, Richard, 98

Cantillon effects, 98

capital markets, 69n38, 71

capital theory, 7, 49, 71, 104, 138–39

Carilli, Anthony M., 118

cash balances, 14n5, 15, 16n6, 17, 17n7, 18–19, 27n15, 28, 30–31, 35–37, 40n19, 69, 78–81, 82n44, 83, 98, 114, 129, 135

cash building, 23, 28, 81n43

cash-building deflation, 14–15, 17–19, 134, 136

Chandler, Lester V., 89

commercial loan theory of banking. See real bills doctrine

coordination problems, 24, 107, 129, 134

Corrigan, Sean, 67

credit, 12–13, 15, 40–41, 55n30, 58, 60, 63, 66, 86, 87nn47–48, 88, 88n50, 89–91, 91n52, 92, 95, 97, 116n63, 125, 133, 138–39. See also under money

circulation credit, 12, 50, 97

commodity credit, 12, 50

credit contraction, 66

credit money. See under money

credit transaction, 51, 57, 61

demand for credit. See under demand

modern credit system, 60n32

“on-demand credit,” 60

short-term credit (real bills), 11

credit expansion, 10, 11n3, 19–21, 24, 34, 39, 40n20, 42, 44, 44n23, 47, 47n24, 49, 58, 62–63, 63n33, 64–65, 69, 69n37, 69–70n38, 70–71, 73n79, 77n41, 83, 83n45, 84–86, 87n47, 88, 88n49, 89–91, 91n52, 92–95, 99, 101, 103, 111–18, 122, 136, 138–40. See also cash-building deflation; intertemporal coordination; intertemporal discoordination; intertemporal distortion

credit markets, 69n38, 84, 86, 88–89, 137–38

Crusoe, Robinson, 72, 72n39, 73–75, 75n40, 77, 105, 105n57, 106

currency school, 12. 21, 133

Davidson, Laura, 108, 110, 112

demand

for consumer goods, 115

for credit, 96n54, 97

for fiduciary media, 95–96, 98–99, 121

for good as medium of exchange, 132

for loans, 95–97, 121, 139

for money, 8–10, 11n3, 15, 15–17n6, 17, 17n8, 18–20, 20n10, 21–22, 22n11, 23–27, 29–31, 33–37, 40, 42, 57, 78, 79n42, 81–82n43, 83, 87n47, 97–98, 121, 130–32, 134, 138–39. See also uncertainty demand; transaction demand

for real capital, 128n69

demand and supply curves, 135

demand deposits, 50–52, 55n30, 57, 59, 93, 126. See also “on-sight credits”

financial asset (Rallo) vs. claim to present goods (Mises), 52

Dempster, Gregory M., 118

diminishing marginal utility, law of, 53–54

discounted marginal value product (DMVP), 28, 130

discounting of real bills, 10, 37, 40, 43–44, 47, 65–69, 70n38, 76, 78, 86, 90–92, 95, 97, 127

discount rate, 84–85, 96, 138. See also interest rate

distortions, 30, 34 – 35, 37, 71, 101, 111, 137–38

dynamic efficiency, 8, 101, 105, 105n56, 139

economic calculation, 21, 32, 32–33n18, 121

“elastic currency.” See under money supply

elastic money supply. See under money supply

entrepreneur, 16n6, 27n15, 29, 31, 33–35, 40, 72, 98, 102, 104, 110, 113, 116, 122, 122n66, 128

entrepreneurial error, 57n31, 103

entrepreneurial forecasting, 16n6, 24, 28, 34, 134

entrepreneurial profit, 130

entrepreneurial speculation, 45

evenly rotating economy (ERE), 93

Federal Reserve, 19–20n9, 89

Federal Reserve Bank of New York, 89

fiat money, 25, 124-25

fiduciary media, 8–10, 11n3, 12–13, 13n4, 14, 19–21, 23, 25, 27, 34, 37, 41, 45–46, 49–50, 52–53, 55n30, 56–57, 57n31, 58–63, 63n33, 64–70, 70n38, 72, 72n39, 74, 74–75n40, 75–79, 82, 86–87, 87n47, 89–90, 93–95, 95–96n54, 97n55, 98–99, 112–14, 117–18, 121, 123, 123n67, 125–28, 133–35, 137-38

financial media. See under assets

Fekete, Antal, 7

Feketian real bills doctrine, 123n67

fractional reserves, 112, 136

fractional reserve (free) banking, 9–10, 11n3, 14–15, 21, 23–24, 30, 33–34, 39, 42n21, 45, 47, 51–52, 55n30, 58–59, 63, 72, 73n39, 78n41, 84, 86–87, 94, 99, 111–12, 119, 126–27, 133, 135, 139. See also Rallo’s (neo-banking) approach; Selgin and White’s fractional-reserve approach

fractional reserve bank, 37, 41, 46, 55n30, 58, 63, 67, 72n39, 78, 99, 114, 117–18, 133

fractional reserve credit expansion, 77n41, 101, 112–13, 117

fractional reserve real bill discounting, 66

fractional reserve deposit, 66

fractional reserve gold standard, 12, 43, 72, 72n39

fractional reserve loans, 60n32

Friday (Crusoe’s man), 73–75, 105–106

Friedman, Milton, 126–28

Fullarton, John, 9, 42, 95–96n54

full reserve banking, 24–37, 121n64. See also 100% reserve banking; fractional reserve (free) banking

Gabriel, Amadeus, 112n61

Gertchev, Nicolay, 120–22

gold mining, 16n6, 22–23n13, 25, 121, 121n64

gold standard, 12, 16n6, 22n13, 24–26, 41–44, 50, 72, 72n39

goods, 10, 18, 32n17, 34, 39–40, 40n26, 43, 50–51n26, 54, 64, 66, 77, 86–87, 87n47, 112, 120, 122n65, 123, 124n67, 125, 128n69, 129

and assets, 30

and services, 19, 34, 36, 46, 64–65, 69, 135

capital goods, investment goods, 16n6, 45, 58, 62, 64–66, 74n40, 77–78, 79n42, 80, 84, 89, 94, 107, 114–16, 129–30, 137

consumer goods, 16n6, 18, 31, 40n19, 43, 45, 47, 52, 58, 63–64, 64n34, 65–68, 68n36, 69–70, 70n37, 72, 72n39, 74, 75n40, 76–77, 79n42, 80, 81n43, 82, 84, 87n48, 90, 107, 114–16, 129, 136, 137–38

future goods, 51–52, 56–58, 71, 79n42, 81n43, 83–84, 126, 128n69, 137

goods produced (real goods), 10, 31, 39, 43–47, 64n34, 67, 68n36, 77–78, 83n45, 84, 93–95, 138

intermediate goods, 66, 68n36

present goods (property), 11, 13, 50–51, 51n26, 52–53, 56–58, 63, 67, 70–71, 79n42, 81n43, 84, 125–26, 128n69, 137

producer goods, 52, 64n34, 66, 71–72, 72n39, 75n40, 77–78, 81n43, 83n45, 89, 89n51, 104

titles to, 51–52, 54, 71, 108, 137

government intervention, 28–29, 97n55, 102–103, 111, 136

Hansen, Kristoffer J. Mousten, 123n67

Havenstein, Rudolf, 43n22

Hayek, Friedrich A. von, 21, 23, 89n51, 115, 116n63, 120, 123n67

Herbener, Jeffrey, 57

hoard, 27n19, 73, 75. See also cash building

dishoarding, 16n6, 64n34, 74–75n40, 75

Hoppe, Hans-Hermann, 11n3, 52, 79n42

Howden, David, 17n7, 20, 34, 37, 56, 73n39, 77, 77n41, 85, 99, 101–103, 105, 105n57, 112n61, 113, 117–18, 124, 124n67

Huerta de Soto, Jesús, 7–8, 11, 11n3, 18, 20n10, 21, 23, 25, 36–37, 44, 62–64, 71, 73n39, 76–77, 79n42, 81n43, 82n44, 85, 93, 96, 99, 101, 105, 105n56, 112, 112n61, 117–18, 126

Hülsmann, Jörg Guido, 8, 17, 50, 52, 54, 55n30, 74n40, 81n43, 119–20, 123n67

human action, actions of individuals, 22, 25, 31n16, 32n17, 36

Humphrey, Thomas M., 10n2, 39–43, 43n22, 44–46, 58, 89

Hutt, William H., 29

ideal money. See under money

information costs, 33

intertemporal coordination, 107

intertemporal discoordination, 71, 113, 115

intertemporal distortions, 71, 111, 137

intertemporal valuations, 33

interest rate, 8, 16n6, 33–34, 47, 49, 70–71, 81–82n43, 83n45, 84–85, 85n46, 86, 89, 89n51, 95–96, 96n54, 97, 103, 111-13, 116, 127, 127–28n69, 128, 134, 138–39. See also discount rate

intervention. See government intervention

investment, 8, 16n6, 17n8, 30, 37, 40, 47, 49, 52, 60–62, 64–65, 67, 70, 70n37, 71–72, 72n39, 74, 74–75n40, 76, 78, 78n41, 79, 79n42, 80–81, 81–82n43, 82, 82n44, 83–88, 88n50, 89, 89n51, 90–91, 93–94, 96, 103–110, 113–14, 114n62, 115–16, 138, 140

Keynes, John Maynard,19, 61–63, 63n33, 133, 137

Keynesian(s), 134, 138

Köhler, Michael, 112

Lachmann, Ludwig, M., 45, 130

Law, John, 136

Lewin, Peter, 89n51

Longfield, S. M., 99

Machlup, Fritz, 21, 60n32, 77, 87n48, 88, 88nn49–50, 89, 89n51, 90, 91n52, 97, 108, 108n59, 109n60, 110, 116n63, 120, 123n67

macroeconomic processes, 31n16, 36. See also microeconomic processes

macroeconomic schools, 24, 138. See also Keynes; monetarists; real bills doctrine

marginal borrowers, 88–89, 89n51

marginal utility, 31n16, 64, 96n54, 135

market changes, 31

market evolution, market changes, 26–27, 98, 110, 134

market participants, 26, 33, 35, 75, 134

maturity mismatching, 8, 11n3, 47n24, 85, 101–107, 109–112, 112n61, 113, 114n62, 117–18, 139

medium of exchange, 21–22, 22n13, 26–27, 123–24, 129n70, 130, 132

secondary, 15n6, 39n19, 54, 58, 87n47, 123, 123n67

Menger, Carl, 50

microeconomic processes, 24, 31n16, 36, 135. See also Austrian economics; macroeconomic processes

microeconomic schools, 71. See also Austrian economics

Mints, Lloyd, 10n2, 41

Mises, Ludwig von, 12, 31n16, 50–52, 58–59, 63, 65, 75, 80, 91, 94, 95n54, 96, 97n55, 98–99, 105, 119–21, 121n64, 122–25, 125n68, 126–27, 127–28n69, 128, 130, 132–33, 136, 139–40

monetarists, 20n10, 23, 138. See also monetary-equilibrium theory

monetary-equilibrium theory, 11n3, 23, 31n16, 36, 60n32, 135

monetary theory. See monetary-equilibrium theory. See under Austrian economics

money, 16n6, 17, 21–22, 25–27, 27n15, 32n17, 33, 35, 39–40, 40n19, 41–43, 45–46, 52, 55n30, 56–57, 57n31, 58–64, 67, 69, 72n39, 74n40, 79n42, 80, 81n43, 86–87, 87n47, 88–91, 103, 114, 114n62, 119, 123–24, 126–28, 128n69, 129–32. See also cash balances; fiat money; fiduciary media; money certificates; “moneyness”; money substitutes; money supply; medium of exchange. See also under stability

as fungible, 86, 93–94

credit money, 123–25

counterfeit, 67

demand for. See under demand

economizing on, 15n6

equilibrium value of, 31n16

evolution of, 26–27, 134

future money, 52, 130. See also goods: future goods

ideal, good, optimal, 7–8, 14, 21, 23, 23n13, 25–26, 30, 30n16, 51, 121n64

market chosen (nonmanipulated), 21

money proper (gold), 11–14, 16n6, 50, 52, 53n28, 54, 55n30, 56–57, 59–60, 66–67, 69, 72, 74, 82, 125, 137. See also money substitutes

nature and function of, 7, 10, 22n11, 56–57, 120, 123–24n67, 126, 128–29, 137, 139

not a capital good (Mises), 128, 129n70

present money, 110, 130. See also goods: present goods

quantity of, 22, 22n11, 23n13, 25, 36, 43n22, 44, 47, 62, 90, 96n54, 122, 122n65, 126

purchasing power of, 22, 22n11, 26–27, 30–33, 35, 75n40, 83, 87n47, 131

titles to. See money substitutes: perfect money substitutes

utility of, marginal utility of, 22, 22n11, 23n13, 31n16, 57, 59, 120, 123, 129, 131–32, 135

value of, 22nn11–12, 31, 35, 110, 120–21, 131–32

money certificates, 50

“moneyness,” 123n67

money substitutes, 9–10, 12, 39–40, 43, 45, 50–51, 53, 53n28, 54, 55n30, 56–57, 60, 76, 82, 93, 94, 123, 123n67, 124–25. See also fiduciary media; money: money substitutes

perfect money substitutes (titles), 13n4, 51–53, 53n28, 54, 55n30, 56–58, 66, 75, 93, 98, 124, 126, 138

money supply. See also money: quantity of

elastic, flexible, variable, 8–9, 15, 19– 20n9, 22n13, 23, 26, 30n16, 34, 36, 41–43, 43n22, 45–47, 56, 66, 77, 92, 95, 98–99, 112, 127, 129, 135–36, 138–40

indeterminable, 123n67

inelastic, constant, 9, 17, 77, 112

subjective view of, 53n29

Murphy, Robert P., 20n9

Musk, Elon, 55n30

Napoleonic Wars, 42

“needs of trade” doctrine, 9–11, 20n9, 23, 41–42, 43n22, 44, 49, 72n39, 87n48, 95, 98–99, 133, 138

“on sight credits” (on-demand credits), 59. See also demand deposits

Parnell, Henry, 99

Peel’s Bank Act, 92–93

“preferred idleness,” 29

prices, 17n7, 19, 27n15, 28–30, 34, 39–40, 42–46, 64, 70, 122

constant, stable, 29–30, 33–34. See also under stability

deflation (falling prices), 8, 17–19, 26–30, 33–36, 40, 79n42, 80, 81n22, 98, 116, 121, 122n65, 134

equilibrium prices, 31n16

factor prices (costs), 28–29, 89n51

future prices (anticipation of), 29, 31, 33

general price level, 36, 122, 122n66, 135

inflation (rising prices), 11n3, 16n6, 18, 29, 43, 43n22, 47, 61, 67, 74–76, 80, 81n22, 82, 89n51, 98–99, 115–16

long-run flexibility in free market, 28

relative prices, 29–30, 34–36, 115, 75n40, 134–35

price stabilization. See under stability

property. See under goods

purchasing power. See under money

Rallo’s critique of Mises, misunderstandings and misconceptions in, 7–8, 12, 24, 119–32

Rallo’s (neo-banking) theory, 7–8, 11n3, 12–14, 14n5, 23–24, 27, 31, 34–35, 39, 52–53, 56, 67–68, 77, 92, 127, 136–37, 139–40. See also Selgin and White’s fractional-banking theory

arguments for credit expansion based on real bills as unproblematic, 10–11, 11n3, 21, 24

arguments for maturity mismatching as cause of business cycle and as destabilizing, 8, 11n3, 101–18

arguments for elastic money supply, 8–9, 15, 20n9, 23–30, 135

arguments for stable value of ideal money, 26, 30–36

as fractional-reserve approach, 11, 11n3, 15, 19, 21, 23–24, 42n21, 43, 133

as neither new nor Austrian, 7

as revival of “dead horse” of real-bills doctrine, 133–140

Austrian critique of, 49–118

combines real bills doctrine, needs-of-trade doctrine, and reflux theory, 9–11, 133

idiosyncratic variant of classical banking school, 7, 9–10, 133

implicit macroeconomic approach (ideal money), 36–37

more commonalities than differences with Selgin and White’s approach, 11n3

relies on main ideas of traditional real bills doctrine, 39, 133–36

Rallo, Juan Ramón, 7–11. See also Rallo’s critique of Mises; Rallo’s (neo-banking) theory

real bills, 11, 15, 24, 30, 37, 40, 40n20, 41–44, 45–49, 52, 58, 63, 65, 68, 69n37, 70n38, 72n39, 76, 78, 84, 86, 88–90, 92, 94–97, 99, 111–12, 136–37

also known as short-term commercial paper or self-liquidating bills of exchange, 11, 39–41, 45

financial asset (Rallo) vs. claim to future goods (Mises), 52

real bills doctrine, 10, 21, 34, 39–40, 40n20, 41–42, 43n22, 44, 68n36, 69n38, 78, 82, 91n52, 92–94, 109, 123n67, 127, 133, 136, 138, 140. See also Smith, Adam; Law, John

also known as “banking school view” or “commercial loan theory of banking,” 10n2

combined by Rallo with needs-of-trade doctrine and reflux theory, 11

refined version of (if not equivalent to) banking school view, 10

real savings, 8, 12, 20–21, 34, 47, 49, 53, 58, 61–63, 65–67, 69, 69n37, 71–72, 72–73n39, 73–75, 75n40, 76–78, 82–83, 86, 88, 94, 104, 107, 113–14, 116–17, 138–39

recession, 20, 47, 64, 72, 75n40, 76, 97, 114–16

reflux, 13, 42, 98

reflux theory, 11, 42

reflux, law of, 10, 23, 40, 133

regression theorem (Mises), 120, 130–32

Reisman, George, 120

Ricardo, David, 44

Rothbard, Murray

Salerno, Joseph, 11n3, 16n6, 47n25, 53n29, 129

savings, 11n3, 16n6, 58, 61–63, 65n35, 66–68, 70n38, 72, 74, 75n40, 76–77, 79–80, 81n43, 102–108, 109n60, 110, 113, 133, 138–39

as flow variable, 77–79, 83, 101, 104, 109

cash building and, 81n43, 82n44

confusion with cash holdings, 77n41, 78

ex post forced savings, 64, 67

future availability of, 102–104, 106, 139

future (real) savings, 104, 112, 117

gross savings, 84, 110, 117, 139

long-term savings, 109, 109n60

prior savings, 55n30, 64, 90–91, 94, 140

real savings, 7–8, 12, 20–21, 34, 47, 49, 53, 58, 61–63, 65–67, 69, 69n37, 71–72, 72–73n39, 73–75, 75n40, 76–78, 82–83, 86, 88, 94, 107, 113–14, 116–17, 138–39

short-term (revolving) savings, 85–86, 101, 108, 108n59, 109, 118

Say, Jean-Baptiste, 19

Say’s law, 19

Schumpeter, Joseph A., 40

Selgin and White’s fractional-reserve approach, 11n3, 119

Selgin, George, 39, 63, 63n33, 73n39, 79n42, 133, 137. See also Selgin and White’s fractional reserve approach

Serrano, Joel, 131–32

Smith, Adam, 41, 136

Somary, Felix, 85n46

speculation, 44–45, 89–90

stability, stabilization

of demand for money, 127

of market processes, 8, 24, 32n18, 135–36, 140

of prices, 20n9, 21, 29–30, 33–34, 42, 61, 134

of total spending, 31n16

of value of money, 27, 30, 31n16, 32n18, 33, 131

stock market, 40n20, 45, 55–56, 90, 108

Strigl, Richard von, 78

Strong, Benjamin, 89

subjective

costs as, 25, 134

point of view, consideration, 25, 53, 53nn23–29, 54, 55n30

strategies, 135

utility and welfare as, 25

typology of money, 50

valuations, preferences, assessments as, 30–32, 36, 65

value theory, 64, 121

subjective value economics, 136

sustainability

of credit expansion, 69n37

of investment project, 61, 64, 73, 76, 82, 116, 118

of maturity mismatching, 101

of structure of production, 16n6, 113

Thornton, Henry, 44, 46

Timberlake, Richard H., 10n2, 39–43, 43n22, 44–46, 58, 89

time preference, 16n6, 35, 64n34, 70, 74–75n40, 76, 78, 79n42, 81, 81–82n43, 83, 83n45, 84, 94, 103–104, 106–107, 109, 110–11, 113, 116–18, 128, 135, 138

Tooke, Thomas, 42, 96n54

transaction demand, 15n6

uncertainty, 15, 18–20, 27n15, 29, 34–36, 45, 51, 56–57, 57n31, 129. See also uncertainty demand

uncertainty demand, 15n6

unemployment, 19, 28–29

Van Den Hauwe, Ludwig, 36

Warburg, Paul, 19–20n9

White, Lawrence. See Selgin and White’s fractional reserve approach

Williams, Jeffrey C., 112

yield curve, 84, 86, 112, 138

Zhu, Joy, 20n9