Why Mises Thought Fractional Reserve Banking Caused the Boom-Bust Cycle
Bob returns to the fractional reserve banking debate to clarify a point the critics keep missing: in the Mises-Hayek-Rothbard framework, it's fractional reserve banking itself that sets the boom-bust cycle in motion, not merely central banks.
Source: Mises Institute
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DW NOTE
The free banking debate isn't about which side sounds more libertarian — it's about what actually restrains credit creation. Under fractional reserves without a central bank, individual banks still issue more claims than reserves, still bid up asset prices with phantom capital, and still leave their depositors holding the same note when two people think they own it. The difference between nationalised central banking and competitive fractional reserve banking is a question of who administers the fraud, not whether fraud occurs.