What is the Latin for ‘Mayonnaise’? A Response to Bagus, Howden and Gabriel
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If fractional-reserve demand deposits are common, and illegitimate, an obvious flaw in the banking system is exposed. However, this article maintains that the only reason why demand deposits may be considered illegitimate is because of a way of defining them that renders them almost irrelevant. This article provides a response to Bagus et al. (J Bus Ethics, Forthcoming, 2014), and identifies examples of how they misrepresent Evans (J Bus Ethics, Forthcoming, 2013). It also provides further considerations on the tradeoffs relating to the availability of a deposit; methodological subjectivism; and the potential for hybrid contracts. Deposit and loan contracts may be hard to mix, but the actual results of doing so should not be ignored.
Keywords100 % reserve requirement Banking Demand deposits Fractional-reserve banking Fraud Maturity mismatching Time deposits
- Bagus, P., Howden, D., & Gabriel, A. (2014). Oil and water do not mix, or: aliud est credere, aliud deponere. Journal of Business Ethics (Forthcoming).Google Scholar
- Evans, A. J. (2013). In Defence of ‘Demand’ Deposits: Contractual Solutions to the Barnett and Block, and Bagus and Howden Debate. Journal of Business Ethics (Forthcoming).Google Scholar
- White, L. H. (2007, January 8). Heurta De Soto’s case against fractional reserves, Free Market News Network.Google Scholar