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Journal of Business Ethics

, Volume 131, Issue 3, pp 619–623 | Cite as

What is the Latin for ‘Mayonnaise’? A Response to Bagus, Howden and Gabriel

  • Anthony J. Evans
Article

Abstract

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.

Keywords

100 % reserve requirement Banking Demand deposits Fractional-reserve banking Fraud Maturity mismatching Time deposits 

References

  1. Bagus, Philipp, & Howden, D. (2009). The legitimacy of loan maturity mismatching: A risky, but not fraudulent undertaking. Journal of Business Ethics, 90(3), 399–406.CrossRefGoogle Scholar
  2. Bagus, P., & Howden, D. (2012). The continuing continuum problem of deposits and loans. Journal of Business Ethics, 106, 295–300.CrossRefGoogle Scholar
  3. 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
  4. Cachanosky, N. (2011). A comment on Barnett and Block on time deposit and Bagus and Howden on loan maturity mismatching. Journal of Business Ethics, 104, 219–221.CrossRefGoogle Scholar
  5. 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
  6. White, L. H. (2007, January 8). Heurta De Soto’s case against fractional reserves, Free Market News Network.Google Scholar
  7. Yeager, L. B. (2010). Bank reserves: A dispute over words and classification. The Review of Austrian Economics, 23(2), 183–191.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2014

Authors and Affiliations

  1. 1.ESCP Europe Business SchoolLondonUK

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