The Ethics of Fractional-Reserve Banking System: A Private Property Rights Approach

Víctor I. Espinosa (), Miguel A. Alonso-Neira () and Jesús Huerta de Soto
Additional contact information
Víctor I. Espinosa: Department of Business Administration, Universidad Autónoma de Chile, Providencia 7500912, Chile
Miguel A. Alonso-Neira: Department of Applied Economics I, Social and Legal Sciences Faculty, Rey Juan Carlos University, 28033 Madrid, Spain
Jesús Huerta de Soto: Department of Applied Economics I, Social and Legal Sciences Faculty, Rey Juan Carlos University, 28033 Madrid, Spain

Economies, 2023, vol. 11, issue 9, 1-15

Abstract: It is generally stated that the fractional-reserve banking system (FRBS) is consistent with sustainable economic growth and development. While it assumes that depositors will not be a joint demand who will claim all their money simultaneously, it supposes that a monetary aggregate greater than the monetary base will not harm economic performance. However, the FRBS’s call to central banks casts doubt on the sustainability argument and its ethical support. This article explores the FRBS from the ethics of private property, proving a radically different course to promote sustainable economic growth and development. After reviewing and discussing the ethics of private property for the FRBS and its call for central banks, the case of fiat inflation and business cycles clarifies the narrow relationship between ethics and sustainability. These findings are applied to some modern ethical dilemmas around the FRBS, proving novel avenues for policy reform and research opportunities.

Keywords: private property; fractional-reserve banking; 100 percent reserve requirements; business cycle; banking ethics (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-7099/11/9/221/pdf (application/pdf)
https://www.mdpi.com/2227-7099/11/9/221/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jecomi:v:11:y:2023:i:9:p:221-:d:1225655

Access Statistics for this article

Economies is currently edited by Ms. Hongyan Zhang

More articles in Economies from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().