Ep. 325 Continuing the Fractional Reserve Debate in Light of Selgin and White’s Response
In BMS ep. 322, Bob criticized a recent interview of George Selgin regarding the lack of historical examples of 100% reserve banking. In this episode, Bob responses to George’s pushback (on Twitter) and also Larry White’s in-print response to Rothbard’s old critique of the Scottish “free banking” episode.
Mentioned in the Episode and Other Links of Interest:
- What started this fiasco: BMS ep. 322, “Selgin vs. Selgin.”
- Rothbard’s critique of Larry White on the Scottish episode (starts p. 859). White’s response (chap. 3).
- John Cochrane on The Narrow Bank. Selgin’s contrarian take.
- Selgin on the history of 100% reserve banks.
- Block and Barnett on maturity mismatching.
- Murphy’s journal article critiquing the Selgin/White view of fractional reserve free banking. Murphy’s book Understanding Money Mechanics.
- Help support the Bob Murphy Show.
About the author, Robert
Christian and economist, Chief Economist at infineo, and Senior Fellow with the Mises Institute.
It was mentioned on the show, somewhat in passing, that a boom/bust cycle could be kicked off even under commodity money with 100% reserve banking – but I’m not so sure about this. Yes you could run into a motherlode of something, and this would lead to a lot of prices rising, but as commodity moneys necessarily have other uses, the prices of those other uses should start falling and absorb the extra supply until equilibrium is again reached. For example, a huge gold haul would enable circuitry prices to come down.
You might want to watch my discussion with Walter Block on this.
In the queue!