IDEAS home Printed from https://ideas.repec.org/a/kap/jbuset/v90y2009i3p399-406.html
   My bibliography  Save this article

The Legitimacy of Loan Maturity Mismatching: A Risky, but not Fraudulent, Undertaking

Author

Listed:
  • Philipp Bagus
  • David Howden

Abstract

Barnett and Block (2008) attack the heart of modern banking by claiming that the practice of borrowing short and lending long is illicit. While their claim of illegitimacy concerning fractional reserve banking can be defended, their justification lacks substance. Their claim is herein strengthened by a legal analysis of deposits and loans based on Huerta de Soto (2006). A combined legal and economic analysis shows that while lending deposits can be regarded as illicit, the maturity mismatching of loans is legitimate contrary to Barnett and Block's claim. No over-issuance of property rights is involved with this practice once the distinction between present and future goods is taken into account. However, while the practice is not illicit per se, it is greatly assisted and developed through the presence of a fractional reserve banking system, and can sometimes breed detrimental effects.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Philipp Bagus & David Howden, 2009. "The Legitimacy of Loan Maturity Mismatching: A Risky, but not Fraudulent, Undertaking," Journal of Business Ethics, Springer, vol. 90(3), pages 399-406, December.
    • Handle: RePEc:kap:jbuset:v:90:y:2009:i:3:p:399-406
    DOI: 10.1007/s10551-009-0050-z
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10551-009-0050-z
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10551-009-0050-z?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. de Soto, Jesus Huerta, 1995. "A Critical Analysis of Central Banks and Fractional-Reserve Free Banking from the Austrian School Perspective," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 8(2), pages 25-38.
    2. Hoppe, Hans-Hermann, 1994. "How Is Fiat Money Possible?--or, the Devolution of Money and Credit," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 7(2), pages 49-74.
    3. Philipp Bagus, 2008. "Monetary policy as bad medicine: The volatile relationship between business cycles and asset prices," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 21(4), pages 283-300, December.
    4. repec:ucp:bkecon:9780226320625 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Van Den Hauwe, Ludwig, 2006. "The Uneasy Case for Fractional-Reserve Free Banking," MPRA Paper 119085, University Library of Munich, Germany.
    2. Bagus, Philipp & Howden, David, 2010. "Fractional Reserve Banking: Some Quibbles," MPRA Paper 79590, University Library of Munich, Germany.
    3. Laura Davidson, 2010. "The Ethics of Countering the Private Counterfeiter: Rejoinder to Block," American Journal of Economics and Sociology, Wiley Blackwell, vol. 69(4), pages 1321-1327, October.
    4. Vicente Moreno-Casas & Philipp Bagus, 2021. "The ethics of care and the tragedy of the commons," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 68(4), pages 405-422, December.
    5. Philipp Bagus & David Howden, 2016. "The economic and legal significance of “full” deposit availability," European Journal of Law and Economics, Springer, vol. 41(1), pages 243-254, February.
    6. Walter Block, 2010. "Rejoinder To Boettke On Coasean Economics And Communism," Romanian Economic Business Review, Romanian-American University, vol. 5(3), pages 9-30, September.
    7. Bagus, Philipp & Gabriel, Amadeus & Howden, David, 2014. "Causes and Consequences of Inflation," MPRA Paper 79608, University Library of Munich, Germany.
    8. Malte Tobias Kähler, 2011. "From German Rules to European Discretion: Policy’s Slippery Slope," Chapters, in: David Howden (ed.), Institutions in Crisis, chapter 9, Edward Elgar Publishing.
    9. Le Maux Laurent, 2000. "Ludwig Von Mises, Theoriceen De La Banque Libre : Reponse Aj.G. Hülsmann," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 10(1), pages 169-178, March.
    10. Gentier Antoine, 2013. "3 Comments on “An Austrian Defense of the Euro”," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 19(1), pages 29-40, December.
    11. Kajtazi, Anton & Moro, Andrea, 2019. "The role of bitcoin in well diversified portfolios: A comparative global study," International Review of Financial Analysis, Elsevier, vol. 61(C), pages 143-157.
    12. Philipp Bagus & David Howden & Amadeus Gabriel, 2015. "Oil and Water Do Not Mix, or: Aliud Est Credere, Aliud Deponere," Journal of Business Ethics, Springer, vol. 128(1), pages 197-206, April.
    13. Hoffmann, Andreas, 2009. "Fear of depression - Asymmetric monetary policy with respect to asset markets," MPRA Paper 17522, University Library of Munich, Germany.
    14. Facchini, François, 2004. "La théorie autrichienne des cycles : une théorie de la récurrence des erreurs collectives d’anticipation," L'Actualité Economique, Société Canadienne de Science Economique, vol. 80(1), pages 67-94, Mars.
    15. Walter E. Block & William Barnett, 2017. "Maturity Mismatching and “Market Failure”," Journal of Business Ethics, Springer, vol. 142(2), pages 313-323, May.
    16. Philipp Bagus, 2011. "The Eurosystem: Costs and Tragedies," Chapters, in: David Howden (ed.), Institutions in Crisis, chapter 7, Edward Elgar Publishing.
    17. George Selgin, 2012. "Mere quibbles: Bagus and Howden’s critique of the theory of free banking," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 25(2), pages 131-148, June.
    18. Bagus, Philipp & Howden, David, 2011. "Unanswered Quibbles with Fractional Reserve Free Banking," MPRA Paper 79594, University Library of Munich, Germany.
    19. Walter Block, 2003. "Decentralization, Subsidiarity, Rodney King and State Deification: A Libertarian Analysis," European Journal of Law and Economics, Springer, vol. 16(2), pages 139-147, September.
    20. Philipp Bagus & David Howden, 2011. "Monetary equilibrium and price stickiness: Causes, consequences and remedies," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 24(4), pages 383-402, December.

    More about this item

    Keywords

    time deposits; private property rights; fraud; maturity mismatching; fractional reserve banking;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jbuset:v:90:y:2009:i:3:p:399-406. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.