Mediations on the Sound Money Debate: How Banking Can Be Free, Fractional and Solvent

Posted: 19 May 2010 Last revised: 7 Jun 2013

Anthony J. Evans

ESCP Europe; ESCP Europe - Department of Economics

Date Written: September 25, 2010

Abstract

This paper attempts to shift the debate between fractional and 100% reserve free banking from issues of fraud to issues of solvency. By drawing attention to the reflux mechanism of “adverse clearings,” “withdrawal notices” and “option clauses” it is argued that fractional reserve “instant access” funds are not necessarily fraudulent. However additional institutional devices such as auditing requirements, margins, and limited liability protection are required to ensure banks operate within the general business law. Since the traditional distinction between deposits and loans is mostly etymological and thus irrelevant, a “sound money” system can be free, fractional, and solvent.

Keywords: Fraud, Solvency, 100% Reserve Banking, Fractional Reserve Banking, Business Cycles

Suggested Citation

Evans, Anthony J., Mediations on the Sound Money Debate: How Banking Can Be Free, Fractional and Solvent (September 25, 2010). Available at SSRN: https://ssrn.com/abstract=1610095 or http://dx.doi.org/10.2139/ssrn.1610095

Anthony J. Evans (Contact Author)

ESCP Europe ( email )

79 Avenue de la Republique
Paris, 75011
France

HOME PAGE: http://anthonyjevans.com

ESCP Europe - Department of Economics ( email )

United Kingdom

HOME PAGE: http://anthonyjevans.com

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