Crash and Carry: Financial Intermediaries, the Intertemporal-Carry Trade, and Austrian Business Cycles

Ethics & Politics, Vol. 11, No. 1, pp. 455-469, 2009

15 Pages Posted: 8 Jul 2011

See all articles by Walter E. Block

Walter E. Block

Loyola University New Orleans - Joseph A. Butt, S.J. College of Business

William Barnett

Loyola University New Orleans

Date Written: July 6, 2011

Abstract

Barnett and Block (2008) establish that not only are fractional reserve demand deposits fraudulent and create an Austrian Business Cycle (ABC), but that a certain type of mismatching between time deposits and the period for which the depository institution re-lends the deposited funds (banks or other financial intermediaries “borrowing short and lending long”) are also contrary to libertarian law. The question we address in the present paper is whether or not this type of disconnect between the period for which the ultimate lender committed funds and the ultimate borrower gained possession thereof also necessarily start an Austrian Business Cycle. Even though this does not constitute an increase in the stock of money, we answer in the affirmative.

Suggested Citation

Block, Walter E. and Barnett, William, Crash and Carry: Financial Intermediaries, the Intertemporal-Carry Trade, and Austrian Business Cycles (July 6, 2011). Ethics & Politics, Vol. 11, No. 1, pp. 455-469, 2009. Available at SSRN: https://ssrn.com/abstract=1880270

Walter E. Block (Contact Author)

Loyola University New Orleans - Joseph A. Butt, S.J. College of Business ( email )

6363 St. Charles Avenue
Box 15, Miller 321
New Orleans, LA 70118
United States
(504) 864-7944 (Phone)
(504) 864-7970 (Fax)

William Barnett

Loyola University New Orleans ( email )

526 Pine Street
New Orleans, LA 70118
United States

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