Munich Personal RePEc Archive

Unanswered Quibbles with Fractional Reserve Free Banking

Bagus, Philipp and Howden, David (2011): Unanswered Quibbles with Fractional Reserve Free Banking. Published in: Libertarian Papers , Vol. 18, No. 3 (2011): pp. 1-24.

[img]
Preview
PDF
MPRA_paper_79594.pdf

Download (275kB) | Preview

Abstract

We reassess monetary equilibrium theory by focusing on its foundation – price stickiness – and answer several ancillary questions. Prices are sticky at times. Contra monetary equilibrium theorists, this is not a reason to advocate an issuance of fiduciary media to counteract the effects of a sluggish price adjustment process. Issuances of fiduciary media will breed negative effects, primarily via wealth redistributions, faulty interest rate signals and exacerbated business cycles. Allowing the price level to adjust to maintain monetary equilibrium provides for fewer detrimental effects than adjusting the supply of credit.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.