Munich Personal RePEc Archive

The Continuing Continuum Problem and Future Goods

Bagus, Philipp and Howden, David (2012): The Continuing Continuum Problem and Future Goods. Published in: The Journal of Business Ethics , Vol. 3, No. 106 (2012): pp. 295-300.

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Barnett and Block (2011) argue that one cannot distinguish between deposits and loans due to the continuum problem of maturities and because future goods do not exist – both essential characteristics that distinguish deposit from loan contracts. In a similar way but leading to opposite conclusions, Bagus and Howden (forthcoming) maintains that both maturity mismatching and fractional reserve banking are ethically justified as deposit and loan contracts are equivalent. We argue herein that the economic and legal differences between genuine deposit and loan contracts are clear. This implies different legal obligations for deposit and loan contracts, a necessary step in assessing the ethics of both fractional reserve banking and maturity mismatching. While the former is economically, legally, and perhaps most importantly ethically problematic, there are no such troubles with the latter.

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