Rozeff on free banking: a critique

Abstract

Purpose

The purpose of this paper is to correct Rozeff (2010). He contends that fractional-reserve banking is legitimate and efficacious. The authors demonstrate that it is not.

Design/methodology/approach

The design of this paper is to quote widely from Rozeff (2010) and then to expose his errors of analysis.

Findings

The authors demonstrate that fractional-reserve banking is neither legitimate nor efficacious.

Originality/value

Money is the lifeblood of the economy. If so, then banking is the marrow of the economy, since it is from that sector that money arises in the first place. It is crucially important, then, that the monetary system be based on sound principles. Fractional-reserve banking is a violation of these sound principles. Therefore, it is valuable to demonstrate that this is indeed the case.

Citation

Davidson, L. and Block, W.E. (2018), "Rozeff on free banking: a critique", Journal of Economic and Administrative Sciences, Vol. 34 No. 2, pp. 123-136. https://doi.org/10.1108/JEAS-07-2017-0067