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The Human Action Podcast
Unpacking Mises: Fractional Reserve Banking and the Currency School
Nov 1, 2024
Kristoffer Hansen, a Mises Fellow, shares insightful perspectives on fractional reserve banking and free banking. He clarifies Mises' acknowledgment of the benefits of fractional reserve banking, as highlighted by economist Larry White. The conversation explores the historical influence of the Currency School on economic stability and the intricate relationship between commodity-backed money and business cycles. Hansen also discusses the inefficacies of Peel's Act in preventing banking crises and delves into various definitions of inflation, emphasizing Mises' complex views on money.
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Quick takeaways
- Mises acknowledged the potential benefits of fractional reserve banking, suggesting it could promote economic growth and resource efficiency.
- The podcast highlights the challenges faced by the Currency School, which aimed for monetary stability through strict gold-backed regulations that ultimately failed to prevent financial crises.
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Discourse on Fractional Reserve Banking
The discussion revolves around fractional reserve banking and its implications, particularly in the context of economist Mises' views. The debate was sparked by Larry White referencing a review written by Christopher on the topic of banking, which led to further exploration of Mises' stance, especially regarding his acceptance of fractional reserve banking. Mises argued that the existence of bank money could save resources and facilitate economic growth, suggesting a certain level of acceptance. However, this has led to confusion and debates regarding whether Mises was wholly supportive of fractional reserve banking practices or if he had reservations about them.
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Discover
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Listen to the best highlights from the podcasts you love and dive into the full episode