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The Continuing Continuum Problem and Future Goods

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  • Bagus, Philipp
  • Howden, David

Abstract

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.

Suggested Citation

  • Bagus, Philipp & Howden, David, 2012. "The Continuing Continuum Problem and Future Goods," MPRA Paper 79595, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:79595
    as

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    File URL: https://mpra.ub.uni-muenchen.de/79595/1/MPRA_paper_79595.pdf
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    References listed on IDEAS

    as
    1. William Barnett & Walter Block, 2005. "Money: Capital Good, Consumers’ Good, or (Media of) Exchange Good?," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 18(2), pages 179-194, June.
    2. Philipp Bagus & David Howden & Walter Block, 2013. "Deposits, Loans, and Banking: Clarifying the Debate," American Journal of Economics and Sociology, Wiley Blackwell, vol. 72(3), pages 627-644, July.
    3. Leland Yeager, 2010. "Bank reserves: A dispute over words and classification," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 23(2), pages 183-191, June.
    4. William Barnett & Walter Block, 2011. "Rejoinder to Bagus and Howden on Borrowing Short and Lending Long," Journal of Business Ethics, Springer, vol. 100(2), pages 229-238, May.
    5. Philipp Bagus & David Howden, 2009. "The Legitimacy of Loan Maturity Mismatching: A Risky, but not Fraudulent, Undertaking," Journal of Business Ethics, Springer, vol. 90(3), pages 399-406, December.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Bagus, Philipp & Gabriel, Amadeus & Howden, David, 2014. "Causes and Consequences of Inflation," MPRA Paper 79608, University Library of Munich, Germany.
    2. Howden, David, 2013. "The Quantity Theory of Money," MPRA Paper 79601, University Library of Munich, Germany.
    3. Philipp Bagus & Amadeus Gabriel & David Howden, 2018. "On the Necessary and Sufficient Conditions for Legitimate Banking Contracts," Journal of Business Ethics, Springer, vol. 147(3), pages 669-678, February.
    4. Philipp Bagus & Amadeus Gabriel & David Howden, 2016. "Reassessing the Ethicality of Some Common Financial Practices," Journal of Business Ethics, Springer, vol. 136(3), pages 471-480, July.

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    More about this item

    Keywords

    banking; fraud; fractional reserves; maturity mismatching; natural law; difference loans and deposits; continuum problem; claims to future goods;
    All these keywords.

    JEL classification:

    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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