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Oil and Water Do Not Mix, or: Aliud Est Credere, Aliud Deponere

Author

Listed:
  • Philipp Bagus
  • David Howden
  • Amadeus Gabriel

    (CERIIM - Centre de Recherche en Intelligence et Innovation Managériales - Excelia Group | La Rochelle Business School, CEREGE [Poitiers, La Rochelle] - Centre de recherche en gestion [EA 1722] - UP - Université de Poitiers = University of Poitiers - ULR - La Rochelle Université)

Abstract

The financial crisis has led to new interest in the ethics of financial markets. In this article we further the debate on the nature of banking contracts by showing that the fundamental subjective purposes of loan and deposit contracts are irreconcilable. Any resultant mixture of the two contracts is a legal aberration. We consider a mutual fund as an important and legitimate alternative to the common demand deposit to provide high liquidity and some yield without offering full availability of a nominal sum. Besides being a close substitute for how many deposit accounts function today, the mutual fund has the additional benefit of satisfying all legal and ethical requirements. Loan and investment contracts (such as money market mutual funds) allow for the “bank” to make use of their clients’ funds while the intents of money owners are clearly classified without running into legal or ethical problems.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Philipp Bagus & David Howden & Amadeus Gabriel, 2015. "Oil and Water Do Not Mix, or: Aliud Est Credere, Aliud Deponere," Post-Print hal-02633361, HAL.
    • Handle: RePEc:hal:journl:hal-02633361
    DOI: 10.1007/s10551-014-2087-x
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    Citations

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    Cited by:

    1. Jesús Huerta de Soto & Antonio Sánchez-Bayón & Philipp Bagus, 2021. "Principles of Monetary & Financial Sustainability and Wellbeing in a Post-COVID-19 World: The Crisis and Its Management," Sustainability, MDPI, vol. 13(9), pages 1-11, April.
    2. Philipp Bagus & David Howden & Jesús Huerta de Soto Ballester, 2018. "Entrepreneurial Error Does Not Equal Market Failure," Journal of Business Ethics, Springer, vol. 149(2), pages 433-441, May.
    3. David Howden & Amadeus Gabriel, 2015. "The Interest Rate Brake on Maturity Transformation," Journal of Economic Issues, Taylor & Francis Journals, vol. 49(4), pages 1100-1111, October.
    4. Laura Davidson, 2015. "Ethical Differences Between Loan Maturity Mismatching and Fractional Reserve Banking: A Natural Law Approach," Journal of Business Ethics, Springer, vol. 131(1), pages 9-18, September.
    5. Philipp Bagus & David Howden & Amadeus Gabriel, 2017. "The Hubris of Hybrids," Journal of Business Ethics, Springer, vol. 145(2), pages 373-382, October.
    6. Anthony Evans, 2015. "What is the Latin for ‘Mayonnaise’? A Response to Bagus, Howden and Gabriel," Journal of Business Ethics, Springer, vol. 131(3), pages 619-623, October.
    7. 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.
    8. 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.
    9. Philipp Bagus & David Howden, 2023. "Consumer rights and banking contracts," Journal of Banking Regulation, Palgrave Macmillan, vol. 24(1), pages 105-114, March.

    More about this item

    JEL classification:

    • G0 - Financial Economics - - General
    • G00 - Financial Economics - - General - - - General
    • K1 - Law and Economics - - Basic Areas of Law
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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