Senior Honors Theses

Publication Date

Spring 4-7-2017

School

School of Business

Major

Business: Finance

Keywords

Fractional reserve free banking, Austrian business cycle, banking, fraud, one-hundred percent reserve, deposit, loan

Disciplines

Economic History | Economic Theory | Finance and Financial Management | Macroeconomics | Other Business | Political Economy

Abstract

This paper serves as a compilation and analysis of different banking systems with an emphasis on fractional reserve free banking. Contemporary academic literature has debated fractional reserve banking with revisited scrutiny since the 2007–2009 financial crisis. The Austrian School, drawing conclusions from the Austrian business cycle theory, blames central banking for boom-bust economics. One proposed solution, fractional reserve free banking, eliminates the central bank’s control for a purer form of fractional reserve practice; however, this system may be inherently fraudulent and unethical. After completing an economic analysis of the western world’s banking system, this paper then explores an alternative solution.

Keywords: Fractional reserve free banking, Austrian business cycle, banking, fraud, one-hundred percent reserve, deposit, loan