Banks are inherently bankrupt due the fractional-reserve banking system-Rothbard

“Banks are ‘inherently bankrupt’ because they issue far more warehouse receipts to cash (nowadays in the form of ‘deposits’ redeemable in cash on demand) than they have cash available. Hence, they are always vulnerable to bank runs. These runs are not like any other business failures because they simply consist of depositors claiming their own rightful property which the banks do not have. ‘Inherently bankruptcy’ then is an essential feature of ‘fractional reserve’ banking system.”

America’s Great Depression, p. 15n11, Murray N. Rothbard


… the clearest way of preventing inflation is to outlaw fractional-reserve banking, and to impose a 100 percent gold reserve to all notes and deposits…. Fraud is equivalent to theft, for fraud is committed when one part of an exchange contract is deliberately not fulfilled after the other’s property has been taken. Banks that issue receipts to non-existent gold are really committing fraud, because it is then impossible for all property owners (of claims to gold) to claim their rightful property. Therefore, prohibition of such practice would not be an act of governmental intervention in the free market; it would be part of the general legal defense of property against attack which a free market requires.

America’s Great Depression, p. 27, Murray N. Rothbard


Book: America’s Great Depression–Rothbard

One comment

Comments are closed.