The Continuing Continuum Problem of Deposits and Loans |
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Authors: | Philipp Bagus David Howden |
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Institution: | (1) Department of Applied Economics I, Universidad Rey Juan Carlos, Paseo Artilleros s/n, Madrid, 28032, Spain;(2) Department of Business and Social Sciences, St. Louis University, Madrid Campus, Avenida del Valle, 34, Madrid, 28003, Spain |
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Abstract: | Barnett and Block (J Bus Ethics 18(2):179–194, 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 (Cachanosky, forthcoming) maintains that both maturity mismatching and fractional reserve banking
are ethically justified as these 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 these 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. |
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