100 Percent Reserve Banking and the Path to a Single-Country Gold Standard

By Hossein Askari and Noureddine Krichene,

ABSTRACT: One hundred percent reserve banking is an essential foundation and prerequisite for a country to establish long-term financial stability and sustained economic growth. It is also an essential element for a country contemplating the adoption of a stable gold standard monetary system. Debt money, i.e., debt created by banks, was once called malum per se, a thing that is evil in its nature. It has supported excessive government debt, inflated speculative bubbles, fueled inflation, reduced investment and growth, and resulted in an unjust redistribution of wealth. In this paper, we discuss some of the detrimental consequences of fractional reserve banking and outline its abolition as the principal reform before one or more countries can establish a viable gold standard.

Read the full article in the Quarterly Journal of Austrian Economics.