Some economists of the Austrian school oppose fractional-reserve banking on the grounds that it is inherently fraudulent, pro-cyclical and unstable. These critics should focus their wrath on repressive financial legislation and central-bank mischief, not on a legitimate practice that encourages savings and investment.

George A. Selgin is Professor Emeritus of Economics at the University of Georgia, Director of the Center for Monetary and Financial Alternatives at the Cato Institute, and former Research Fellow at the Independent Institute.
Banking and FinanceBanking Law and RegulationEconomic PolicyEconomyFiscal Policy/DebtLaw and Liberty
Other Independent Review articles by George A. Selgin
Fall 2013 The Financial Crisis and the Free Market Cure: Why Pure Capitalism Is the World Economy’s Only Hope
Summer 2011 They Stumble Who Run Fast: Roubini and Mihm’s Crisis Economics
Spring 2010 Central Banks as Sources of Financial Instability