IV FRACTIONAL RESERVE BANKING Fractional reserve banking under a gold standard, as Mises defined it, is a system of lending wherein a bank issues receipts for money metals supposedly held in reserve, which it does not have in reserve. It therefore issues promises to pay, which are legal liabilities for the bank, yet the bank cannot redeem all of these liabilities on demand. Mises called this form of money credit money or fiduciary media. FRACTIONAL RESERVES WITH GOLD The familiar story of how fractional reserve banking began may be mythical historically, but it does accurately describe the process. A goldsmith … Continue reading Fractional-Reserve Fraud