Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

Attempts to Legally Justify Fractional-Reserve Banking 133of the violation of traditional principles of property rightswith respect to the monetary irregular deposit. In the followingchapters we will examine these effects (the distortion ofthe productive structure; the generation of successive, recurrentstages of economic boom and recession; the promotion ofwidespread malinvestment; the creation of massive unemploymentand the perpetuation of a privileged financial systemincapable of guaranteeing smooth and sustainable economicdevelopment).CRITICISM OF THE ATTEMPT TO EQUATE THE MONETARYIRREGULAR-DEPOSIT CONTRACT WITH THE LOAN ORMUTUUM CONTRACTEven though the doctrinal association between irregulardeposits and monetary loan or mutuum contracts is the perfecttool for justifying fractional-reserve banking, this associationis so awkward that the most prestigious experts in commerciallaw have failed to accept it. Joaquín Garrigues,though he seems to want to unreservedly defend the doctrineof association, ultimately realizes that it is not justifiable, andhe concludes that, despite the possible positive-law arguments(Article 1768 of the Spanish Civil Code and Article 309 of theSpanish Commercial Code, both cited earlier) that could beused to justify the association between the loan or mutuumcontract and the irregular deposit contract,there are still some factors which lead one to continue consideringthe contract a deposit and not a loan (for example, thefree availability to the depositor, the fact that the depositorinitiates the contract, the limited interest, etc.). 14Curiously, Joaquín Garrigues does not expound on thesefactors, mentioning them only in passing. Instead he immediatelytries to construct the theory based on the reinterpretationof the concept of availability, which we will study in the nextsection. Nevertheless, considering what we covered in chapter14 Garrigues, Contratos bancarios, p. 363; italics added.