Barnett and Block (2008) establish that not only are fractional reserve demand deposits
fraudulent and create an Austrian Business Cycle (ABC), but that a certain type of
mismatching between time deposits and the period for which the depository institution relends
the deposited funds (banks or other financial intermediaries “borrowing short and
lending long”) are also contrary to libertarian law. The question we address in the present
paper is whether or not this type of disconnect between the period for which the ultimate
lender committed funds and the ultimate borrower gained possession thereof also
necessarily start an Austrian Business Cycle. Even though this does not constitute an
increase in the stock of money, we answer in the affirmative
