So, continuing yesterday's discussion: what do Austrians say about MMFs? Let us be clear about the analogy Krugman draws between MMFs and banks. The term "fractional reserve" just means that the bank doesn't have all the money in the vault. Yes, there are a lot of checks floating around that represent the amount of money the bank is responsible to pay on demand and, yes, in the event of a bank run this is a dangerous situation. The bank only has some small fraction of the money in reserve. Hence the term. So: what do Austrians say about that? Is this a case where their hard money views come into conflict with their laissez-faire views, and where they ought in consistency with the former to demand that the government close these dangerous fractional reserve institutions down as so many embezzlers? Well, there are different approaches within this broad school of thought. But the general line of thought is well stated by Detlev S. Schlichter, in his recent book...