However, I am taken to task with the accusation that my question is “an illustration of just how poorly LK understands both the Austrian theory of industrial fluctuations and the theory of free banking.” That is surprising. Catalán seems to imply he will dispute my assertion that “Mises’ and Hayek’s work in the area was to show how fiduciary expansion leads to business cycles.”
Yet only a few paragraphs we read:
“In Hayek’s early writing (I have in mind his 1933  article “Monetary Theory and the Trade Cycle;” specifically, chapter four), he does actually believe that fractional reserve banking leads to recurrent business cycles.”It is like watching someone proclaim that they are going to walk down a flight of stairs with elegance and grace - only to trip over and fall head over heels to the bottom.
Nor do I find the White/Selgin model of fractional reserve banking, and how it will supposedly stop cycles, very convincing. Many nations had approximations of free banking in the 19th century, e.g., Australia. In this case, a system of banks under a gold standard, no central bank and very light regulation (that was mostly ignored anyway) produced a credit boom that blew a huge asset bubble in property. The familiar debt deflationary depression followed.
Anyway, more on this tomorrow.