Let us now turn to the case of maturity mismatching in a free market.
We see, therefore, that maturity mismatching does not lead to unsustainable change in the structure of production, when savings are renewed or "rolled over" and this is correctly anticipated by entrepreneurs.
Now we shall examine what restricts the amount of maturity mismatching in a free market.
In a free banking system there are limits to the practice of maturity mismatching by banks besides the wish to comply with the wisdom of the principles of sound finance and secure financing sources.
A similar procedure limits the amount of maturity mismatching in a free banking system.
Another check to maturity mismatching is provided by bank customers.
Credit expansion as a special case of maturity mismatching
the granting of credits with demand deposits, is a special case of maturity mismatching.
Thus, fractional reserve banking is maturity mismatching in extremis, as it relies on liabilities with zero maturity and the need to roll them over continuously.
This insight applies to other kinds of maturity mismatching.