But even if the 100 percent reserve plan were to be adopted on the basis of the unadulterated gold standard, it would not entirely remove the drawbacks inherent in every kind of government interference with banking. What is needed to prevent any further credit expansion is to place the banking business under the general rules of commercial and civil laws compelling every individual and firm to fulfill all obligations in full compliance with the terms of the contract. If banks are preserved as privileged establishments subject to special legislative provisions, the tool remains that governments can use for fiscal purposes. Then every restriction imposed upon the issuance of fiduciary media depends upon the government's and the parliament's good intentions. They may limit the issuance for periods which are called normal. The restriction will be withdrawn whenever a government deems that an emergency justifies resorting to extraordinary measures. If an administration and the party backing it want to increase expenditure without jeopardizing their popularity through the imposition of higher taxes, they will always be ready to call their impasse an emergency. Recourse to the printing press and to the obsequiousness of bank managers willing to oblige the authorities regulating their conduct of affairs is the foremost means of governments eager to spend money for purposes for which the taxpayers are not ready to pay higher taxes (p. 444).

http://www.mises.org/humanaction/chap17sec12.asp

In contrast, Rothbard held to a system of 100% reserves, which he defended by an appeal to law: a prohibition against issuing receipts for which there was insufficient metal. He presented this view in his important essay, "The Case for a 100 Per Cent Gold Dollar": "In my view, issuing promises to pay on demand in excess of the amount of goods on hand is simply fraud, and should be so considered by the legal system. For this means that a bank issues 'fake' warehouse receipts – warehouse receipts, for example, for ounces of gold that do not actually exist in the vaults. This is legalized counterfeiting. . . . In short, I believe that fractional reserve banking is disastrous both for the morality and for the fundamental bases and institutions of the market economy" (In Search of a Monetary Constitution, edited by Leland B. Yeager [Harvard University Press, 1962], p. 114).