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Money, Bank Credit, and Economic Cycles
Can the market fully manage the money and banking sector? Jesús Huerta de Soto, professor of economics at the Universidad Rey Juan Carlos, Madrid, has made history with this mammoth and exciting treatise that it has and can again, without inflation, without business cycles, and without the economic instability that has characterized the age of government control.
Such a book as this comes along only once every several a complete comprehensive treatise on economic theory. It is sweeping, revolutionary, and devastating--not only the most extended elucidation of Austrian business cycle theory to ever appear in print but also a decisive vindication of the Misesian-Rothbardian perspective on money, banking, and the law.
Jörg Guido Hülsmann has said that this is the most significant work on money and banking to appear since 1912, when Mises's own book was published and changed the way all economists thought about the subject.
Its five main
a wholesale reconstruction of the legal framework for money and banking, from the ancient world to modern times,
an application of law-and-economics logic to banking that links microeconomic analysis to macroeconomic phenomena,
a comprehensive critique of fractional-reserve banking from the point of view of history, theory, and policy,
an application of the Austrian critique of socialism to central banking,
the most comprehensive look at banking enterprise from the point of view of market-based entrepreneurship.
Those are the main points but, in fact, this only scratches the surface. Indeed, it would be difficult to overestimate the importance of this book. De Soto provides also a defense of the Austrian perspective on business cycles against every other theory, defends the 100% reserve perspective from the point of view of Roman and British law, takes on the most important objections to full reserve theory, and presents a full policy program for radical reform.
It was Hülsmann's review of the Spanish edition that inspired the translation that led to this Mises Institute edition in English. The result is an 875-page masterpiece that utterly demolishes the case for fiat currency and central banking, and shows that these institutions have compromised economic stability and freedom, and, moreover, are intolerable in a free society.
De Soto has set new scholarly standards with this detailed discussion of monetary reform from an Austro-libertarian point of view. Huerta de Soto’s solid elaboration of his arguments along these lines makes his treatise a model illustration of the Austrian approach to the study of the relationship between law and economics.
It could take a decade for the full implications of this book to be absorbed but this much is all serious students of these subject matters will have to master this treatise.
875 page hardback
Such a book as this comes along only once every several a complete comprehensive treatise on economic theory. It is sweeping, revolutionary, and devastating--not only the most extended elucidation of Austrian business cycle theory to ever appear in print but also a decisive vindication of the Misesian-Rothbardian perspective on money, banking, and the law.
Jörg Guido Hülsmann has said that this is the most significant work on money and banking to appear since 1912, when Mises's own book was published and changed the way all economists thought about the subject.
Its five main
a wholesale reconstruction of the legal framework for money and banking, from the ancient world to modern times,
an application of law-and-economics logic to banking that links microeconomic analysis to macroeconomic phenomena,
a comprehensive critique of fractional-reserve banking from the point of view of history, theory, and policy,
an application of the Austrian critique of socialism to central banking,
the most comprehensive look at banking enterprise from the point of view of market-based entrepreneurship.
Those are the main points but, in fact, this only scratches the surface. Indeed, it would be difficult to overestimate the importance of this book. De Soto provides also a defense of the Austrian perspective on business cycles against every other theory, defends the 100% reserve perspective from the point of view of Roman and British law, takes on the most important objections to full reserve theory, and presents a full policy program for radical reform.
It was Hülsmann's review of the Spanish edition that inspired the translation that led to this Mises Institute edition in English. The result is an 875-page masterpiece that utterly demolishes the case for fiat currency and central banking, and shows that these institutions have compromised economic stability and freedom, and, moreover, are intolerable in a free society.
De Soto has set new scholarly standards with this detailed discussion of monetary reform from an Austro-libertarian point of view. Huerta de Soto’s solid elaboration of his arguments along these lines makes his treatise a model illustration of the Austrian approach to the study of the relationship between law and economics.
It could take a decade for the full implications of this book to be absorbed but this much is all serious students of these subject matters will have to master this treatise.
875 page hardback
875 pages, Hardcover
First published January 1, 1998
About the author
Jesús Huerta de Soto
70 books93 followersJesús Huerta de Soto Ballester (Madrid, 1956) is a Spanish economist of the Austrian School. He is a professor in the Department of Applied Economics at King Juan Carlos University of Madrid, Spain and a Senior Fellow at the Ludwig von Mises Institute.
Huerta de Soto received a bachelor's degree in economics in 1978 and a PhD in economics in 1992, from Complutense University. His MBA in actuarial science is from Stanford University, 1985. In 2000 he became a full professor of Political Economy at Universidad Rey Juan Carlos in Madrid.
Huerta de Soto was Editor of seven volumes of the Spanish language version of the University of Chicago Press's The Collected Works of F.A. Hayek. In that capacity, he was responsible for bibliographies, footnotes, introductions, and hiring translators. He is a member of the editorial board of New Perspectives on Political Economy and on the advisory editorial board of the Journal of Markets and Morality. Huerta de Soto is a Senior Fellow of the Ludwig von Mises Institute and is on the editorial board of its Quarterly Journal of Austrian Economics. He was formerly a Trustee of the Madrid Institute for Advanced Studies (IMDEA) in social sciences and was a vice-president and director of the Mont Pelerin Society from 2000 to 2004.
Huerta de Soto received a bachelor's degree in economics in 1978 and a PhD in economics in 1992, from Complutense University. His MBA in actuarial science is from Stanford University, 1985. In 2000 he became a full professor of Political Economy at Universidad Rey Juan Carlos in Madrid.
Huerta de Soto was Editor of seven volumes of the Spanish language version of the University of Chicago Press's The Collected Works of F.A. Hayek. In that capacity, he was responsible for bibliographies, footnotes, introductions, and hiring translators. He is a member of the editorial board of New Perspectives on Political Economy and on the advisory editorial board of the Journal of Markets and Morality. Huerta de Soto is a Senior Fellow of the Ludwig von Mises Institute and is on the editorial board of its Quarterly Journal of Austrian Economics. He was formerly a Trustee of the Madrid Institute for Advanced Studies (IMDEA) in social sciences and was a vice-president and director of the Mont Pelerin Society from 2000 to 2004.
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Displaying 1 - 30 of 30 reviews
January 2, 2008
This book is the best exposition of Austrian macro-economic theory, particularly: Austrian Business Cycle Theory, Theory of Capital and Monetary Theory. The book first details the differing legal and economic nature of demand deposits and time deposits. Then it covers historical violations of the legal principles governing demand deposits, attempts to legally justify fractional-reserve banking, the credit expansion process and its effects on the economic system. In the process is detailed the workings of the economy’s intertemporal capital structure and how this structure is distorted by the credit-expansion process. The latter bulk of the book is devoted to critiquing monetarist and keynesian theories and provides an exposition of central and free banking theory as well as a proposal for banking reform: the theory of a 100-percent reserve requirement.
May 25, 2021
Not the first book on economics you should read but one you must read if you desire to understand economics. This book is not perfect, it does not define money, does not define markets either. It’s a technical read but not a difficult one if vou have some basic Austrian economics.
October 1, 2017
Huerta de Soto's book is comprehensive and represents an extraordinary way of thinking about economics. My economics lectures in college (major in international business administration) did not cover monetary policy in such depth and the Austrian School tends to be not very present in economics classes. Therefore, I took away many new insights and I am glad to have read this lengthy book.
Some aspects, however, were repeated too often, making the lack of conciseness the main downside. Still, one should consider that Huerta de Soto used a lot of footnotes that are not a must-read. (I did not read the footnotes at all and was still able to follow.) Therefore, the book is not as long as one may initially think. The rather wordy style makes the ideas in the book relatively easy to comprehend.
All in all, the book is a great read for anyone who wants to understand our monetary system better but the book does demand some time and effort.
These are the notes that I took when reading the book:
-State intervention in the financial sector leads to similar distortions as socialism (p. xxiii)
-“I will endeavor to show that the central bank did not emerge spontaneously as the result of market institutions, but was forcibly imposed by the government and responds to the demands of powerful pressure groups.” (p. xxvii)
-Chapter 1: The author explains different forms of deposit contracts and contrasts them to loan contracts. He classifies money that is deposited at a bank as a monetary “irregular deposit contract”, a contract for depositing fungible goods. Huerta de Soto argues that The fungible nature of the deposit does not allow the depository to use the good (the money) in any way because the ownership of the good is not transferred. As a result of this rule, a 100% reserve requirement is necessary to guarantee 100% availability of the deposits. (pp. 1-36)
-Chapter 2: The author states that fractional-reserve banking has been used illegally throughout large parts of history.
--On the one hand, governments sanctioned risky behavior and bankruptcies of banks, on the other hand, governments funded state banks and benefitted from the financial power of fractional-reserve banking.
--Huerta de Soto describes when and why government banks introduced fractional-reserve banking.
--Governments commonly introduced fractional-reserve banking in times of financial difficulty (especially wars), with the bank of Amsterdam being the last bank to make that decision in the fourth Anglo-Dutch war: “The Bank of Amsterdam was the last bank in history to maintain a 100-percent reserve ratio, and its disappearance marked the end of the last attempts to found banks upon general legal principles.” (p. 106)
--Three of the most noted monetary theorists of the eighteenth and early nineteenth centuries were bankers: John Law, Richard Cantillon, and Henry Thornton. (pp. 111-112)
-Chapter 3: The author refutes arguments for legally justifying fractional-reserve banking.
--One argument made by defenders of fractional-reserve banking is that depositors know that it is not a real deposit. Huerta de Soto argues that even then, the contract is impossible because irregular deposits cannot have the characteristics of a loan.
--Fractional-reserve banking is a legal paradox.
--Government deposit guarantees do not guarantee purchasing power.
--Sophisticated risk assessment will never be able to solve the economically adverse consequences of fractional-reserve banking (e.g., misallocation of funds).
--“The legal doctrines aimed at justifying fractional-reserve banking have been formulated ex post facto.” (p. 115)
--Huerta de Soto contrasts life insurance with irregular deposit contracts. He states that “... life insurance contracts, the calculation of probabilities based on mortality and survival tables, and the principle of mutualism or dividing loss among all policyholders sustaining an institution make is possible from the first moment to receive, should the anticipated event occur, a significant sum of money which, using other methods, could only be accumulated after a period of many years.” (p 162)
-Chapter 4: Explanation of the credit expansion process
--Natural means of production = labor and natural resources
--Fractional-reserve banking in an economy with one bank has the same effect as fractional-reserve banking in an economy with more than one bank.
--“This is precisely why we should be especially critical of traditional national accounting measures. For example, the traditional definition of “gross national product” (GNP) contains the word “gross,” yet in no way reflects the true gross income spent during the year on the entire productive structure. On the one hand, GNP figures hide the existence of different stages in the production process. On the other hand, what is even more serious and consequential is that the gross national product, despite the “gross” in its name, does not reflect the total gross monetary spending which takes place in all productive stages and sectors of the economy. This is because it is based solely on the production of goods and services delivered to final users. In fact, it rests on a narrow accounting criterion of added value which is foreign to the fundamental truths of the economy; it only adds the value of consumer goods and services and of the final capital goods completed during the year. It does not incorporate the other intermediate products which make up the stages in the production process and which pass from one stage to another during the financial year. Hence gross national product figures only include a small percentage of the total of capital goods. Indeed GNP incorporates the value of the sales of fixed or durable capital goods, such as real estate, industrial vehicles, machinery, tools, computers, etc., which are finished and sold to their final users during the year, and thus are considered final goods. However it in no way includes the value of circulating capital goods, intermediate non-durable products, nor of capital goods which are not yet finished or if so, pass from one stage to another during the process of production. In contrast, our gross output figure from Table V-2 incorporates the gross production of all capital goods, whether completed or not, fixed, durable or circulating, as well as all consumer goods and services produced during the financial year.
--In short the Gross National Product is an aggregate figure representing added values, and it excludes intermediate goods. The only reason national accounting theorists offer for using this figure is that with this criterion they avoid the problem of “double counting.” Yet from the standpoint of macroeconomic theory, this argument rests on a narrow accounting concept applicable to individual companies and is very dangerous, as it excludes from the computation the enormous volume of entrepreneurial effort which each year is dedicated to the production of intermediate capital goods, the bulk of economic activity but not all worth evaluating, according to GNP figures. To get an idea of the amounts involved, it suffices to consider that the gross output (calculated according to our criterion) of an advanced country like the United States is equal to more than twice the country’s official GNP.” (The author later states that the use of GNP almost inevitably implies that production is instantaneous and requires no time, i.e., that there are no intermediate stages in the production process and that time preference is irrelevant with respect to determining the interest rate.) (pp. 308-310)
--Gross national product exaggerates the importance of consumption. Gross domestic output (GDO) would be a better measure. (pp. 419-420)
--There are different ways how savings can be transferred into investments. The credit market is “of secondary importance and plays a subsidiary role in relation to the more general market in which present goods are exchanged for future goods through self-financing or capitalists’ direct reinvestment of present goods in their productive stages (the first and second procedures of saving-investment mentioned above).” The first and second procedures of saving-investment are direct saving-investments by capitalists, and saving-investments by workers and owners of natural resources and are, as mentioned, significantly more important than saving-investments through the credit market. (p. 314)
--Expansions of the production structure in an economy without fractional-reserve banking
---Savings lead to a lengthened/deepened production structure. Suppose there is only one stage of production in the economy. This stage of production incurs costs of 90 and has a gross income of 100. When demand for final goods (gross income) drops from 100 to 75 (savings increase by 25), the final stage of production would make a loss (costs of 90; gross income of 75). Therefore, the resources freed through saving are transferred to stages further from consumption (stages before the final stage; stage 2, 3 etc.). “... all increases in saving cause considerable relative losses to or decreases in the accounting profits of the companies which operate closest to final consumption.” (p. 321)
---The stages closest to consumption suffer the highest losses when savings increase. Therefore, capitalists seek to invest into stages further from consumption after savings increase. This leads to a uniform interest rate throughout the productive structure. (pp. 322-323)
---The production structure becomes wider (existing stages of production far away from consumption expand). Also, new capital goods that were not profitable before are introduced. Stages close to consumption become more narrow.
---The increase in prices of the capital goods also increases stock prices (except those stocks that represent equity close to consumption)
---The Ricardo effect is explained: Savings increase -> Consumption decreases -> Prices of consumer good decrease -> Real wages increase -> Labor is replaced by capital -> Lengthening and widening of productive structure
---Naturally, savings decrease the output of consumer goods in the short run. This slowdown lasts until the capital-intensive processes are completed. The temporary drop in the supply of new consumer goods would trigger a substantial rise in the relative price of consumer goods if there were no excess supplies (as a result of the drop in consumption).
--Expansions of the production structure in an economy with fractional-reserve banking
---Entrepreneurs that receive financing act as if there were enough savings to finance their investment projects. They invest into capital goods even though the necessary savings to produce those capital goods are not existent, causing a bad resource allocation in the economy. The projects that the entrepreneurs invested in may not be profitable if the interest rate had not been artificially reduced. Huerta de Soto explains that this intertemporal discoordination between investments and savings/consumption leads to initial optimism. The prices for original means of production increase dramatically because entrepreneurs compete for the small amount of existing means of production (small because there were no savings to back up the provision of those means). This inflationary process gets stronger over time so that long-lasting projects far exceed their budgets.
---The initial interest rate decline under unbacked investments is less severe than the interest rate decline under real saving-investments (because consumption does not decline when investments are unbacked by savings).
---Increases in the price of consumer goods:
----Original means of production are taken away from the stages closest to consumption, causing consumer prices to rise due to lower output of final goods.
----Workers and landowners (owners of original means of production) increase their income as a result of increased prices for their services. This increases their purchasing power and the demand for consumer goods.
----Entrepreneurs overestimate their future profit (illusion of entrepreneurial prosperity), causing them to overconsume.
----All in all, the inflationary effects on consumer good prices exceed the positive income effects that owners of original means of production enjoy.
---The increases in the prices of consumer goods cause the stages closest to consumption to become relatively more profitable again. The prices for original means of production rise less quickly. Entrepreneurs thus rethink their initial investment strategy and shift investments to stages closer to consumption.
---Ricardo effect: The over-proportional increase of consumer good prices decreases the real prices of original means of production (esp. wages). This causes a drop in demand for capital goods, decreasing the accounting profits of the stages furthest from consumption. (pp. 368-370)
---Interest rates return to their pre-credit-expansion level and even exceed it as soon as credit expansion stops again.
----Lenders add an inflation premium on their interest rates.
----Entrepreneurs are willing to pay high interest rates to finish their projects (they want to pay capital goods that are complementary to the goods they purchased before)
---The factors above cause losses for the stages furthest from consumption. Capital is shifted from the stages furthest from consumption to the stages closest to consumption. This adjustment is accompanied by high costs. Capital becomes non-convertible to a certain extent (see also pp. 413-414). Some projects cannot be completed, leaving society with capital that is now worth less than the initial purchase value.
-Other chapters
--It is not possible to predict whether savings will increase as a result of credit expansion. (pp. 410-411)
--The best way to deal with economic crises is to make markets as flexible as possible, especially labor markets. (pp. 434-435)
--The public perception of state intervention is often wrong. Crises seemingly prove that state interventions are necessary, but those interventions only pave the way for the next crisis (p. 459)
--Uninterrupted stock market growth never indicates favorable economic conditions. Such growth is a sign of credit expansion unbacked by real saving. (p. 462)
--Stock markets can be used as an indicator for a crisis because companies in the stages furthest from consumption are hit hardest. (p. 464)
--Socialist economies take a very long time to adjust to a market economy because they are in a permanent state of crisis (which is defined as a time in which means of production are badly allocated). The shift from socialism to a market economy can be compared to the adjustments that are necessary after an economic crisis.
--The summary of the stages of economies with and without credit expansion is a good read: pp. 506-507.
--Huerta de Soto, in line with the Austrian school, advocates a focus on individuals and refrains from overly confident macroeconomic analyses. (pp. 519-512) Capital is not just a single, homogenous productive fund but consists of different stages. (p. 522)
--Macroeconomic theory disregards relative prices. (p. 526)
--“The above reflections on monetarism (its lack of capital theory and the adoption of a macroeconomic outlook which masks the issues of true importance) would not be complete without a criticism of the equation of exchange, MV=PT, on which monetarists have relied since Irving Fisher proposed it in his book, The Purchasing Power of Money. Clearly this “equation of exchange” is simply an ideogram which rather awkwardly represents the relationship between growth in the money supply and a decline in the purchasing power of money. The origin of this “formula” is a simple tautology which expresses that the total amount of money spent on transactions conducted in the economic system during a certain time period must be identical to the quantity of money received on the same transactions during the same period (MV = sum pt). However monetarists then take a leap in the dark when they assume the other side of the equation can be represented as PT, where T is an absurd “aggregate” which calls for adding up heterogenous quantities of goods and services exchanged over a period of time. The lack of homogeneity makes this an impossible sum. Mises also points out the absurdity of the concept of “velocity of money,” which is defined simply as the variable which, dependent on the others, is necessary to maintain the balance of the equation of exchange The concept makes no economic sense because individual economic agents cannot possibly act as the formula indicates.” (pp. 530-532)
--Money is not neutral. It modifies the structure of relative prices of goods and services because it is injected into the economy in a sequential manner and at various specific points (via public expenditure, credit expansion, or the discovery of new gold reserves in particular places). “To the extent this occurs, only certain people will be the first to receive the new monetary units and have the chance to purchase new goods and services at prices not yet affected by monetary growth. Thus begins a process of income redistributions in which the first to receive the monetary units benefit from the situation at the expense of all other economic agents, who find themselves purchasing goods and services at rising prices before any of the newly-created monetary units reach their pockets.” (p. 533)
--As classical economics assumes money neutrality, crises cannot be explained using those theories.
--Table that contrasts the Austrian School and “macroeconomics”: p. 582.
--Proposed banking reform (p. 736)
---Freedom of currency
---Free banking, no central bank
---100-percent reserve requirement (gold as a transition currency; just see which currency will be adapted afterwards)
--Advantages of the proposed banking system (pp. 745-760)
---Prevention of bank crises.
---Prevention of cyclical economic crises.
---Respect for private property (no misuse of deposits).
-Reduction of market transaction costs (esp. labor negotiations) as a result of stable economic growth.
---Reduction of excessive financial speculation.
---Minimization of public interventions (esp. the central bank).
---System has a better compatibility with democracy (less influence of powerful people on a key aspect of the economy, the monetary policy).
---Reduced potential for war because states find it harder to conceal the true costs of war.
--Replies to possible objections to the proposed banking system: pp. 760-787.
--Overview about the extent of government control on the monetary system and the stages in the process of banking reform: p. 793.
Some aspects, however, were repeated too often, making the lack of conciseness the main downside. Still, one should consider that Huerta de Soto used a lot of footnotes that are not a must-read. (I did not read the footnotes at all and was still able to follow.) Therefore, the book is not as long as one may initially think. The rather wordy style makes the ideas in the book relatively easy to comprehend.
All in all, the book is a great read for anyone who wants to understand our monetary system better but the book does demand some time and effort.
These are the notes that I took when reading the book:
-State intervention in the financial sector leads to similar distortions as socialism (p. xxiii)
-“I will endeavor to show that the central bank did not emerge spontaneously as the result of market institutions, but was forcibly imposed by the government and responds to the demands of powerful pressure groups.” (p. xxvii)
-Chapter 1: The author explains different forms of deposit contracts and contrasts them to loan contracts. He classifies money that is deposited at a bank as a monetary “irregular deposit contract”, a contract for depositing fungible goods. Huerta de Soto argues that The fungible nature of the deposit does not allow the depository to use the good (the money) in any way because the ownership of the good is not transferred. As a result of this rule, a 100% reserve requirement is necessary to guarantee 100% availability of the deposits. (pp. 1-36)
-Chapter 2: The author states that fractional-reserve banking has been used illegally throughout large parts of history.
--On the one hand, governments sanctioned risky behavior and bankruptcies of banks, on the other hand, governments funded state banks and benefitted from the financial power of fractional-reserve banking.
--Huerta de Soto describes when and why government banks introduced fractional-reserve banking.
--Governments commonly introduced fractional-reserve banking in times of financial difficulty (especially wars), with the bank of Amsterdam being the last bank to make that decision in the fourth Anglo-Dutch war: “The Bank of Amsterdam was the last bank in history to maintain a 100-percent reserve ratio, and its disappearance marked the end of the last attempts to found banks upon general legal principles.” (p. 106)
--Three of the most noted monetary theorists of the eighteenth and early nineteenth centuries were bankers: John Law, Richard Cantillon, and Henry Thornton. (pp. 111-112)
-Chapter 3: The author refutes arguments for legally justifying fractional-reserve banking.
--One argument made by defenders of fractional-reserve banking is that depositors know that it is not a real deposit. Huerta de Soto argues that even then, the contract is impossible because irregular deposits cannot have the characteristics of a loan.
--Fractional-reserve banking is a legal paradox.
--Government deposit guarantees do not guarantee purchasing power.
--Sophisticated risk assessment will never be able to solve the economically adverse consequences of fractional-reserve banking (e.g., misallocation of funds).
--“The legal doctrines aimed at justifying fractional-reserve banking have been formulated ex post facto.” (p. 115)
--Huerta de Soto contrasts life insurance with irregular deposit contracts. He states that “... life insurance contracts, the calculation of probabilities based on mortality and survival tables, and the principle of mutualism or dividing loss among all policyholders sustaining an institution make is possible from the first moment to receive, should the anticipated event occur, a significant sum of money which, using other methods, could only be accumulated after a period of many years.” (p 162)
-Chapter 4: Explanation of the credit expansion process
--Natural means of production = labor and natural resources
--Fractional-reserve banking in an economy with one bank has the same effect as fractional-reserve banking in an economy with more than one bank.
--“This is precisely why we should be especially critical of traditional national accounting measures. For example, the traditional definition of “gross national product” (GNP) contains the word “gross,” yet in no way reflects the true gross income spent during the year on the entire productive structure. On the one hand, GNP figures hide the existence of different stages in the production process. On the other hand, what is even more serious and consequential is that the gross national product, despite the “gross” in its name, does not reflect the total gross monetary spending which takes place in all productive stages and sectors of the economy. This is because it is based solely on the production of goods and services delivered to final users. In fact, it rests on a narrow accounting criterion of added value which is foreign to the fundamental truths of the economy; it only adds the value of consumer goods and services and of the final capital goods completed during the year. It does not incorporate the other intermediate products which make up the stages in the production process and which pass from one stage to another during the financial year. Hence gross national product figures only include a small percentage of the total of capital goods. Indeed GNP incorporates the value of the sales of fixed or durable capital goods, such as real estate, industrial vehicles, machinery, tools, computers, etc., which are finished and sold to their final users during the year, and thus are considered final goods. However it in no way includes the value of circulating capital goods, intermediate non-durable products, nor of capital goods which are not yet finished or if so, pass from one stage to another during the process of production. In contrast, our gross output figure from Table V-2 incorporates the gross production of all capital goods, whether completed or not, fixed, durable or circulating, as well as all consumer goods and services produced during the financial year.
--In short the Gross National Product is an aggregate figure representing added values, and it excludes intermediate goods. The only reason national accounting theorists offer for using this figure is that with this criterion they avoid the problem of “double counting.” Yet from the standpoint of macroeconomic theory, this argument rests on a narrow accounting concept applicable to individual companies and is very dangerous, as it excludes from the computation the enormous volume of entrepreneurial effort which each year is dedicated to the production of intermediate capital goods, the bulk of economic activity but not all worth evaluating, according to GNP figures. To get an idea of the amounts involved, it suffices to consider that the gross output (calculated according to our criterion) of an advanced country like the United States is equal to more than twice the country’s official GNP.” (The author later states that the use of GNP almost inevitably implies that production is instantaneous and requires no time, i.e., that there are no intermediate stages in the production process and that time preference is irrelevant with respect to determining the interest rate.) (pp. 308-310)
--Gross national product exaggerates the importance of consumption. Gross domestic output (GDO) would be a better measure. (pp. 419-420)
--There are different ways how savings can be transferred into investments. The credit market is “of secondary importance and plays a subsidiary role in relation to the more general market in which present goods are exchanged for future goods through self-financing or capitalists’ direct reinvestment of present goods in their productive stages (the first and second procedures of saving-investment mentioned above).” The first and second procedures of saving-investment are direct saving-investments by capitalists, and saving-investments by workers and owners of natural resources and are, as mentioned, significantly more important than saving-investments through the credit market. (p. 314)
--Expansions of the production structure in an economy without fractional-reserve banking
---Savings lead to a lengthened/deepened production structure. Suppose there is only one stage of production in the economy. This stage of production incurs costs of 90 and has a gross income of 100. When demand for final goods (gross income) drops from 100 to 75 (savings increase by 25), the final stage of production would make a loss (costs of 90; gross income of 75). Therefore, the resources freed through saving are transferred to stages further from consumption (stages before the final stage; stage 2, 3 etc.). “... all increases in saving cause considerable relative losses to or decreases in the accounting profits of the companies which operate closest to final consumption.” (p. 321)
---The stages closest to consumption suffer the highest losses when savings increase. Therefore, capitalists seek to invest into stages further from consumption after savings increase. This leads to a uniform interest rate throughout the productive structure. (pp. 322-323)
---The production structure becomes wider (existing stages of production far away from consumption expand). Also, new capital goods that were not profitable before are introduced. Stages close to consumption become more narrow.
---The increase in prices of the capital goods also increases stock prices (except those stocks that represent equity close to consumption)
---The Ricardo effect is explained: Savings increase -> Consumption decreases -> Prices of consumer good decrease -> Real wages increase -> Labor is replaced by capital -> Lengthening and widening of productive structure
---Naturally, savings decrease the output of consumer goods in the short run. This slowdown lasts until the capital-intensive processes are completed. The temporary drop in the supply of new consumer goods would trigger a substantial rise in the relative price of consumer goods if there were no excess supplies (as a result of the drop in consumption).
--Expansions of the production structure in an economy with fractional-reserve banking
---Entrepreneurs that receive financing act as if there were enough savings to finance their investment projects. They invest into capital goods even though the necessary savings to produce those capital goods are not existent, causing a bad resource allocation in the economy. The projects that the entrepreneurs invested in may not be profitable if the interest rate had not been artificially reduced. Huerta de Soto explains that this intertemporal discoordination between investments and savings/consumption leads to initial optimism. The prices for original means of production increase dramatically because entrepreneurs compete for the small amount of existing means of production (small because there were no savings to back up the provision of those means). This inflationary process gets stronger over time so that long-lasting projects far exceed their budgets.
---The initial interest rate decline under unbacked investments is less severe than the interest rate decline under real saving-investments (because consumption does not decline when investments are unbacked by savings).
---Increases in the price of consumer goods:
----Original means of production are taken away from the stages closest to consumption, causing consumer prices to rise due to lower output of final goods.
----Workers and landowners (owners of original means of production) increase their income as a result of increased prices for their services. This increases their purchasing power and the demand for consumer goods.
----Entrepreneurs overestimate their future profit (illusion of entrepreneurial prosperity), causing them to overconsume.
----All in all, the inflationary effects on consumer good prices exceed the positive income effects that owners of original means of production enjoy.
---The increases in the prices of consumer goods cause the stages closest to consumption to become relatively more profitable again. The prices for original means of production rise less quickly. Entrepreneurs thus rethink their initial investment strategy and shift investments to stages closer to consumption.
---Ricardo effect: The over-proportional increase of consumer good prices decreases the real prices of original means of production (esp. wages). This causes a drop in demand for capital goods, decreasing the accounting profits of the stages furthest from consumption. (pp. 368-370)
---Interest rates return to their pre-credit-expansion level and even exceed it as soon as credit expansion stops again.
----Lenders add an inflation premium on their interest rates.
----Entrepreneurs are willing to pay high interest rates to finish their projects (they want to pay capital goods that are complementary to the goods they purchased before)
---The factors above cause losses for the stages furthest from consumption. Capital is shifted from the stages furthest from consumption to the stages closest to consumption. This adjustment is accompanied by high costs. Capital becomes non-convertible to a certain extent (see also pp. 413-414). Some projects cannot be completed, leaving society with capital that is now worth less than the initial purchase value.
-Other chapters
--It is not possible to predict whether savings will increase as a result of credit expansion. (pp. 410-411)
--The best way to deal with economic crises is to make markets as flexible as possible, especially labor markets. (pp. 434-435)
--The public perception of state intervention is often wrong. Crises seemingly prove that state interventions are necessary, but those interventions only pave the way for the next crisis (p. 459)
--Uninterrupted stock market growth never indicates favorable economic conditions. Such growth is a sign of credit expansion unbacked by real saving. (p. 462)
--Stock markets can be used as an indicator for a crisis because companies in the stages furthest from consumption are hit hardest. (p. 464)
--Socialist economies take a very long time to adjust to a market economy because they are in a permanent state of crisis (which is defined as a time in which means of production are badly allocated). The shift from socialism to a market economy can be compared to the adjustments that are necessary after an economic crisis.
--The summary of the stages of economies with and without credit expansion is a good read: pp. 506-507.
--Huerta de Soto, in line with the Austrian school, advocates a focus on individuals and refrains from overly confident macroeconomic analyses. (pp. 519-512) Capital is not just a single, homogenous productive fund but consists of different stages. (p. 522)
--Macroeconomic theory disregards relative prices. (p. 526)
--“The above reflections on monetarism (its lack of capital theory and the adoption of a macroeconomic outlook which masks the issues of true importance) would not be complete without a criticism of the equation of exchange, MV=PT, on which monetarists have relied since Irving Fisher proposed it in his book, The Purchasing Power of Money. Clearly this “equation of exchange” is simply an ideogram which rather awkwardly represents the relationship between growth in the money supply and a decline in the purchasing power of money. The origin of this “formula” is a simple tautology which expresses that the total amount of money spent on transactions conducted in the economic system during a certain time period must be identical to the quantity of money received on the same transactions during the same period (MV = sum pt). However monetarists then take a leap in the dark when they assume the other side of the equation can be represented as PT, where T is an absurd “aggregate” which calls for adding up heterogenous quantities of goods and services exchanged over a period of time. The lack of homogeneity makes this an impossible sum. Mises also points out the absurdity of the concept of “velocity of money,” which is defined simply as the variable which, dependent on the others, is necessary to maintain the balance of the equation of exchange The concept makes no economic sense because individual economic agents cannot possibly act as the formula indicates.” (pp. 530-532)
--Money is not neutral. It modifies the structure of relative prices of goods and services because it is injected into the economy in a sequential manner and at various specific points (via public expenditure, credit expansion, or the discovery of new gold reserves in particular places). “To the extent this occurs, only certain people will be the first to receive the new monetary units and have the chance to purchase new goods and services at prices not yet affected by monetary growth. Thus begins a process of income redistributions in which the first to receive the monetary units benefit from the situation at the expense of all other economic agents, who find themselves purchasing goods and services at rising prices before any of the newly-created monetary units reach their pockets.” (p. 533)
--As classical economics assumes money neutrality, crises cannot be explained using those theories.
--Table that contrasts the Austrian School and “macroeconomics”: p. 582.
--Proposed banking reform (p. 736)
---Freedom of currency
---Free banking, no central bank
---100-percent reserve requirement (gold as a transition currency; just see which currency will be adapted afterwards)
--Advantages of the proposed banking system (pp. 745-760)
---Prevention of bank crises.
---Prevention of cyclical economic crises.
---Respect for private property (no misuse of deposits).
-Reduction of market transaction costs (esp. labor negotiations) as a result of stable economic growth.
---Reduction of excessive financial speculation.
---Minimization of public interventions (esp. the central bank).
---System has a better compatibility with democracy (less influence of powerful people on a key aspect of the economy, the monetary policy).
---Reduced potential for war because states find it harder to conceal the true costs of war.
--Replies to possible objections to the proposed banking system: pp. 760-787.
--Overview about the extent of government control on the monetary system and the stages in the process of banking reform: p. 793.
June 16, 2013
This is one of the best books on any subject I've ever read. No joke. Completely lays out and modernizes the Austro-libertarian perspective on the legal foundations (or lack thereof) of fractional reserve banking, as well as the micro and macroeconomic implications of its implementation. This leads the reader into the clearest and most comprehensive exposition of the Austrian Business Cycle Theory availaible. Next, the author gives insightful critiques of the major contradicting schools of economic thought - the chicagoite monetarists and the Keynesians. I cannot recommend this book highly enough to anyone interested in banking, legal theory, economic theory, economic history, or modern macro issues.
March 9, 2009
In depth defense of the Austrian economics theory of banking and the business cycle focusing on the problems caused by artificial credit expansion, fiat currency, and fractional reserve banking.
January 24, 2013
A trully masterpiece.
October 5, 2023
Neste grande livro, Jesús Huerta de Soto demonstra que o socialismo, que não funciona em nenhuma área que seja aplicado, também não funciona na área financeira, através das instituições socialistas chamadas bancos centrais.
Define juridicamente os termos empréstimo e suas modalidades, e os tipos de depósito.
Mostra como houve uma simbiose entre governo e banqueiros. Os banqueiros perceberam que podiam emprestar dinheiro alheio com juros e os governos viram a ótima oportunidade de participar nesses lucros, dando proteções de todo o tipo para essas atividades criminosas.
Tem uma parte histórica interessante, mostrando que na Grécia, principalmente através dos escritos de Isócrates, e na Roma Antiga, já existiam banqueiros fraudulentos que não utilizavam coeficiente de 100% de reservas e usavam o dinheiro para seu próprio bem.
Mostra como as proibições canônicas cristãs/islâmicas/judaicas dos juros nos empréstimos, na época, contribuiu para que houvesse uma confusão grande na diferenciação de depósito à vista e à prazo.
Narra a história do Banco de Amsterdã, que a princípio era muito bom, e sua queda quando o governo o forçou a emprestar para bancar gastos estatais. E também mostra a especulação de John Law com o expansionismo monetário na França.
Traz uma análise rápida de como criou-se uma confusão entre os seguros de vida e os depósitos bancários, em especial fomentados por Keynes na época em que ele fazia operações parecidas com pirâmides para uma entidade inglesa de seguros de vida, fingindo que o dinheiro dos segurados estava rendendo mais.
Passa a analisar os efeitos econômicos do descumprimento dos princípios do direito, quando o banco começa a fraudar.
Na parte de "efeitos da expansão de crédito bancário sobre o sistema econômico", discorre de forma didática sobre os aspectos da produção de bens, através de bens de capital, e como o Produto Nacional Bruto supervaloriza o consumo como parte do desenvolvimento, ignorando bens não prontos e sugerindo que magicamente os produtos são algo que podem aparecer imediatamente, não gastando tempo para tal. Essas etapas intermediarias, se consideradas, num "Rendimento Social Bruto", tirariam boa parte da distorcida ideia dos economistas governamentais, que acreditam que para desenvolver o país devemos focar no consumo e não no investimento.
Soto resume em 6 os efeitos microeconômicos que explicam a reversão do processo de boom precipitado por expansão de crédito:
1 - A subida do preço dos fatores de produção originais
2 - Subsequente subida do preço dos bens de consumo
3 - Aumento relativo substancial dos lucros contábeis das empresas das etapas mais próximas do consumo final
4 - Efeito Ricardo
5 - Aumento das taxas de juros dos créditos para um nível que chega a ser superior ao que tinham antes do início da expansão de crédito
6 - O aparecimento de perdas contabilísticas nas empresas das etapas relativamente mais afastadas do consumo: o inevitável advento da crise
Resume o porque não ocorre crise quando o investimento é financiado por poupança real e não por expansão de crédito. Ao diminuir relativamente o consumo imediato, resultado da poupança real, libera recursos produtivos no mercado de fatores de produção originais, que ficam disponíveis para etapas mais afastadas do consumo sem precisar de pagar por eles preços mais elevados. No caso de expansão de crédito, os preços sobem porque não são libertados nas etapas próximas do consumo recursos de produção originais, e a única forma de obtê-los é pagando por eles preços mais altos. Isso também via "efeito Ricardo", torna vantajoso substituir mão de obra por equipamento, já que os salários reais aumentam por conta de diminuição relativa do preço dos bens de consumo.
A depressão numa expansão de crédito surge por falta de poupança para manter estrutura produtiva intensiva em capital. "Qualquer crescimento real no estoque de capital exige tempo e requer aumento da poupança voluntária líquida. Não há possibilidade de uma expansão de oferta monetária por créditos bancários se converter em um atalho que permita acelerar o crescimento econômico."
Ao explicar que as crises não são inerentes ao sistema capitalista: "a causa da expansão de crédito e dos ciclos econômicos é a violação forçada institucionalmente do direito de propriedade no âmbito concreto do contrato de depósito bancário de dinheiro".
Por fim, indica um caminho de transição para que os bancos virem meros gestores de fundos de investimentos/intermediários de empréstimos/custodiantes, respeitando o coeficiente de 100% de reservas e seguindo os princípios tradicionais do direito.
Excelente livro, embora excessivamente extenso.
Tempo estimado de leitura: 34 horas
Define juridicamente os termos empréstimo e suas modalidades, e os tipos de depósito.
Mostra como houve uma simbiose entre governo e banqueiros. Os banqueiros perceberam que podiam emprestar dinheiro alheio com juros e os governos viram a ótima oportunidade de participar nesses lucros, dando proteções de todo o tipo para essas atividades criminosas.
Tem uma parte histórica interessante, mostrando que na Grécia, principalmente através dos escritos de Isócrates, e na Roma Antiga, já existiam banqueiros fraudulentos que não utilizavam coeficiente de 100% de reservas e usavam o dinheiro para seu próprio bem.
Mostra como as proibições canônicas cristãs/islâmicas/judaicas dos juros nos empréstimos, na época, contribuiu para que houvesse uma confusão grande na diferenciação de depósito à vista e à prazo.
Narra a história do Banco de Amsterdã, que a princípio era muito bom, e sua queda quando o governo o forçou a emprestar para bancar gastos estatais. E também mostra a especulação de John Law com o expansionismo monetário na França.
Traz uma análise rápida de como criou-se uma confusão entre os seguros de vida e os depósitos bancários, em especial fomentados por Keynes na época em que ele fazia operações parecidas com pirâmides para uma entidade inglesa de seguros de vida, fingindo que o dinheiro dos segurados estava rendendo mais.
Passa a analisar os efeitos econômicos do descumprimento dos princípios do direito, quando o banco começa a fraudar.
Na parte de "efeitos da expansão de crédito bancário sobre o sistema econômico", discorre de forma didática sobre os aspectos da produção de bens, através de bens de capital, e como o Produto Nacional Bruto supervaloriza o consumo como parte do desenvolvimento, ignorando bens não prontos e sugerindo que magicamente os produtos são algo que podem aparecer imediatamente, não gastando tempo para tal. Essas etapas intermediarias, se consideradas, num "Rendimento Social Bruto", tirariam boa parte da distorcida ideia dos economistas governamentais, que acreditam que para desenvolver o país devemos focar no consumo e não no investimento.
Soto resume em 6 os efeitos microeconômicos que explicam a reversão do processo de boom precipitado por expansão de crédito:
1 - A subida do preço dos fatores de produção originais
2 - Subsequente subida do preço dos bens de consumo
3 - Aumento relativo substancial dos lucros contábeis das empresas das etapas mais próximas do consumo final
4 - Efeito Ricardo
5 - Aumento das taxas de juros dos créditos para um nível que chega a ser superior ao que tinham antes do início da expansão de crédito
6 - O aparecimento de perdas contabilísticas nas empresas das etapas relativamente mais afastadas do consumo: o inevitável advento da crise
Resume o porque não ocorre crise quando o investimento é financiado por poupança real e não por expansão de crédito. Ao diminuir relativamente o consumo imediato, resultado da poupança real, libera recursos produtivos no mercado de fatores de produção originais, que ficam disponíveis para etapas mais afastadas do consumo sem precisar de pagar por eles preços mais elevados. No caso de expansão de crédito, os preços sobem porque não são libertados nas etapas próximas do consumo recursos de produção originais, e a única forma de obtê-los é pagando por eles preços mais altos. Isso também via "efeito Ricardo", torna vantajoso substituir mão de obra por equipamento, já que os salários reais aumentam por conta de diminuição relativa do preço dos bens de consumo.
A depressão numa expansão de crédito surge por falta de poupança para manter estrutura produtiva intensiva em capital. "Qualquer crescimento real no estoque de capital exige tempo e requer aumento da poupança voluntária líquida. Não há possibilidade de uma expansão de oferta monetária por créditos bancários se converter em um atalho que permita acelerar o crescimento econômico."
Ao explicar que as crises não são inerentes ao sistema capitalista: "a causa da expansão de crédito e dos ciclos econômicos é a violação forçada institucionalmente do direito de propriedade no âmbito concreto do contrato de depósito bancário de dinheiro".
Por fim, indica um caminho de transição para que os bancos virem meros gestores de fundos de investimentos/intermediários de empréstimos/custodiantes, respeitando o coeficiente de 100% de reservas e seguindo os princípios tradicionais do direito.
Excelente livro, embora excessivamente extenso.
Tempo estimado de leitura: 34 horas
February 23, 2024
Lo bueno: Huerta de Soto en 20 páginas te hace un resumen macro y monetario del periodo 1996-2018 y sus crisis detectando las cagadas de los Bancos Centrales y del resto de actores de una manera impecable, de auténtico genio del análisis económico.
Lo de los coeficientes de caja nada de trasladar los bancos el riesgo a terceros es más marxista que Marx y la única medida que evitaría que esos hijos de la grandísima puta hiciesen una vez tras otra lo de asumir unos riesgos insensatos a sabiendas que si sale bien los beneficios para ellos pero si palman ayayay too big to fall help me please.
Lo malo: Huerta de Soto es de la escuela austríaca, sus mentores son vizcondes raros con apellidos de malo de película de James Bond y si por él fuera todos los pobres a un troncho de kebab a ser productivos aunque fuese en forma de comida rápida. Que manda cojones que no se tape un poco en estas cosas un pavo que ha vivido de becas del Banco de España y tercerías toda la vida sin salirse del ámbito académico o la consejería muy puntual, aunque sea por mínimo decoro.
Lo de los coeficientes de caja nada de trasladar los bancos el riesgo a terceros es más marxista que Marx y la única medida que evitaría que esos hijos de la grandísima puta hiciesen una vez tras otra lo de asumir unos riesgos insensatos a sabiendas que si sale bien los beneficios para ellos pero si palman ayayay too big to fall help me please.
Lo malo: Huerta de Soto es de la escuela austríaca, sus mentores son vizcondes raros con apellidos de malo de película de James Bond y si por él fuera todos los pobres a un troncho de kebab a ser productivos aunque fuese en forma de comida rápida. Que manda cojones que no se tape un poco en estas cosas un pavo que ha vivido de becas del Banco de España y tercerías toda la vida sin salirse del ámbito académico o la consejería muy puntual, aunque sea por mínimo decoro.
May 13, 2017
All other things being equal... This was the most illuminating book on the subject of banking and the Austrian perspective. But it is no easy book, The author's most cited thinkers are Hayek, Mises and Rothbard and it would not be a bad idea to have read some works from all of them.
What differentiates this book from others on this subject is that is starts with a clear affirmation of legal issues. Modern banking and fractional reserve must be treated as a multi disciplinary issue between the study of law and political economy. Thus the modern practice of fractional reserve is a fraud that brings misery ans suffering to society
What differentiates this book from others on this subject is that is starts with a clear affirmation of legal issues. Modern banking and fractional reserve must be treated as a multi disciplinary issue between the study of law and political economy. Thus the modern practice of fractional reserve is a fraud that brings misery ans suffering to society
February 17, 2021
This is not only Jesus Huerta de Soto's magnum opus, its the Austrian Magnum opus on business cycle theory. Do yourself a favor however and read this after The Structure of Production by Mark Skousen. I feel that at times Money, Bank Credit, and Economic Cycles relies heavily on its citations for building concepts and after reading Skousen whom the Money, Bank Credit, and Economic Cycles cites I would argue it will propel the readers understanding of de Soto's daunting read.
December 26, 2021
La teoría monetaria es el mayor reto al que los economistas del Siglo XXI nos enfrentamos.
Este libro recorre la historia de la banca y su perversión a lo largo de los años y posteriores reformas desafortunadas. Su conclusión final permite ver la viabilidad de un sistema bancario alternativo, positivo para nuestras sociedades y economías.
Sin duda un libro que debería leerse en las facultades de Economía.
Este libro recorre la historia de la banca y su perversión a lo largo de los años y posteriores reformas desafortunadas. Su conclusión final permite ver la viabilidad de un sistema bancario alternativo, positivo para nuestras sociedades y economías.
Sin duda un libro que debería leerse en las facultades de Economía.
October 1, 2017
Приятно слушать австрийских экономистов-минимум формул, максиму�� экспрессии при обсуждении оппонентов. Невольно задумываешься какие порой нелепые предположения закладывались в экономические теории, которые изучали в институте; впрочем, и самим австрийцам присуща небольшая идеологизированность. Во многом это повторение Фон Мизеса, но чем больше повторений, тем проще потом вспомнить важные вещи.
June 13, 2017
Read for an independent study on Austrian business cycle theory. Good introduction to Austrian business cycle theory and various free-market perspectives on banking theory. The only thing I would change is to make the graphs color, and add more description.
March 3, 2020
A big book, very thought provoking on the cause of boom and bust economic cycles being the fractional reserve banking system we have in the West, setting out the linkages. Lost me a bit on the solution.
This entire review has been hidden because of spoilers.
December 18, 2022
Fundamental para entender la escuela Austriaca aunque esta esté equivocada con 100x100 coeficiente legal de caja.
February 14, 2024
Sublime obra del profesor.
March 4, 2017
Obra maestra. Imprescindible
April 2, 2013
Strap yourself in and make a pot of coffee. You're going to be here for a while, but it's worth it.
This is, quite simply, the most comprehensive treatise on its titular subject matter I've read. From the ancient Romans and their banking/contract law to the School of Salamanca to the Bank of Amsterdam to the Bank of England to the Fed, you'll come to learn how banks work, what money is, and why fractional reserve banking is immoral and should be illegal—and often has been, as multiple economies and political systems painfully relearn that mutuum and commodatum contracts are two different things after suffering the consequences of banks and governments conveniently and self-servingly conflating them. Also includes very helpful critiques of the theories from other schools of economic thought (the view on offer here is Austrian).
I'm tempted to take off a star for repetition, because the mutuum vs. commodatum argument really is rehashed half a dozen times, at least. However, having just read reviews of The Case Against the Fed that claim Rothbard failed in his effort (!) I'm going to let it stand.
This is, quite simply, the most comprehensive treatise on its titular subject matter I've read. From the ancient Romans and their banking/contract law to the School of Salamanca to the Bank of Amsterdam to the Bank of England to the Fed, you'll come to learn how banks work, what money is, and why fractional reserve banking is immoral and should be illegal—and often has been, as multiple economies and political systems painfully relearn that mutuum and commodatum contracts are two different things after suffering the consequences of banks and governments conveniently and self-servingly conflating them. Also includes very helpful critiques of the theories from other schools of economic thought (the view on offer here is Austrian).
I'm tempted to take off a star for repetition, because the mutuum vs. commodatum argument really is rehashed half a dozen times, at least. However, having just read reviews of The Case Against the Fed that claim Rothbard failed in his effort (!) I'm going to let it stand.
May 6, 2011
I'm only 9% through this book (per my Kindle), but my understanding of banking has increased dramatically. Huerta de Soto explains the legal and economic principles behind regular deposits, irregular deposits, and loan contracts or mutuums as they were defined by ancient Roman law. The importance of these definitions to establishing a sound system of money and banking cannot be denied. The author also provides insight as to why these Roman laws should even be followed, offering the explanation that 'laws' as they are often decreed have in fact evolved to that point, based on the needs of human beings in a civilized society. It follows that a violation of these laws causes harm to individuals and society as a whole.
A very fascinating read, especially given the fragile state of our current economic/banking system.
A very fascinating read, especially given the fragile state of our current economic/banking system.
August 19, 2010
This book had an intriguing premise, that fractional-reserve banking causes the business cycle and that we should return to a 100% gold-backed reserve requirement for bank deposits. If we do that, our economy should experience a slow gradual growth and our money will slowly become more valuable. This was a well-thought out book that made me think more about our economy. I now don't believe that GNP is a good measure of our economy. The book did seem lack empirical evidence to back up its premise. I would have like to have seen that. All the arguments were theoretical and logical. For the depth of thought, I'm giving it 4 stars. I am still not totally convinced of the premise, I need to bounce the ideas off of my banking friends.
May 2, 2014
Exposición histórica, económica y jurídica de la teoría macroeconómica del dinero y la banca desde el punto de vista de la versión "Currency School" de la escuela austriaca. Importante para conocer las diferencias entre la macroeconomía monetaria neoclásica, keynesiana, y la versión "Banking School" de la escuela austriaca (entre las principales expuestas). Se coincida o no con los análisis y propuestas, el tratado pone de manifiesto la importancia del dinero y el crédito 'saludables' para la estabilidad y prosperidad de las sociedades.
July 27, 2013
You are going to learn alot reading this book! It may educate you more in one sitting about fundamentals of economics, banking, and economic theory than you have ever had before. The book is long, and must be to go through the fallacies of the two main competing schools of economic thought, the Classical/Chicago school and the Keynesian school. I cannot recommend this book highly enough. This is one of the best books the Austrian School of Economics has to offer.
August 26, 2015
Autor dobitnie pokazuje jakie cykle zachodzą w całej gospodarce. Kredyty i banki to przerośnięta forma, która wcześniej czy później i tak upadnie. Powinien też poruszyć temat chwilówek i pożyczek pozabankowych, które obecnie są popularne, a zapoczątkował je kryzys w 2008 roku. Pełno jest ofert chwilówek w Polsce http://chwilowo.com.pl/ i jak popatrzeć na nie dokładniej to lichwa niesamowita.
December 16, 2019
The chapters on Austrian economics are sublime and though I am not an adherent of his ideas I have an admiration for the author for doing his best at exposing Austrian economics in the way that Mises would approve. This is the best book on ABCT period. It eludes me how almost every Austrian gets ABCT wrong. Maybe because of that babbling buffoon Rothbard.
November 27, 2013
Detallado análisis sobre el ciclo económico desde la perspectiva de la escuela austríaca. Quizás se hace demasiado énfasis en el análisis del depósito irregular de dinero y en la condena del sistema bancario con reserva fraccionaria.
April 28, 2014
This may be one of the most important books in current Political Economics, the bare science of economics. If you need a treaty from the natural basics of human action to the highest level of economics complexity this is your book.
October 25, 2019
Una gran lectura de economía para entender el por qué las economias que actualmente dicen ser liberales, en realidad no lo son, y como este sistema ideológico es la respuesta para una económia dinámica.
October 21, 2021
I have tried to read it but I could not finish because it contains many repetitions.
At some point, I was tired because of reading the same thing again and again.
For the first time, I got an idea about the real cause of inflation with the help of this book.
You should definitely read it.
At some point, I was tired because of reading the same thing again and again.
For the first time, I got an idea about the real cause of inflation with the help of this book.
You should definitely read it.
February 27, 2013
An amazing in-depth study of the Austrian theory of the business cycle. I've made it through about the first 25% or so -- better review to follow eventually!
May 3, 2010
By far one of the best economics books I have ever read.
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