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The Theory of Money and Credit
The Theory of Money and Credit integrated monetary theory into the main body of economic analysis for the first time, providing fresh, new insights into the nature of money and its role in the economy and bringing Mises into the front rank of European economists. The Theory of Money and Credit also presented a new monetary theory of the trade cycle, which, under further development by Mises’s student Nobel Laureate F. A. Hayek, came to challenge all previous trade-cycle theories. Ludwig von Mises (1881–1973) was the leading spokesman of the Austrian School of economics throughout most of the twentieth century.
544 pages, Hardcover
First published January 1, 1912
About the author
Ludwig von Mises
142 books1,078 followersLudwig Heinrich Edler von Mises (German pronunciation: [ˈluːtvɪç fɔn ˈmiːzəs]; September 29, 1881 – October 10, 1973) was an Austrian economist, historian, philosopher, author, and classical liberal who had a significant influence on the Austrian government's economic policies in the first third of the 20th century, the Austrian School of Economics, and the modern free-market libertarian movement.
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Displaying 1 - 30 of 45 reviews
January 12, 2011
If you want to become like Jim Rogers, Marc Faber, Peter Schiff, you need to read and understand this book, otherwise you will be only an amateur on financial markets, this book alone with Mises 1928 monograph are the best books on money ever, becareful you need to have some background on Menger,Bohm-Bawerk and Banking theories, Take a breath and open your mind into the best book on money ever !
March 30, 2023
Fourth re-read, this time with gpt4 helping me, still goat. DM for summary.
January 7, 2013
As most of the Western world continues to believe that monetization of debt has no real consequences, it is important to point out that not everyone shares this view.
Ludwig von Mises's The Theory of Money and Credit takes the opposite view. This book belongs to what is called "The Austrian School" - the concept that the expansion of the money supply and/or credit will have real - although not always apparent - consequences.
The heart of much contention is a debate over the nature of economic activity. Is the economy largely organic or is the economy basically created and guided by the state?
Von Mises, of course, believes that the economy functions best without government intervention in the money supply (which can take many forms).
This is a debate that many people are having, and it behooves you to read up on more specific points like the business cycle, potential price distortions in the market, demand, and international trade.
My favorite point: creating money does not always produce obvious inflation if it prices goods out of the reach of ordinary people. Hmmm.....
Ludwig von Mises's The Theory of Money and Credit takes the opposite view. This book belongs to what is called "The Austrian School" - the concept that the expansion of the money supply and/or credit will have real - although not always apparent - consequences.
The heart of much contention is a debate over the nature of economic activity. Is the economy largely organic or is the economy basically created and guided by the state?
Von Mises, of course, believes that the economy functions best without government intervention in the money supply (which can take many forms).
This is a debate that many people are having, and it behooves you to read up on more specific points like the business cycle, potential price distortions in the market, demand, and international trade.
My favorite point: creating money does not always produce obvious inflation if it prices goods out of the reach of ordinary people. Hmmm.....
January 15, 2013
As most of the Western world continues to believe that monetization of debt has no real consequences, it is important to point out that not everyone shares this view.
Ludwig von Mises's The Theory of Money and Credit takes the opposite view. This book belongs to what is called "The Austrian School" - the concept that the expansion of the money supply and/or credit will have real - although not always apparent - consequences.
The heart of much contention is a debate over the nature of economic activity. Is the economy largely organic or is the economy basically created and guided by the state?
Von Mises, of course, believes that the economy functions best without government intervention in the money supply (which can take many forms).
This is a debate that many people are having, and it behooves you to read up on more specific points like the business cycle, potential price distortions in the market, demand, and international trade.
My favorite point: creating money does not always produce obvious inflation if it prices goods out of the reach of ordinary people. Hmmm.....
Ludwig von Mises's The Theory of Money and Credit takes the opposite view. This book belongs to what is called "The Austrian School" - the concept that the expansion of the money supply and/or credit will have real - although not always apparent - consequences.
The heart of much contention is a debate over the nature of economic activity. Is the economy largely organic or is the economy basically created and guided by the state?
Von Mises, of course, believes that the economy functions best without government intervention in the money supply (which can take many forms).
This is a debate that many people are having, and it behooves you to read up on more specific points like the business cycle, potential price distortions in the market, demand, and international trade.
My favorite point: creating money does not always produce obvious inflation if it prices goods out of the reach of ordinary people. Hmmm.....
April 18, 2010
This was surprisingly readable once I got into it (I expected von Mises to be impenetrable). Critics will say it has not aged well since some things von Mises posits as impossible have come to pass. I'm actually not sure our current, completely-untethered-to-gold money system will remain indefinitely intact, but I doubt von Mises would have believed it would endure 35+ years, which it has. Still, I found myself agreeing with the basic thesis that money is too important to entrust to government, even a theoretically apolitical part of it like a central bank. The temptation to expand monetary issue, stealing little by little from the holders of money until a crisis occurs, is a problem I cannot see any way to avoid but removing the power over money from government altogether.
October 4, 2013
a dense and somewhat difficult book on the nature of money, the reasons for interest, the effects of inflation, and the justifications for metal currency. The arguments that it refutes soundly I still hear today, but they are no more correct now than then, and I think this holds up quite well with the passing of time, and is a good point of reference for arguments against deficit spending and inflationary policies. Far more self consistent than the competition.
November 22, 2019
In the end I couldn't follow this as an audiobook. I didn't abandon it because it wasn't interesting, 'twas very interesting.
Basically monetarism + geography + time + humans. Delivers a constant stream of iinteresting ideas (Keynesiasm as inflationary disaster, inflation as a very uneven redistribution - banks first.)
But this book is from way back, before the current era of a completely false economy
Basically monetarism + geography + time + humans. Delivers a constant stream of iinteresting ideas (Keynesiasm as inflationary disaster, inflation as a very uneven redistribution - banks first.)
But this book is from way back, before the current era of a completely false economy
March 5, 2016
This is a nice booklet, but Human Action is a better book, and it contains a section on monetary policy, and this book doesn't add anything to it
April 18, 2024
Money and Banking > Chapter 19. Money, Credit, and Interest
1. On the Nature of the Problem
The fatal error of Fullarton and his disciples was to have overlooked the fact that even convertible banknotes remain permanently in circulation and can then bring about a glut of fiduciary media the consequences of which resemble those of an increase in the quantity of money in circulation. Even if it is true, as Fullarton insists, that banknotes issued as loans automatically flow back to the bank after the term of the loan has passed, still this does not tell us anything about the question whether the bank is able to maintain them in circulation by repeated prolongation of the loan. The assertion that lies at the heart of the position taken up by the Banking School, namely that it is impossible to set and permanently maintain in circulation more notes than will meet the public demand, is untenable; for the demand for credit is not a fixed quantity; it expands as the rate of interest falls, and contracts as the rate of interest rises. But since the rate of interest that is charged for loans made in fiduciary media created expressly for that purpose can be reduced by the banks in the first instance down to the limit set by the marginal utility of the capital used in the banking business, that is, practically to zero, the whole edifice built up by Tooke's school collapses...
3. Equilibrium Rate and Money Rate of Interest
What is necessary for clearing up this important problem still remains to be done; for even Wicksell's most noteworthy attempt cannot be said to have achieved its object. But at least it has the merit of having stated the problem clearly.
Wicksell distinguishes between the natural rate of interest (natürliche Kapitalzins), or the rate of interest that would be determined by supply and demand if actual capital goods were lent without the mediation of money, and the money rate of interest (Geldzins), or the rate of interest that is demanded and paid for loans in money or money substitutes. The money rate of interest and the natural rate of interest need not necessarily coincide, since it is possible for the banks to extend the amount of their issues of fiduciary media as they wish and thus to exert a pressure on the money rate of interest that might bring it down to the minimum set by their costs. Nevertheless, it is certain that the money rate of interest must sooner or later come to the level of the natural rate of interest, and the problem is to say in what way this ultimate coincidence is brought about.15 Up to this point Wicksell commands assent; but his further argument provokes contradiction.
According to Wicksell, at every time and under all possible economic conditions there is a level of the average money rate of interest at which the general level of commodity prices no longer has any tendency to move either upward or downward. He calls it the normal rate of interest; its level is determined by the prevailing natural rate of interest, although, for certain reasons which do not concern our present problem, the two rates need not coincide exactly. When, he says, from any cause whatever, the average rate of interest is below this normal rate, by any amount, however small, and remains at this level, a progressive and eventually enormous rise of prices must occur "which would naturally cause the banks sooner or later to raise their rates of interest."16 Now, so far as the rise of prices is concerned, this may be provisionally conceded. But it still remains inconceivable why a general rise in commodity prices should induce the banks to raise their rates of interest. It is clear that there may be a motive for this in the regulations, whether legislative or established by mercantile custom, that limit the circulation of fiduciary media; or necessary consideration of the procedure of other banks might have the same sort of effect. But if we start with the assumption, as Wicksell does, that only fiduciary media are in circulation and that the quantity of them is not legislatively restricted, so that the banks are entirely free to extend their issues of them, then it is impossible to see why rising prices and an increasing demand for loans should induce them to raise the rate of interest they charge for loans. Even Wicksell can think of no other reason for this than that since the requirements of business for gold coins and banknotes becomes greater as the price level rises, the banks do not receive back the whole of the sums they have lent, part of them remaining in the hands of the public; and that the bank reserves are consequently depleted while the total liabilities of the banks increase; and that this must naturally induce them to raise their rate of interest.17 But in this argument Wicksell contradicts the assumption that he takes as the starting point of his investigation. Consideration of the level of its cash reserves and their relation to the liabilities arising from the issue of fiduciary media cannot concern the hypothetical bank that he describes. He seems suddenly to have forgotten his original assumption of a circulation consisting exclusively of fiduciary media, on which assumption, at first, he rightly laid great weight.
4. Interest Policy and Production
...This is one of the ways in which the equilibrium of the loan market is reestablished after it has been disturbed by the intervention of the banks. The increased productive activity that sets in when the banks start the policy of granting loans at less than the natural rate of interest at first causes the prices of production goods to rise while the prices of consumption goods, although they rise also, do so only in a moderate degree, namely, only insofar as they are raised by the rise in wages. Thus the tendency toward a fall in the rate of interest on loans that originates in the policy of the banks is at first strengthened. But soon a countermovement sets in: the prices of consumption goods rise, those of production goods fall. That is, the rate of interest on loans rises again, it again approaches the natural rate.
This countermovement is now strengthened by the fact that the increase of the stock of money in the broader sense that is involved in the increase in the quantity of fiduciary media reduces the objective exchange value of money. Now, as has been shown, so long as this depreciation of money is going on, the rate of interest on loans must rise above the level that would be demanded and paid if the objective exchange value of money remained unaltered.22
At first the banks may try to oppose these two tendencies that counteract their interest policy by continually reducing the rate of interest charged for loans and forcing fresh quantities of fiduciary media into circulation. But the more they thus increase the stock of money in the broader sense, the more quickly does the value of money fall, and the stronger is its countereffect on the rate of interest. However much the banks may endeavor to extend their credit circulation, they cannot stop the rise in the rate of interest. Even if they were prepared to go on increasing the quantity of fiduciary media until further increase was no longer possible (whether because the money in use was metallic money and the limit had been reached below which the purchasing power of the money-and-credit unit could not sink without the banks being forced to suspend cash redemption, or whether because the reduction of the interest charged on loans had reached the limit set by the running costs of the banks), they would still be unable to secure the intended result. For such an avalanche of fiduciary media, when its cessation cannot be foreseen, must lead to a fall in the objective exchange value of the money-and-credit unit to the paniclike course of which there can be no bounds.23 Then the rate of interest on loans must also rise in a similar degree and fashion.
Thus the banks will ultimately be forced to cease their endeavors to underbid the natural rate of interest. That ratio between the prices of goods of the first order and of goods of higher orders which is determined by the state of the capital market and has been disturbed merely by the intervention of the banks will be approximately reestablished, and the only remaining trace of the disturbance will be a general increase in the objective exchange value of money due to factors emanating from the monetary side. A precise reestablishment of the old price ratios between production goods and consumption goods is not possible, on the one hand because the intervention of the banks has brought about a redistribution of property, and on the other hand because the automatic recovery of the loan market involves certain of the phenomena of a crisis, which are signs of the loss of some of the capital invested in the excessively lengthened roundabout processes of production. It is not practicable to transfer all the production goods from those uses that have proved unprofitable to other avenues of employment; a part of them cannot be withdrawn and must therefore either be left entirely unused or at least be used less economically. In either case there is a loss of value. Let us, for example, suppose that an artificial extension of bank credit is responsible for the establishment of an enterprise which only yields a net profit of four percent. So long as the rate of interest on loans was four and one-half percent, the establishment of such a business could not be thought of; we may suppose that it has been made possible by a fall to a rate of three and one-half percent which has followed an extension of the issue of fiduciary media. Now let us assume the reaction to begin, in the way described above. The rate of interest on loans rises to four and one-half percent again. It will no longer be profitable to conduct this enterprise. Whatever may now occur, whether the business is stopped entirely or whether it is carried on after the entrepreneur has decided to make do with the smaller profits, in either case—not merely from the individual point of view, but also from that of the community—there has been a loss of value. Economic goods which could have satisfied more important wants have been employed for the satisfaction of less important; only insofar as the mistake that has been made can be rectified by diversion into another channel can loss be prevented.
5. Credit and Economic Crises
Our theory of banking, like that of the currency principle, leads ultimately to a theory of business cycles. It is true that the Currency School did not inquire thoroughly into even this problem. It did not ask what consequences follow from the unrestricted extension of credit on the part of the credit-issuing banks; it did not even inquire whether it was possible for them permanently to depress the natural rate of interest. It set itself more modest aims and was content to ask what would happen if the banks in one country extended the issue of fiduciary media more than those of other countries. Thus it arrived at its doctrine of the "external drain" and at its explanation of the English crises that had occurred up to the middle of the nineteenth century.
If our doctrine of crises is to be applied to more recent history, then it must be observed that the banks have never gone as far as they might in extending credit and expanding the issue of fiduciary media. They have always left off long before reaching this limit, whether because of growing uneasiness on their own part and on the part of all those who had not forgotten the earlier crises, or whether because they had to defer to legislative regulations concerning the maximum circulation of fiduciary media. And so the crises broke out before they need have broken out. It is only in this sense that we can interpret the statement that it is apparently true after all to say that restriction of loans is the cause of economic crises, or at least their immediate impulse; that if the banks would only go on reducing the rate of interest on loans they could continue to postpone the collapse of the market. If the stress is laid upon the word postpone, then this line of argument can be assented to without more ado. Certainly, the banks would be able to postpone the collapse; but nevertheless, as has been shown, the moment must eventually come when no further extension of the circulation of fiduciary media is possible. Then the catastrophe occurs, and its consequences are the worse and the reaction against the bull tendency of the market the stronger, the longer the period during which the rate of interest on loans has been below the natural rate of interest and the greater the extent to which roundabout processes of production that are not justified by the state of the capital market have been adopted.
1. On the Nature of the Problem
The fatal error of Fullarton and his disciples was to have overlooked the fact that even convertible banknotes remain permanently in circulation and can then bring about a glut of fiduciary media the consequences of which resemble those of an increase in the quantity of money in circulation. Even if it is true, as Fullarton insists, that banknotes issued as loans automatically flow back to the bank after the term of the loan has passed, still this does not tell us anything about the question whether the bank is able to maintain them in circulation by repeated prolongation of the loan. The assertion that lies at the heart of the position taken up by the Banking School, namely that it is impossible to set and permanently maintain in circulation more notes than will meet the public demand, is untenable; for the demand for credit is not a fixed quantity; it expands as the rate of interest falls, and contracts as the rate of interest rises. But since the rate of interest that is charged for loans made in fiduciary media created expressly for that purpose can be reduced by the banks in the first instance down to the limit set by the marginal utility of the capital used in the banking business, that is, practically to zero, the whole edifice built up by Tooke's school collapses...
3. Equilibrium Rate and Money Rate of Interest
What is necessary for clearing up this important problem still remains to be done; for even Wicksell's most noteworthy attempt cannot be said to have achieved its object. But at least it has the merit of having stated the problem clearly.
Wicksell distinguishes between the natural rate of interest (natürliche Kapitalzins), or the rate of interest that would be determined by supply and demand if actual capital goods were lent without the mediation of money, and the money rate of interest (Geldzins), or the rate of interest that is demanded and paid for loans in money or money substitutes. The money rate of interest and the natural rate of interest need not necessarily coincide, since it is possible for the banks to extend the amount of their issues of fiduciary media as they wish and thus to exert a pressure on the money rate of interest that might bring it down to the minimum set by their costs. Nevertheless, it is certain that the money rate of interest must sooner or later come to the level of the natural rate of interest, and the problem is to say in what way this ultimate coincidence is brought about.15 Up to this point Wicksell commands assent; but his further argument provokes contradiction.
According to Wicksell, at every time and under all possible economic conditions there is a level of the average money rate of interest at which the general level of commodity prices no longer has any tendency to move either upward or downward. He calls it the normal rate of interest; its level is determined by the prevailing natural rate of interest, although, for certain reasons which do not concern our present problem, the two rates need not coincide exactly. When, he says, from any cause whatever, the average rate of interest is below this normal rate, by any amount, however small, and remains at this level, a progressive and eventually enormous rise of prices must occur "which would naturally cause the banks sooner or later to raise their rates of interest."16 Now, so far as the rise of prices is concerned, this may be provisionally conceded. But it still remains inconceivable why a general rise in commodity prices should induce the banks to raise their rates of interest. It is clear that there may be a motive for this in the regulations, whether legislative or established by mercantile custom, that limit the circulation of fiduciary media; or necessary consideration of the procedure of other banks might have the same sort of effect. But if we start with the assumption, as Wicksell does, that only fiduciary media are in circulation and that the quantity of them is not legislatively restricted, so that the banks are entirely free to extend their issues of them, then it is impossible to see why rising prices and an increasing demand for loans should induce them to raise the rate of interest they charge for loans. Even Wicksell can think of no other reason for this than that since the requirements of business for gold coins and banknotes becomes greater as the price level rises, the banks do not receive back the whole of the sums they have lent, part of them remaining in the hands of the public; and that the bank reserves are consequently depleted while the total liabilities of the banks increase; and that this must naturally induce them to raise their rate of interest.17 But in this argument Wicksell contradicts the assumption that he takes as the starting point of his investigation. Consideration of the level of its cash reserves and their relation to the liabilities arising from the issue of fiduciary media cannot concern the hypothetical bank that he describes. He seems suddenly to have forgotten his original assumption of a circulation consisting exclusively of fiduciary media, on which assumption, at first, he rightly laid great weight.
4. Interest Policy and Production
...This is one of the ways in which the equilibrium of the loan market is reestablished after it has been disturbed by the intervention of the banks. The increased productive activity that sets in when the banks start the policy of granting loans at less than the natural rate of interest at first causes the prices of production goods to rise while the prices of consumption goods, although they rise also, do so only in a moderate degree, namely, only insofar as they are raised by the rise in wages. Thus the tendency toward a fall in the rate of interest on loans that originates in the policy of the banks is at first strengthened. But soon a countermovement sets in: the prices of consumption goods rise, those of production goods fall. That is, the rate of interest on loans rises again, it again approaches the natural rate.
This countermovement is now strengthened by the fact that the increase of the stock of money in the broader sense that is involved in the increase in the quantity of fiduciary media reduces the objective exchange value of money. Now, as has been shown, so long as this depreciation of money is going on, the rate of interest on loans must rise above the level that would be demanded and paid if the objective exchange value of money remained unaltered.22
At first the banks may try to oppose these two tendencies that counteract their interest policy by continually reducing the rate of interest charged for loans and forcing fresh quantities of fiduciary media into circulation. But the more they thus increase the stock of money in the broader sense, the more quickly does the value of money fall, and the stronger is its countereffect on the rate of interest. However much the banks may endeavor to extend their credit circulation, they cannot stop the rise in the rate of interest. Even if they were prepared to go on increasing the quantity of fiduciary media until further increase was no longer possible (whether because the money in use was metallic money and the limit had been reached below which the purchasing power of the money-and-credit unit could not sink without the banks being forced to suspend cash redemption, or whether because the reduction of the interest charged on loans had reached the limit set by the running costs of the banks), they would still be unable to secure the intended result. For such an avalanche of fiduciary media, when its cessation cannot be foreseen, must lead to a fall in the objective exchange value of the money-and-credit unit to the paniclike course of which there can be no bounds.23 Then the rate of interest on loans must also rise in a similar degree and fashion.
Thus the banks will ultimately be forced to cease their endeavors to underbid the natural rate of interest. That ratio between the prices of goods of the first order and of goods of higher orders which is determined by the state of the capital market and has been disturbed merely by the intervention of the banks will be approximately reestablished, and the only remaining trace of the disturbance will be a general increase in the objective exchange value of money due to factors emanating from the monetary side. A precise reestablishment of the old price ratios between production goods and consumption goods is not possible, on the one hand because the intervention of the banks has brought about a redistribution of property, and on the other hand because the automatic recovery of the loan market involves certain of the phenomena of a crisis, which are signs of the loss of some of the capital invested in the excessively lengthened roundabout processes of production. It is not practicable to transfer all the production goods from those uses that have proved unprofitable to other avenues of employment; a part of them cannot be withdrawn and must therefore either be left entirely unused or at least be used less economically. In either case there is a loss of value. Let us, for example, suppose that an artificial extension of bank credit is responsible for the establishment of an enterprise which only yields a net profit of four percent. So long as the rate of interest on loans was four and one-half percent, the establishment of such a business could not be thought of; we may suppose that it has been made possible by a fall to a rate of three and one-half percent which has followed an extension of the issue of fiduciary media. Now let us assume the reaction to begin, in the way described above. The rate of interest on loans rises to four and one-half percent again. It will no longer be profitable to conduct this enterprise. Whatever may now occur, whether the business is stopped entirely or whether it is carried on after the entrepreneur has decided to make do with the smaller profits, in either case—not merely from the individual point of view, but also from that of the community—there has been a loss of value. Economic goods which could have satisfied more important wants have been employed for the satisfaction of less important; only insofar as the mistake that has been made can be rectified by diversion into another channel can loss be prevented.
5. Credit and Economic Crises
Our theory of banking, like that of the currency principle, leads ultimately to a theory of business cycles. It is true that the Currency School did not inquire thoroughly into even this problem. It did not ask what consequences follow from the unrestricted extension of credit on the part of the credit-issuing banks; it did not even inquire whether it was possible for them permanently to depress the natural rate of interest. It set itself more modest aims and was content to ask what would happen if the banks in one country extended the issue of fiduciary media more than those of other countries. Thus it arrived at its doctrine of the "external drain" and at its explanation of the English crises that had occurred up to the middle of the nineteenth century.
If our doctrine of crises is to be applied to more recent history, then it must be observed that the banks have never gone as far as they might in extending credit and expanding the issue of fiduciary media. They have always left off long before reaching this limit, whether because of growing uneasiness on their own part and on the part of all those who had not forgotten the earlier crises, or whether because they had to defer to legislative regulations concerning the maximum circulation of fiduciary media. And so the crises broke out before they need have broken out. It is only in this sense that we can interpret the statement that it is apparently true after all to say that restriction of loans is the cause of economic crises, or at least their immediate impulse; that if the banks would only go on reducing the rate of interest on loans they could continue to postpone the collapse of the market. If the stress is laid upon the word postpone, then this line of argument can be assented to without more ado. Certainly, the banks would be able to postpone the collapse; but nevertheless, as has been shown, the moment must eventually come when no further extension of the circulation of fiduciary media is possible. Then the catastrophe occurs, and its consequences are the worse and the reaction against the bull tendency of the market the stronger, the longer the period during which the rate of interest on loans has been below the natural rate of interest and the greater the extent to which roundabout processes of production that are not justified by the state of the capital market have been adopted.
February 5, 2018
Being on a particular topic in economics, The Theory of Money and Credit struck me as a clearer and more focused effort than did Mises's magnus opus, the possibly better-known Human Action. There is no waxing on the virtues of praxeology here; instead, Mises writes exhaustively and with precision solely on the natures of money and credit, and almost always with a dispassionate, analytical, and careful disposition (pace Rothbard, for example). The result is a lengthy tome on money and credit, written by a master, as far as one could understand the subject prior to the Great Depression.
And to be honest, I'm not entirely sure how much knowledge of the subject has really improved since. Surely as far as micro is concerned there is little that Mises has left out (probably the most interesting, developed after Mises published this work, would be game-theoretic explanations for the emergence of monetary standards via coordination games). From a macro standpoint -- I'm afraid I can't really say. I feel as if almost all of 20th century macro can be dispensed outright; I'll have to review what I think I know about the Depression and the monetarists and such and see if, in hindsight & post-Mises, I reckon anyone from Keynes onward actually had anything useful to contribute. There's probably something or other useful that I'm forgetting, but somehow I doubt I'll reckon that Mises missed very much.
And to be honest, I'm not entirely sure how much knowledge of the subject has really improved since. Surely as far as micro is concerned there is little that Mises has left out (probably the most interesting, developed after Mises published this work, would be game-theoretic explanations for the emergence of monetary standards via coordination games). From a macro standpoint -- I'm afraid I can't really say. I feel as if almost all of 20th century macro can be dispensed outright; I'll have to review what I think I know about the Depression and the monetarists and such and see if, in hindsight & post-Mises, I reckon anyone from Keynes onward actually had anything useful to contribute. There's probably something or other useful that I'm forgetting, but somehow I doubt I'll reckon that Mises missed very much.
May 20, 2021
The first two-thirds of this book is legitimately interesting with Ludwig Von Mises thoughts on the price of gold’s effect on the creditor-debtor relationship and how the government turning to the printer in order to pay national debts gives banks that offer access to credit a heads up to increase interest on extending credit. This and how the banks work more together cooperatively opposed to be in strict competition with each other as banks rely on other banks not to fail to not lose consumer trust in their monetary deposits. Several goods points in here and I like most of what Mises was saying about inflation and inflationary policies. I don’t agree that going back to the gold standard is a worthy idea but I feel like I left this text with a better understanding of Golds importance as a store of value.
The last third of the book though is just Mises trying to push “individual freedoms” of laisez-faire capitalism and thinks muttering this line is enough to sink the idea of central planning and socialist economics. Saying multiple times how deep critical analysis is required but continues to give a dogmatic defense of the invisible hand of the market and the gold standard as means to stop “totalitarian” government practices.
The last third of the book though is just Mises trying to push “individual freedoms” of laisez-faire capitalism and thinks muttering this line is enough to sink the idea of central planning and socialist economics. Saying multiple times how deep critical analysis is required but continues to give a dogmatic defense of the invisible hand of the market and the gold standard as means to stop “totalitarian” government practices.
July 3, 2021
This is a 100 years old book about economics. How the hell could it be relevant now? Well, it contains a lot of economical bombshells and "basic principles" of economics, that i could not believed nobody told me about before (and probably everyone that has to deal with money should be aware).
A lot about basics of "value", functions of money, inflation, gold, commodities and trade.
Having said that, it also contains some very funny parts (or maybe things that should be extremely worrying).
"Concerned about interest rates bellow 5%": Weeeelll, we went a little bit negative with that one :P
"Concerned about money with 'no intrinsic value'': lets compute some hash functions and call it money!
"Concerned about banking notes with nominal values in milions?": Venezuela approves!
Headsup: This is not an easy read. I tried for multiple months and failed horribly. This is even harder to listen as an audiobook. Some of the arguments are pretty long and pretty complicated to keep track of which side is beeing argued for (and i failed at this multiple times). However, it is surprisingly accessible. It is like walking 1000km. It may look a bit intimidating, but you probably have everything you need for it, it will just take a while.
A lot about basics of "value", functions of money, inflation, gold, commodities and trade.
Having said that, it also contains some very funny parts (or maybe things that should be extremely worrying).
"Concerned about interest rates bellow 5%": Weeeelll, we went a little bit negative with that one :P
"Concerned about money with 'no intrinsic value'': lets compute some hash functions and call it money!
"Concerned about banking notes with nominal values in milions?": Venezuela approves!
Headsup: This is not an easy read. I tried for multiple months and failed horribly. This is even harder to listen as an audiobook. Some of the arguments are pretty long and pretty complicated to keep track of which side is beeing argued for (and i failed at this multiple times). However, it is surprisingly accessible. It is like walking 1000km. It may look a bit intimidating, but you probably have everything you need for it, it will just take a while.
June 15, 2019
Awesome read. Very comprehensive. I will be reading this one again. It is difficult to review this book. The original content and the addendum that Mises made later are well worth the read. Both the original content and the addendum, Part Four, are within this binding and edition. I recommend that anyone who cares about Economics, whether you are of the Austrian School persuasion or not, read this book.
November 1, 2020
Although a little dated, the majority of Ludwig Von Mises' arguments regarding government intervention being the primary cause of uncontrollable inflation without a gold standard to stabilise currency still hold water even today... and it wouldn't be a book by Von Mises unless he continued in his criticisms towards socialist and Keynesian monetary theory.
Definitely something to read slowly, but still an excellent and insightful read.
Definitely something to read slowly, but still an excellent and insightful read.
June 24, 2022
There's a lot of stuff in this book. That's the problem with this book. There are plenty of theories, facts and differing ideas but their all over the place. Thiz is more of a text book then a book many may want to read. The main idea ends up being stick to gold. That sounds great but keep in mind this book was written in the middle of the last century. The few ideas that connect to current times are spread out so be prepared for lots of information but put in a boring presentation.
December 14, 2022
This really gets good about half way through and it really gets interesting after about chapter 29 when he talks about inflation. But really, this was a longggg book and it was work to get through.
If you want Austrian Economics (economics) then read Thomas Sowell. If nothing else this has just really solidified my admiration and appreciation of Sowell's ability to communicate economic ideas.
If you want Austrian Economics (economics) then read Thomas Sowell. If nothing else this has just really solidified my admiration and appreciation of Sowell's ability to communicate economic ideas.
October 14, 2020
Good read if you want to understand what money was until 1500-1600, useless if you want to actually understand money after that. LvM insists on bringing forward his own personal opinions regardless of 400+ years of historical evidence falsifying them. Much more annoying than this fact, of course, are the ones who, more than a hundred years later, point to this book saying it was right: surreal.
January 30, 2023
The best book on money ever written in history. Mises saw the future and accurately predicted and warned us of the consequences. I wish the whole world would read this book, but unfortunately it is very dense.
November 30, 2018
Amazing concepts, more about currency than economy. Very hard to read, doesn't flow well, but the single line quotes are among the best you'll find in any novel.
Read
December 30, 2019Stopped at page 60, not engaging
January 2, 2022
Good book with clear argumentation, but does not seem very relevant for our age of fiat currency.
February 24, 2022
A tough read, but well worth it. Much more accessible than Human Action. A good primer on Austrian economics, and an alternative viewpoint from the conventional Keynesian economic thought.
October 22, 2023
Certainly not my favorite work from the notoriously overrated Mises. But still a good and light read for beginners to the Austrian School.
September 3, 2019
This was reading number two. Product warning - I am not a believer in the Austrian School (non-interventionism in the a world of periodic, weak aggregate demand, long-term unemployment and growing inequality makes no sense to me on a human level, nor as an economist). As we all know, it is challenging to read what one disputes. This is especially true with faced with turgid and convulated prose. Slow and painful progress. In this book, the theory of money is not realistic, even if giving allowance for time of the study's publication. In the contemporary world, the view of a money as simple transactional commodity, as opposed to the true roles money and monetary policy must play, seems the stuff of a goecentric view of the heavens. On a laughable, but still scary note, I seem to remember a recent Republican VP candidate saying she carried this book with her to the beach......
August 2, 2014
Interesting Quotes:
"Arguments from authority are invalid; the proof of a theory is in its reasoning, not in its sponsorship."
-Ludwig von Mises, the Theory of Money and Credit
"The increase in the quantity of money does not mean an increase of income for all individuals. On the contrary, those sections of the community that are the last to be reached by the additional quantity of money have their incomes reduced, as a consequence of the decrease in the value of money called forth by the increase in its quantity."
-Ludwig von Mises, the Theory of Money and Credit
"There cannot be stable money within an environment dominated by ideologies hostile to the preservation of economic freedom...The ruling parties will certainly not consent to reforms that would deprive them of their most formidable weapon, inflation. Monetary reconstruction presupposes...an unconditional rejection of those allegedly progressive policies...designated by the slogans New Deal and Fair Deal."
-Ludwig von Mises, the Theory of Money and Credit
"Arguments from authority are invalid; the proof of a theory is in its reasoning, not in its sponsorship."
-Ludwig von Mises, the Theory of Money and Credit
"The increase in the quantity of money does not mean an increase of income for all individuals. On the contrary, those sections of the community that are the last to be reached by the additional quantity of money have their incomes reduced, as a consequence of the decrease in the value of money called forth by the increase in its quantity."
-Ludwig von Mises, the Theory of Money and Credit
"There cannot be stable money within an environment dominated by ideologies hostile to the preservation of economic freedom...The ruling parties will certainly not consent to reforms that would deprive them of their most formidable weapon, inflation. Monetary reconstruction presupposes...an unconditional rejection of those allegedly progressive policies...designated by the slogans New Deal and Fair Deal."
-Ludwig von Mises, the Theory of Money and Credit
February 5, 2016
Es otra de las obras de economistas austríacos que describen la realidad actual, a pesar de que tiene más de 100 años de haber sido publicado, en este se explica con detalle el ciclo económico y cómo debido a la manipulación centralizada del dinero pueden causar crisis económicas, es decir, las deliberadas y arbitrarias medidas de los banco centrales crean señales erróneas en el mercado sobre el comportamiento del dinero creando la típicas burbujas que conocemos actualmente.
Me sorprende que esta clase de obras hayan existido incluso antes del famoso crash del 29 el cual fue causado por las medidas que aquí se describen, es una lástima que el parche de aquella crisis haya creado el keynesianismo que ha mantenido una fuerte influencia estatal en la sociedad hasta nuestro días, no siendo la cura para el verdadero problema que es el estatismo.
Me sorprende que esta clase de obras hayan existido incluso antes del famoso crash del 29 el cual fue causado por las medidas que aquí se describen, es una lástima que el parche de aquella crisis haya creado el keynesianismo que ha mantenido una fuerte influencia estatal en la sociedad hasta nuestro días, no siendo la cura para el verdadero problema que es el estatismo.
January 23, 2010
Alright this book took me sometime to digest. It wasn't that Mises wasn't clear enough, I just lacked the education to comprehend his theories in total. I would say the Theory of Moeny and Credit is for those who have already grasped the basics of the Austrian school and want to push a little deeper. A great book but know that you are taking on a giant here with giant ideas. Start with Hazlitt in Economics in One Lesson first.
August 9, 2010
I've read many books that could be described as dry or dense and they all seem to deal with the field of economics. I didn't find much to really disagree with but I also didn't find a whole lot that really stuck with me, either. I found myself skimming over large sections of review of 19th century economics/economic theory or sections that just repeated what the author had said already or sections that stated the obvious. Not worth the time in my opinion.
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