Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

Historical Violations of the Legal PrinciplesGoverning the Monetary Irregular-Deposit Contract 45their fraudulent activity is very significant. Also, we maydeduce from Isocrates’s speech that for Passio this was not anisolated case of fraud, an attempt to appropriate the money ofa client under favorable circumstances, but that he had difficultyreturning the money because he had not maintained a100-percent reserve ratio and had used the deposited money inprivate business deals, and he was left with no other “escape”than to publicly deny the initial existence of the deposit.Isocrates continues his speech with more words from hisclient, who states:Since I thought he regretted the incident, I compromisedand told him to find a way to return my money while savingface himself. Three days later we met and both promisedto keep what had happened a secret; (he broke his promise,as you will find later in my speech). He agreed to sail withme to Pontus and to return the gold to me there, in order tocancel the contract as far from this city as possible; that way,no one from here would find out the details of the cancellation,and upon sailing back, he could say whatever he chose.Nevertheless, Passio denies this agreement, causes the disappearanceof the slaves who had been witnesses to it andforges and steals the documents necessary to try to demonstratethat the client had a debt with him instead of a deposit.Given the secrecy in which bankers performed most of theiractivities, and the secret nature of most deposits, 9 witnesseswere not used, and Isocrates was forced to present indirectwitnesses who knew the depositor had taken a large amountof money and had used Passio’s bank. In addition, the witnessesknew that at the time the deposit was made the depositorhad changed more than one thousand staters into gold.9 The Greeks distinguished between monetary demand deposits (phaneràousía) and invisible deposits (aphanés ousía). The distinction, rather thandenote whether or not the money was continually available to the depositor(in both cases it should have been), appears to have referred towhether or not the deposit and its amount were publicly known. If theywere, the money could be seized or confiscated, mostly for tax reasons.