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

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Historical Violations of the Legal PrinciplesGoverning the Monetary Irregular-Deposit Contract 93Also, at the end of chapter 4 of Suma de tratos y contratos,Tomás de Mercado states that the bankers of Seville holddeposits of money and precious metals belonging to merchantswho traded with the New World, and that with such considerabledeposits they “make great investments,” obtaininghefty profits. Here he does not openly condemn these practices,but we must remember that the passage in question is,again, more a description of a state of affairs than a judgmenton its legitimacy. However, he does consider the issue of legitimacyin greater depth in chapter 14, which we have alreadycovered. Tomás de Mercado concludes as well that bankersare also involved in exchanging and charging; bankers inthis republic engage in an extremely wide range of activities,wider than the ocean, but sometimes they spread themselvestoo thin and all is lost. 95The scholastics most misguided in their doctrinal treatmentof the monetary irregular-deposit contract are Domingode Soto and (especially) Luis de Molina and Juan de Lugo.Indeed, these theorists allowed themselves to be influencedBecause the public banks in the markets of Medina delCampo, Rioseco and Villalón, and in the cities, towns and villagesof these kingdoms . . . [have engaged in business otherthan their specific task concerning money], they have as aresult suspended payments and failed; [in order to] avoid theabove-mentioned events, we decree that, from now on, theyconfine themselves to their specific duty, and that not just oneperson but at least two be required to establish these publicbanks . . . and that before they . . . [can practice their profession],they must provide sufficient guarantees. (italics added)Note that “public banks” refers here not to government banks but to privatebanks which may receive deposits from the public under certainconditions (at least two owners, sufficient guarantees, etc.). See JoséAntonio Rubio Sacristán, “La fundación del Banco de Amsterdam (1609)y la banca de Sevilla,” Moneda y crédito (March 1948).95 This is the quotation of Mercado which Ramón Carande includes invol. 1 of Carlos V y sus banqueros, in the introduction to his treatment ofbankers in Seville and the crisis that led them all to fail. See Mercado,Suma de tratos y contratos, vol. 2, pp. 381–82 of the 1977 edition of theInstituto de Estudios Fiscales and p. 321 of the Sierra Bravo edition.
94 Money, Bank Credit, and Economic Cyclesby the medieval tradition of the glossators, which we coveredin section 3 of this chapter, and especially by the doctrinal confusionresulting from the depositum confessatum. De Soto andespecially Molina view the irregular deposit as a loan in whichboth the ownership and full availability of the tantundem aretransferred to the banker. Therefore, they believe the practiceof loaning deposited funds to third parties is legitimate, aslong as bankers act in a “prudent” manner. Domingo de Sotocould be considered the first to maintain this thesis, though hedid so very indirectly. In fact, in book 6, topic 11 of his work,La justicia y el derecho (On justice and law) (1556), we read thatbankers have thecustom, it is said, of being liable for a greater amount ofmoney than that deposited if a merchant makes his depositin cash. I gave the moneychanger ten thousand; so he will beliable to me for twelve, perhaps fifteen; because having cashis very profitable for the moneychanger. Neither is any evilseen in it. 96Another typical example of credit creation whichDomingo de Soto appears to accept is a loan in the form of thediscount of bills, financed using clients’ deposits.Nevertheless, the Jesuit Luis de Molina is the scholar whohas most clearly maintained an erroneous doctrine on thebank contract of monetary irregular deposit. 97 Indeed, in96 Habet autem praeterea istorum usus, ut fertur si mercatorumquispiam in cambio numeratam pecuniam deponat, campsorpro maio ri illius gratia respondeat. Numeravi campsori decemilia: fide habebo apud ipsum & creditu pro duodecim, & forfampro quim decim: qui capsori habere numerata pecuniambonum est lucrum. Neq, vero quicq vitij in hoc foedereapparet. (Domingo de Soto, De iustitia et iure [Salamanca:Andreas Portonarijs, 1556], book 6, topic 11, the only article,p. 591. Instituto de Estudios Políticos edition [Madrid, 1968],vol. 3, p. 591)Sierra Bravo (El pensamiento social y económico de la Escolástica, p. 215) isof the opinion that these words by Domingo de Soto imply his acceptanceof fractional-reserve banking.97 It is very significant that various authors, including Marjorie Grice-Hutchinson, hesitate to place Luis de Molina among the theorists of the
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MONEY,BANK CREDIT,ANDECONOMIC CYCLE
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CONTENTSPREFACE TO THE THIRD ENGLIS
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xiiMoney, Bank Credit, and Economic
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xivMoney, Bank Credit, and Economic
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xviMoney, Bank Credit, and Economic
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xviiiMoney, Bank Credit, and Econom
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PREFACE TO THESECOND ENGLISH EDITIO
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Preface to the Second English Editi
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PREFACE TOTHE THIRDSPANISH EDITIONI
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Preface to the Third Spanish Editio
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xliiMoney, Bank Credit, and Economi
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INTRODUCTIONThe economic analysis o
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Introductionxlviiand foreign exchan
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IntroductionxlixThis book comprises
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Introductionrecurrent phenomenon. I
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Introductionand Professors Hans-Her
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4THE CREDITEXPANSION PROCESSThis ch
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6ADDITIONALCONSIDERATIONSON THE THE
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7A CRITIQUE OFMONETARIST ANDKEYNESI
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A Critique of Monetarist and Keynes
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8CENTRAL AND FREEBANKING THEORYThis
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9A PROPOSAL FOR BANKINGREFORM: THE
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BIBLIOGRAPHYAbrams, M.A., Money in
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Bibliography 815Bajo Fernández, M.
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Bibliography 817Borch, K.H., Econom
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Bibliography 819Coronel de Palma, L
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Bibliography 821N. Durlauf and Lawr
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Bibliography 823Galiani, F., Della
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Bibliography 825Graham, F.D., “Pa
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Bibliography 827——, Prices and
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Bibliography 829translation by N. K
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Bibliography 831——, “Keynes
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Bibliography 833Russian edition by
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Bibliography 835Keeler, J., “Empi
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Bibliography 837——, “On Crisi
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Bibliography 839——, “Professo
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Bibliography 841Miller, H.E., Banki
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Bibliography 843Neira, Alonzo, M.A.
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Bibliography 845Raguet, C., “Repo
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Bibliography 847——, “The Myth
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Bibliography 849——, “Banking
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Bibliography 851M.C. Marcuzzo (Chel
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Bibliography 853——, “A Critiq
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Bibliography 855Walker, A., The Sci
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INDEX OF SUBJECTSAccelerator princi
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Index of Subjects 859Banking reform
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Index of Subjects 861objection to t
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Index of Subjects 863Goal, concept
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Index of Subjects 865See also Fract
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Index of Subjects 867Plan, definiti
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Index of Subjects 869Tragedy of the
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