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

126 Money, Bank Credit, and Economic CyclesConsidering this type of ruling, it is not surprising thatRichard Cantillon fled from France to England, where financialpractices were much more lax, and as we have seen, court rulingsended up defending the same line of argument he used inhis defense. In continental Europe, in contrast, the Roman legaltradition still exerted great influence. Roman jurists had impeccablyformulated the nature of the monetary irregular deposit,basing it on the safekeeping obligation and the unlawfulness ofbanks’ appropriation of deposited funds. Hence Richard Cantillon’sfear is understandable. He fled continental Europe at atime when the Bank of Amsterdam was still operating with itsfull prestige and a 100-percent reserve ratio. 11 Also, the conceptof irregular deposit began to return to its classical legal roots(which outlawed fractional-reserve banking). It had alreadybecome clear that all banking systems which had been based ona fractional reserve had failed (i.e., the systematic failure ofEuropean banks of the late Middle Ages, of banks in Seville andItaly in the sixteenth and seventeenth centuries and the systemof Law in eighteenth-century France), and judges had regularlypronounced rulings against bankers’ appropriation of funds ondeposit (and as we know, such decisions have even been madewell into the twentieth century in France and Spain).We must emphasize that, at least with respect to the institutionthat concerns us (the irregular deposit), clearly the Anglo-Saxon common law system has less effectively guaranteed thedefense of property rights and the correct regulation of socialinteraction than the legal system of continental Europe. We donot mean that the continental system in its latest version,Kelsenian and positivist, is superior to the common law system,only that the latter has often been inferior to Roman law. By“Roman law” we refer to the evolutionary, customary systembased on the logical, exegetic, and doctrinal analysis of jurists ofthe Roman classical school. To put it another way, in the Anglo-Saxon common law system, past decisions are too binding,11 Incrediby, Cantillon does not mention in his Essai this then wellknownfact under the pretext that “he could not get the exact informationabout . . . cash kept in the vaults to pay all deposits” (p. 407). It mustbe assumed that the Essai was mainly written to facilitate Cantillon’sdefense in his lawsuits against his claimants.