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

170 Money, Bank Credit, and Economic Cyclescarry through the necessary reforms, the theoretical analysisof institutional coercion and the granting of privileges in thelabor field is clearly less complex. As a result, the awareness itarouses has spread faster and penetrated deeper at all levels ofsociety. Related theories have been significantly developedand broad social consensus has even been reached regardingthe need for reforms and the direction they should take. Incontrast, the sphere of money, bank credit and financial marketsremains a formidable challenge to theorists and a mystery to mostcitizens. Social relationships in which money is directly orindirectly involved are by far the most abstract and difficult tounderstand, and as a result the related knowledge is the mostvast, complex, and elusive. For this reason, systematic coercionin this area by governments and central banks is by farthe most harmful and pernicious. 1 Furthermore, the insufficientformulation of monetary and banking theory adverselyaffects the development of the world economy. This is evidencedby the fact that, despite theoretical advances and governmentefforts, modern economies have yet to be freed ofrecurring booms and recessions. Only a few years ago, despiteall the sacrifices made to stabilize western economies followingthe crisis of the 1970s, the financial, banking and monetaryfield was invariably again plagued by the same reckless errors.As a result, the beginning of the 1990s marked the inevitableappearance of a new worldwide economic recession of considerableseverity, and the western economic world has only1 The operation of the money and credit structure has, . . . withlanguage and morals, been one of the spontaneous ordersmost resistant to efforts at adequate theoretical explanation,and it remains the object of serious disagreement among specialists.. . . [S]elective processes are interfered with here morethan anywhere else: selection by evolution is prevented bygovernment monopolies that make competitive experimentationimpossible. . . . The history of government managementof money has . . . been one of incessant fraud and deception.In this respect, governments have proved far more immoralthan any private agency supplying distinct kinds of money incompetition possibly could have been. (Hayek, The Fatal Conceit,pp. 102–04). See also chapter 3, p. 152.