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

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The Credit Expansion Process 181Bank A(8) Debit Credit30,000 Cash Income fromClient X in paymentfor services 30,00020,000 Operating expenses Cash 20,000paid by the bank inorder to offer itsservicesAt the end of the year, Bank A’s income statement and balancesheet would be as follows:(9) Bank AIncome Statement(During the year)ExpensesRevenuesOperating costs 20,000 Income from servicesrendered 30,000Net Income 10,000Total Debit 30,000 Total Credit 30,000Balance Sheet(End of the year)AssetsLiabilitiesCash 1,010,000 Owner’s equity(Profit for the year) 10,000Demand deposit 1,000,000Total Assets 1,010,000 Total Liabilities 1,010,000
182 Money, Bank Credit, and Economic CyclesAs we see, up to now there has been nothing unusual orsurprising about the economic events or accounting processesresulting from the monetary irregular-deposit contract. Thebank has made a small legitimate profit, derived from its roleas a renderer of services valued by its customer at 30,000 m.u.Moreover, there has been no change in the quantity of money,and after all of the transactions, the bank’s cash account hasonly increased by 10,000 m.u. This sum corresponds to thepure entrepreneurial profit derived by the bank from the differencebetween the price paid by the client for services (30,000m.u.) and the operating cost of providing them (20,000 m.u.).Finally, given that the depositor believes the money hedeposited in Bank A remains constantly available to him, a situationequal to or even better than his keeping the money inhis own pocket or at home, he need not demand any additionalcompensation, as in the case of the loan contract, whichis radically different. The loan contract required the lender torelinquish the availability of 1,000,000 m.u. of present goods(in other words, to lend) and to transfer the availability to theborrower in exchange for the corresponding interest and therepayment of the principal one year later. 64THE EFFECTS PRODUCED BYBANKERS’ USE OF DEMAND DEPOSITS:THE CASE OF AN INDIVIDUAL BANKNevertheless, as we saw in chapter 2, bankers were soontempted to violate the traditional rule of conduct requiring6 Mises, The Theory of Money and Credit offers this explanation:Therefore the claim obtained in exchange for the sum ofmoney is equally valuable to him whether he converts itsooner or later, or even not at all; and because of this it is possiblefor him, without damaging his economic interests, toacquire such claims in return for the surrender of money withoutdemanding compensation for any difference in value arisingfrom the difference in time between payment and repayment, such,of course, as does not in fact exist. (p. 301; italics added)
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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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2 Money, Bank Credit, and Economic
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100 Money, Bank Credit, and Economi
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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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Central and Free Banking Theory 603
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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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