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

194 Money, Bank Credit, and Economic CyclesAfter carrying out all of the operations, the bank’s balancesheet would appear as follows:(16) Bank ABalance Sheet(End of the year)AssetsLiabilitiesCash 215,000 Owner’s Equity(Profit for the year) 115,000Loans granted 900,000 Demand deposits 1,000,000Total Assets 1,115,000 Total Liabilities 1,115,000ACCOUNTING PRACTICES IN THE ENGLISH-SPEAKING WORLDEnglish banking practices reflect fewer reservations aboutplainly recording in the accounts the creation ex nihilo of fiduciarymedia. Indeed, as Hayek states, “English banking practicecredits the account of the customer with the amount borrowedbefore the latter is actually utilized.” 17In English-speaking countries, when a customer makes ademand deposit of 1,000,000 m.u. at a bank, the first accountentry made corresponds exactly to that made in the continentalsystem:Bank A(17) Debit Credit1,000,000 Cash Demand deposits 1,000,00017 Hayek, Monetary Theory and the Trade Cycle, p. 154. Hayek goes on tosay: “Granted this assumption, the process leading to an increase of circulatingmedia is comparatively easy to survey and therefore hardlyever disputed.”