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

Bank Credit Expansion and Its Effects on the Economic System 287From a legal standpoint, exchanges of present goods forfuture goods can take many forms. For instance, in a cooperativethe workers themselves simultaneously act as capitalists,waiting until the end of the entire production process toacquire the ownership of the final good and its full value.Nevertheless in most cases workers are not willing to waituntil the production process ends nor to take on the risks anduncertainties it entails. Thus instead of forming cooperatives,they prefer to sell the services of their productive effort inexchange for immediate present goods. They agree on a laborcontract (an employment contract for another’s account)according to which the person who advances them the presentgoods (the capitalist, saver or supplier of present goods)receives the full ownership of the final good once it has beenproduced. Combinations of these two different types of contractare also possible. This is not the proper place to analyzethe different legal forms which the exchange of present goodsfor future goods takes in a modern society. Furthermore theseforms do not affect the fundamental argument we advance inthis book, though they are undoubtedly of great interest froma theoretical and practical standpoint.It is worth noting that the “loan market,” in which onemay obtain a loan by agreeing to pay the corresponding interestrate, constitutes a relatively small part of the generalmarket, in which present goods are exchanged for futuregoods and which encompasses the entire productive structureof society. Here owners of the original means of production(labor and natural resources) and capital goods act as demandersof present goods, and savers act as suppliers of them.Therefore the short-, medium-, and long-term loan market issimply a subset of that much broader market in which presentgoods are exchanged for future goods and with respect towhich it plays a mere secondary and dependent role, despitethe fact that the loan market is the most visible and obvious tothe general public. 22 In fact it is entirely possible to conceive22 What we colloquially refer to as the “money market” is actually just ashort-term loan market. The true money market encompasses the entire