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

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Bank Credit Expansion and Its Effects on the Economic System 305unshaded area corresponding to the final stage, that of consumergoods, versus the shaded areas pertaining to the otherstages (including the net monetary income of the factors ofproduction, shown at the top). Hence it is an unquestionablefact that the amount of money spent on intermediate goods duringany time period is much larger by far than the amount spent duringthe same period on consumer goods and services. It is interesting tonote that even minds as brilliant as Adam Smith committedunfortunate errors when it came to recognizing this fundamentaleconomic fact. Indeed, according to Adam Smith,the value of the goods circulated between the different dealers,never can exceed the value of those circulated betweenthe dealers and the consumers; whatever is bought by thedealers, being ultimately destined to be sold to the consumers.35CRITICISM OF THE MEASURES USED IN NATIONALINCOME ACCOUNTINGThe sum of gross income, as we have defined and calculatedit, along with its distribution over the different stages inthe production process, is crucial for a correct understandingof the economic process which takes place in society. In fact thestructure of the stages of capital goods and their value in m.u.are not measures which, once obtained, can be automaticallyand indefinitely maintained regardless of human decisionsmade by entrepreneurs who must deliberately and continuallychoose whether to increase, hold steady or reduce the productivestages undertaken in the past. In other words, whether a35 Adam Smith, The Wealth of Nations, book 2, chap. 2, p. 390 of vol. 1 ofthe original 1776 edition cited earlier, p. 306 of the E. Cannan edition(New York: Modern Library, 1937 and 1965); and p. 322 of vol. 1 of theGlasgow edition, (Oxford: Oxford University Press, 1976). As Hayekpoints out (Prices and Production, p. 47), it is important to note that AdamSmith’s authority on this subject has misled many authors. For example,Thomas Tooke, in his book, An Inquiry into the Currency Principle (London1844, p. 71), and others have used Smith’s argument to justify theerroneous doctrines of the Banking School.
306 Money, Bank Credit, and Economic CyclesTABLE V-2GROSS OUTPUT AND NET INCOME FOR THE YEARGross Output for the Year100 m.u. of final consumption +270 m.u. of totalsupply of present goods(Gross Saving and Investment as shownin detail in Table V-1)Total Gross Output: 370 m.u.Net Income for the Yeara) Net Income Received Capitalists 1st stage: 100-90: = 10by Capitalists (the Capitalists 2nd stage: 80-72: = 8accounting profit or Capitalists 3rd stage: 60-54: = 6interest at each stage) Capitalists 4th stage: 40-36: = 4Capitalists 5th stage: 20-18: = 2Total accounting profits(interest), or net incomereceived by capitalists atall stages:____30 m.u.b) Net income Received From stage 1: 10by Owners of the From stage 2: 12Original Means of From stage 3: 14Production From stage 4: 16From stage 5: 18Total net income receivedby owners of the originalmeans of production:Total Net Income = Total Consumption____70 m.u.____100 m.u.CONCLUSION: The Gross Output for the Year is equal to 3.7 timesthe Net Income.
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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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4THE CREDITEXPANSION PROCESSThis ch
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The Credit Expansion Process 169dif
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The Credit Expansion Process 201d 1
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The Credit Expansion Process 209Thi
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The Credit Expansion Process 217Wit
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The Credit Expansion Process 221(39
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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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A Proposal for Banking Reform:The T
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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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