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

482 Money, Bank Credit, and Economic Cyclesout cash), and to the lack of cash to pay workerson Saturdays. 87Therefore credit expansion and the boom were followedby a depression, due to which trade shrankrapidly and bankruptcies were frequent. At that pointthe Florentine economy fell into a long process ofdecline.(c) In chapter 2 we also mentioned other credit expansionprocesses which inevitably gave rise to subsequenteconomic crises. For example we covered the case ofthe Medici Bank, which expanded credit and eventuallyfailed in 1492. In addition we studied, followingRamón Carande, the processes of expansion and bankfailure which affected all of Charles V’s bankers in theSeville square. Likewise we reflected on the majordepression which stemmed from John Law’s speculativeand financial expansion in France at the beginningof the eighteenth century, expansion which severalauthors, including Hayek himself, have analyzedin detail. 88BUSINESS CYCLES FROM THE INDUSTRIAL REVOLUTION ONWARDWith the Napoleonic Wars, the start of the Industrial Revolutionand the spread of the fractional-reserve banking system,business cycles began to reappear with great regularity andacquired the most significant typical features identified by thetheory we have presented in this book. We will now brieflytouch on the dates and features of the most substantial cyclessince the beginning of the nineteenth century.1. The Panic of 1819. This particularly affected the UnitedStates and has been studied chiefly by Murray N. Rothbard in87 Ibid., p. 111.88 See Hayek’s article, “First Paper Money in Eighteenth CenturyFrance,” printed as chapter 10 of the book, The Collected Works of F.A.Hayek, vol. 3: The Trend of Economic Thinking, pp. 155–76. See alsoKindleberger, A Financial History of Western Europe, pp. 98ff.