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

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The Legal Nature of the Monetary Irregular-Deposit Contract 3fungible good. By this contract, a certain quantity of monetaryunits are handed over today from one person to another andthe ownership and availability of the money are transferredfrom the one granting the loan to the one receiving it. The personwho receives the loan is authorized to use the money as hisown, while promising to return, at the end of a set term, thesame number of monetary units lent. The mutuum contract,since it constitutes a loan of fungible goods, entails an exchangeof “present” goods for “future” goods. Hence, unlike the commodatumcontract, in the case of the mutuum contract the establishmentof an interest agreement is normal, since, by virtue ofthe time preference (according to which, under equal circumstances,present goods are always preferable to future goods),human beings are only willing to relinquish a set quantity ofunits of a fungible good in exchange for a greater number ofunits of a fungible good in the future (at the end of the term).Thus, the difference between the number of units initially deliveredand the number received from the borrower at the end ofthe term is, precisely, the interest. To sum up, in the case of themutuum contract, the lender assumes the obligation to handover the predetermined units to the borrower or mutuary. Theborrower or mutuary who receives the loan assumes the obligationto return the same number of units of the same sort andquality as those received (tantundem) at the end of the term setfor the contract. Plus, he is obliged to pay interest, as long as anagreement has been made to that effect, as is usually the case.The essential obligation involved in a mutuum contract, or loanof a fungible good, is to return at the end of the specified termthe same number of units of the same type and quality as thosereceived, even if the good undergoes a change in price. Thismeans that since the borrower only has to return the tantundemonce the predetermined time period has ended, he receives thebenefit of temporary ownership of the thing and therefore enjoysits complete availability. In addition, a fixed term is an essentialelement in the loan or mutuum contract, since it establishes thetime period during which the availability and ownership of thegood corresponds to the borrower, as well as the moment atwhich he is obliged to return the tantundem. Without the explicit
4 Money, Bank Credit, and Economic Cyclesor implicit establishment of a fixed term, the mutuum contract orloan cannot exist.THE DEPOSIT CONTRACTWhereas loan contracts (commodatum and mutuum)entail the transfer of the availability of the good, which shiftsfrom the lender to the borrower for the duration of the term,another type of contract, the deposit contract, requires that theavailability of the good not be transferred. Indeed, the contract ofdeposit (depositum in Latin) is a contract made in good faith bywhich one person—the depositor—entrusts to another—thedepositary—a movable good for that person to guard, protect,and return at any moment the depositor should ask for it.Consequently, the deposit is always carried out in the interestof the depositor. Its fundamental purpose is the custody or safekeepingof the good and it implies, for the duration of the contract,that the complete availability of the good remain infavor of the depositor, who may request its return at anymoment. The obligation of the depositor, apart from deliveringthe good, is to compensate the depositary for the costs of thedeposit (if such compensation has been agreed upon; if not,the deposit is free of charge). The obligation of the depositaryis to guard and protect the good with the extreme diligencetypical of a good parent, and to return it immediately to thedepositor as soon as he asks for it. It is clear that, while eachloan has a term of duration during which the availability ofthe good is transferred, in the case of a deposit this is not so.Rather a deposit is always held and available to the depositor,and it terminates as soon as he demands the return of the goodfrom the depositary.THE DEPOSIT OF FUNGIBLE GOODSOR “IRREGULAR” DEPOSIT CONTRACTMany times in life we wish to deposit not specific things(such as a painting, a piece of jewelry, or a sealed chest full ofcoins), but fungible goods (like barrels of oil, cubic meters ofgas, bushels of wheat, or thousands of dollars). The deposit offungible goods is definitely also a deposit, inasmuch as its
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MONEY,BANK CREDIT,ANDECONOMIC CYCLE
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CONTENTSPREFACE TO THE THIRD ENGLIS
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4THE CREDITEXPANSION PROCESSThis ch
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6ADDITIONALCONSIDERATIONSON THE THE
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7A CRITIQUE OFMONETARIST ANDKEYNESI
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8CENTRAL AND FREEBANKING THEORYThis
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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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