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

604 Money, Bank Credit, and Economic CyclesIn the lands where there is a serious shortage of money, allother saleable items and even the labor of men are given forless money than where money is abundant; for example,experience shows that in France, where there is less moneythan in Spain, bread, wine, cloth and labor cost much less;and even when there was less money in Spain, saleableitems and the labor of men were given for much less thanafter the Indies were discovered and covered Spain withgold and silver. The reason is that money is worth more whenand where it is scarce, than when and where it is abundant. 4In comparison with the profound and detailed studieswhich have been conducted on the monetary theory of theSchool of Salamanca, up to this point very little effort has beenmade to analyze and evaluate the position of the scholastics onbanking. 5 Nevertheless the theorists of the School of Salamancacarried out a penetrating analysis of banking practices,and by and large, they were forerunners of the differenttheoretical positions which more than two centuries laterreappeared in the debate between members of the “BankingSchool” and those of the “Currency School.”As a matter of fact, in chapter 2 we mentioned the severecriticism of fractional-reserve banking voiced by Doctor Saraviade la Calle in the final chapters of his book, Instrucción demercaderes. In a similar vein, though not as strongly critical asSaravia de la Calle, Martín de Azpilcueta and Tomás de Mercadoundertake a rigorous analysis of banking which includes4 Azpilcueta, Comentario resolutorio de cambios, pp. 74–75; italics added.However Nicholas Copernicus preceded Martín de Azpilcueta byalmost thirty years, since he formulated a (more embryonic) version ofthe quantity theory of money in his book, De monetae cudendae ratio(1526). See Rothbard, Economic Thought Before Adam Smith, p. 165.5 See, for instance, the comments Francisco Gómez Camacho makes inhis introduction to Luis de Molina’s work, La teoría del justo precio(Madrid: Editora Nacional, 1981), pp. 33–34; the remarks Sierra Bravomakes in El pensamiento social y económico de la escolástica desde sus orígenesal comienzo del catolicismo social, vol. 1, pp. 214–37; the article byFrancisco Belda which we cover in detail on the following pages; andthe more recent article by Jesús Huerta de Soto, “New Light on the Prehistoryof the Theory of Banking and the School of Salamanca.”