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

640 Money, Bank Credit, and Economic Cyclesbanknotes and deposits. 61 By this indirect route, they plannedan effective move toward the objective of a 100-percentreserve requirement (for both bills and deposits), an aim to bepursued by all legal means available in each historical context.This idea was first defended in France by Victor Modeste.62 With the same goal in mind, Henri Cernuschi, on October24, 1865, before a commission appointed to investigatebanking activities, stated:I believe that what is called freedom of banking wouldresult in a total suppression of banknotes in France. I wantto give everybody the right to issue banknotes so thatnobody should take any banknotes any longer. 6361 The future development of payment and clearing systems through theInternet and other forms of computer-based communications will makethe “emptying” of those banks which operate with a fractional reservealmost immediate upon the emergence of the slightest doubt concerningtheir solvency. In this respect the technological revolution in the field ofcomputer communications will tend to promote private banking with areserve requirement close to 100 percent (assuming the current systemwere to be completely privatized and the central bank were to disappear).See the paper by our pupil, Jesper N. Katz, “An Austrian Perspectiveon the History and Future of Money and Banking,” ErasmusProgramme in Law and Economics, Summer 1997. See also The Future ofMoney in the Information Age, James A. Dorn, ed. (Washington, D.C.: CatoInstitute, 1997). As for credit cards, or “plastic” or “electronic” money, asthey are commonly known, we should note that they are not money, butmere instruments which, like paper checks, provide the ability to pay bycharging to real money (or perfect money substitutes, such as bankdeposits).62 Victor Modeste, “Le billet des banques d’émission et la fausse monnaie,”Le Journal des Économistes n.s. 3 (August 15, 1866).63 Je crois que ce qu’on appelle liberté bancaire aurait pourrésultat la disparition complète des billets de banque enFrance. Je souhaite donner à tout le monde le droit d’émettredes billets, de sorte que plus personne désormais n’enaccepterait. (Henri Cernuschi, Contre le billet de banque [Paris:Guillaumin, 1866], p. 55)See also Cernuschi’s interesting work, Mécanique de l’échange (Paris: A.Lacroix, 1865). Ludwig von Mises fully accepts Modeste’s and Cernuschi’sviews as expressed above and includes the excerpt in Human