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

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9A PROPOSAL FOR BANKINGREFORM: THE THEORY OFA 100-PERCENT RESERVEREQUIREMENTIn this last chapter, following a brief review of twentiethcenturyproposals for the establishment of a 100-percentreserve requirement in banking, we will present our recommendationfor reforming the banking system, a proposalbased on free-banking practices subject to the traditional legalprinciples which govern the monetary bank-deposit contract(a 100-percent reserve requirement). We will then compare theadvantages of the proposed system with those of other possiblesystems, specifically the current banking and financial systemand a fractional-reserve free-banking system. At thatpoint we will review and answer the different objections madeto proposals for a 100-percent reserve requirement. Then, afterpresenting a program of transitional stages which makes itfeasible to move from the current banking and financial systemto the model proposed, we will finish the chapter with aseries of comments on the possible application of our recommendationsto the specific cases of the European MonetaryUnion and the monetary and financial reconstruction underway in countries of the former Eastern bloc. The book endswith a summary of the most significant conclusions reached.715
716 Money, Bank Credit, and Economic Cycles1A HISTORY OF MODERN THEORIES IN SUPPORT OFA 100-PERCENT RESERVE REQUIREMENTWe know that distrust of fractional-reserve banking datesback at least as far as the Salamancan theorists of the sixteenthand seventeenth centuries, David Hume in the eighteenth century,theorists of the school of Jefferson and Jackson in thedecades following the founding of the United States, and theimportant group of theorists from nineteenth-century continentalEurope (Modeste and Cernuschi in France; Michaelis,Hübner, Geyer, and Tellkampf in Germany). Moreover, certainhighly distinguished economists of the twentieth century,such as Ludwig von Mises and at least four recipients of theNobel Prize for Economics (Friedrich A. Hayek, Milton Friedman,James Tobin, and Maurice Allais) have at some pointdefended the establishment of a 100-percent reserve requirementon demand deposits placed at banks.THE PROPOSAL OF LUDWIG VON MISESLudwig von Mises was the first twentieth-century economistto propose the establishment of a banking system with a100-percent reserve requirement on demand deposits. Misesmade his recommendation in the first edition of his book, TheTheory of Money and Credit, published in 1912. At the end ofthis first edition, in a section literally reproduced in the second,which was printed in 1924, Mises draws the followingconclusion:Fiduciary media are scarcely different in nature frommoney; a supply of them affects the market in the same wayas a supply of money proper; variations in their quantityinfluence the objective exchange value of money in just thesame way as do variations in the quantity of money proper.Hence, they should logically be subjected to the same principlesthat have been established with regard to moneyproper; the same attempts should be made in their case aswell to eliminate as far as possible human influence on theexchange ratio between money and other economic goods.
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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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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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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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