By Murray N. Rothbard
The secret of Banking is a smart professional research of the trendy fractional-reserve banking procedure and its origins-how it truly is risky, the way it exacerbates enterprise cycles, and the way it explanations inflation. This ebook lays out the devastating results of this most typical type of banking at the lives of each guy, girl, and child.
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Extra info for The Mystery of Banking
Sample text
Confidence in the Money An intangible, but highly important determinant of the demand for money, is the basic confidence that the public or market has in the money itself. Thus, an attempt by the Mongols to introduce paper money in Persia in the twelfth and thirteenth centuries flopped, because no one would accept it. The public had no confidence in the paper money, despite the awesomely coercive decrees that always marked Mongol rule. Hence, the public’s demand for the money was zero. It takes many years—in China it took two to three centuries—for the public to gain enough confidence in the money, so that its demand for the money will rise from near zero to a degree great enough to circulate throughout the kingdom.
First, it means that no one—whether government official or economist—need concern himself with the money supply or worry about its optimal amount. Like [p. 47] shoes, butter, or hi-fi sets, the supply of money can readily be left to the marketplace. There is no need to have the government as an allegedly benevolent Uncle, standing ready to pump in more money for allegedly beneficial economic purposes. The market is perfectly able to decide on its own money supply. But isn’t it necessary, one might ask, to make sure that more money is supplied in order to “keep up” with population growth?
The crucial question is how the government and its monetary authorities are going to react to the new situation. When prices are going up faster than the money supply, the people begin to experience a severe shortage of money, for they now face a shortage of cash balances relative to the much higher price levels. Total cash balances are no longer sufficient to carry transactions at the higher price. The people will then clamor for the government to issue more money to catch up to the higher [p.
The Mystery of Banking by Murray N. Rothbard
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