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5
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Before Mises, the most distinguished author who defended the one hundred percent reserve requirement was David Hume in his essay “Of Money” (1752), where he states that “no bank could be more advantageous, than such a one as locked up all the money it received, and never augmented the circulating coin, as is usual, by returning part of its treasure into commerce.” David Hume, Essays: Moral Political and Literary (Indianapolis, Ind.: Liberty Classics, 1985), pp. 284–85.
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6
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On juridical considerations of the traditional legal principle in question, see not only all Title 3, Book 16 of the Digest, especially sections 7 and 8 on the bankcuptcy of bankers (El Digesto de Justiniano 1 [1968]: 606–17, esp. 112, [Spanish edition published by Aranzadi, Pamplona], but also the fine argument by the Spanish Jesuit Luis de Molina, for whom the banker with a fractional reserve “sins by endangering his own capacity to meet his debts, even if in the long run he suffers no legal difficulties because his speculations with the clients' funds turned out well quoted from De Iustitia et Iure, Maguntiae [1614], in Alejandro Chafuen, Christians for Freedom: Late Scholastic Economics [San Francisco: Ignatius Press, 1986], p. 146 n. 1–7). See also the refined conclusions of Pasquale Coppa-Zuccari included in his definitive work Il Deposito Irregolare (Modena 1901), quoted by, among others, Joaquín Garrigues in his Contratos Bancarios, 2nd ed. (Madrid, 1975), p. 365. All these considerations are also applicable to so-called financial operations with repurchase agreements at any moment and at face value (and not at a fluctuating secondary market price), since they disguise, by fraudulently using the law for a purpose for which it was not intended, what are really deposit contracts.
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7
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84934528326
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Ibid., pp. 367–68.
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10
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84934528328
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David Hume, “On Money,” p. 284.
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11
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“The Bank of Amsterdam professes to lend out no part of what is deposited with it, but for every gilder which it gives credit in its books, to keep in its repositories the value of a gilder, either in money or bullion” (Adam Smith, The Wealth of Nations [London: W. Strahan and T. Caddell in the Strand, 1776], vol. 2, bk. 4, chap. 3, p. 72).
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13
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A brief explanation of the Austrian theory of economic cycles, together with the most significant bibliography on the topic, may be found in my article “The Austrian Theory of Economic Cycles,” originally published in Moneda y Crédito, no. 152 (Madrid, March 1980), and republished in volume 1 of my Lecturas de Economía Poliítica (Madrid: Unión Editorial, 1986), pp. 241–56.
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14
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See her article “The Theory of Free Banking,” presented at the regional meeting of the Mont Pèlerin Society in Rio de Janeiro from September 1993, especially page 5.
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15
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Mises, Human Action, pp. 648–88.
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18
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Mises, The Theory of Money and Credit, p. 481.
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20
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F. A. Hayek, Denationalization of Money, pp. 119–20.
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23
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This tradition was initiated by an anonymous 26-page pamphlet on “Banking and Currency Reform,” circulated in 1933 by Henry C. Simons, Aaron Director, Frank H. Knight, Henry Schultz, Paul H. Douglas, A. G. Hart and others and subsequently articulated by Henry C. Simons, “Rules versus Authorities in Monetary Policy,”Journal of Political Economy XLIV, no. 1 (February 1936): 1–30; Albert G. Hart “The ‘Chicago Plan’ of Banking Reform,”Review of Economic Studies 2 (1935): 104–16; and Irving Fisher 100 Percent Money (New York: Aldelphi, 1936) culminating in 1959 with the publication of Milton Friedman's book A Program for Monetary Stability (New York: Fordham University Press, 1960).
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24
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Mises, Human Action, p. 443. In short, according to Mises, it is a question of replacing the current tangle of administrative banking legislation by clear and simple articles in the commercial and criminal codes.
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26
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Quoted by Mises in Human Action, p. 446.
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27
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Only in the sense of indirectly getting closer to the ideal should we understand Cernuschi's position, mentioned by Mises (in Human Action, p. 446), when in 1865, he said, “I believe that what is called freedom of banking would result in a total suppression of banknotes in France. I want to give everybody the right to issue banknotes so that nobody should take banknotes any longer.”
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28
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The practical problems posed by the transition from the current monetary and banking system to a system in which, at last, the creation of money and the banking business were completely separated from the State have been theoretically analyzed and solved by, among others, Murray N. Rothbard in his Mystery of Banking, pp. 249–69.
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