FOREWORD by Gary North

You have in your hands a unique academic treatise on money and banking, a book which combines erudition, clarity of expression, economic theory, monetary theory, economic history, and an appropriate dose of conspiracy theory. Anyone who attempts to explain the mystery of banking—a deliberately contrived mystery in many ways—apart from all of these aspects has not done justice to the topic. But, then again, this is an area in which justice has always been regarded as a liability. The moral account of central banking has been overdrawn since 1694: “insufficient funds.”

I am happy to see The Mystery of Money back in print. I had negotiated with Dr. Rothbard in 1988 to re-publish it through my newsletter publishing company, but both of us got bogged down in other matters. I dithered. I am sure that the Mises Institute will do a much better job than I would have in getting the book into the hands of those who will be able to make good use of it.

I want you to know why I had intended to re-publish this book. It is the only money and banking textbook I have read which forthrightly identifies the process of central banking as both immoral and economically destructive. It identifies fractional reserve banking as a form of embezzlement. While Dr. Rothbard made the moral case against fractional reserve banking in his wonderful little book, What Has Government Done to Our Money? (1964), as far as I am aware, The Mystery of Banking was the first time that this moral insight was applied in a textbook on money and banking.

Perhaps it is unfair to the author to call this book a textbook. Textbooks are traditional expositions that have been carefully crafted to produce a near-paralytic boredom—”chloroform in print,” as Mark Twain once categorized a particular religious treatise.

Textbooks are written to sell to tens of thousands of students in college classes taught by professors of widely varying viewpoints.

Textbook manuscripts are screened by committees of conventional representatives of an academic guild. While a textbook may not be analogous to the traditional definition of a camel—a horse designed by a committee—it almost always resembles a taxidermist’s version of a horse: lifeless and stuffed. The academically captive readers of a textbook, like the taxidermist’s horse, can be easily identified through their glassy-eyed stare. Above all, a textbook must appear to be morally neutral. So, The Mystery of Banking is not really a textbook. It is a monograph.

Those of us who have ever had to sit through a conventional college class on money and banking have been the victims of what I regard—and Dr. Rothbard regards—as an immoral propaganda effort. Despite the rhetoric of value-free economics that is so common in economics classrooms, the reality is very different. By means of the seemingly innocuous analytical device known in money and banking classes as the T-account, the student is morally disarmed. The purchase of a debt instrument—generally a national government’s debt instrument—by the central bank must be balanced in the T-account by a liability to the bank: a unit of money. ...

Download The Mystery of Banking by Murray N. Rothbard

PDF format, 19MB, 314Pages. Provided by The Ludwig von Mises Institute.

First Edition, The Mystery of Banking
®1983 by Murray N. Rothbard
ISBN: 0--943940-04-4

CONTENTS:
Chapter I Money: Its Importance and Origins 1
1. The Importance of Money 1
2. How Money Begins 3
3. The Proper Qualities of Money 6
4. The Money Unit 9
Chapter II What Determines Prices: Supply and Demand 15
Chapter III Money and Overall Prices 29
1. The Supply and Demand for Money and Overall Prices
2. Why Overall Prices Change
Chapter IV The Supply of Money
1. What Should the Supply of Money Be?
2. The Supply of Gold and the Counterfeiting Process
3. Government Paper Money
4. The Origins of Government Paper Money
Chapter V The Demand for Money
1. The Supply of Goods and Services
2. Frequency of Payment
3. Clearing Systems
4. Confidence in the Money
5. Inflationary or Deflationary Expectations
Chapter VI Loan Banking 77
Chapter VII Deposit Banking 87
1. Warehouse Receipts 87
2. Deposit Banking and Embezzlement 91
3. Fractional Reserve Banking 95
4. Bank Notes and Deposits 103
Chapter VIII Free Banking and 111
The Limits on Bank Credit Inflation
Chapter IX Central Banking: Removing the Limits 127
Chapter X Central Banking: Determining
Total Reserves 143
1. The Demand for Cash 143
2. The Demand for Gold 149
3. Loans to the Banks 150
4. Open Market Operations 154
Chapter XI Central Banking: The Process of Bank Credit Expansion 163
1. Expansion from Bank to Bank 163
2. The Central Bank and the Treasury 171
Chapter XII The Origins of Central Banking 179
1. The Bank of England 179
2. Free Banking in Scotland 185
3. The Peelite Crackdown, 1844-1845 187
Chapter XIII Central Banking in the United States
The Origins 193
1. The Bank of North America and the First Bank of the United States 193
2. The Second Bank of the United States 199
Chapter XIV Central Banking in the United States
The 1820's to the Civil War
1. The Jacksonian Movement and the Bank War 209
2. Decentralized Banking from the 1830's to the Civil War 215
Chapter XV Central Banking in the United States
The National Banking System 221
1. The Civil War and the
National Banking System 221
2. The National Banking Era and the
Origins of the Federal Reserve System 230
Chapter XVI Central Banking in the United States
The Federal Reserve System 237
1. The Inflationary Structure of the Fed 237
2. The Inflationary Policies of the Fed 243
Chapter XVII Conclusion
The Present Banking Situation and What to Do About It 249
1. The Road to the Present 249
2. The Present Money Supply 254
3. How to Return to Sound Money 263
Notes 271

About Murray N. Rothbard:

Murray Newton Rothbard (March 2, 1926 – January 7, 1995) was an influential American historian, numismatist, natural law theorist, Aristotelian and economist of the Austrian School who helped define modern libertarianism and founded a form of free-market anarchism he termed "anarcho-capitalism". Rothbard took the Austrian School's emphasis on spontaneous order and condemnation of central planning to an individualist anarchist conclusion.

An individualist anarchist of the Austrian School of economics, Rothbard associated with the Objectivists in his early thirties before allying with the New Left in the 1960s and eventually joining the radical caucus of the Libertarian Party.

Books:

    * Man, Economy, and State (ISBN 0-945466-30-7) (1962)
    * The Panic of 1819. 1962, 2006 edition: ISBN 1-933550-08-2.
    * America's Great Depression. ISBN 0-945466-05-6. (1963, 1972, 1975, 1983, 2000)
    * What Has Government Done to Our Money? ISBN 0-945466-44-7. (1963)
    * Economic Depressions: Causes and Cures (1969)
    * Power and Market. ISBN 1-933550-05-8. (1970) (restored to Man, Economy, and State ISBN 0-945466-30-7, 2004)
    * Education: Free and Compulsory. ISBN 0-945466-22-6. (1972)
    * Left and Right, Selected Essays 1954-65 (1972)
    * For a New Liberty: The Libertarian Manifesto ISBN 0-945466-47-1. (1973, 1978)
    * The Essential von Mises (1973)
    * The Case for the 100 Percent Gold Dollar. ISBN 0-945466-34-X. (Full Text / Audio Book) (1974)
    * Egalitarianism as a Revolt Against Nature and Other Essays ISBN 0-945466-23-4. (1974)
    * Conceived in Liberty (4 vol.) ISBN 0-945466-26-9. (1975-79)
    * Individualism and the Philosophy of the Social Sciences. ISBN 0-932790-03-8. (1979)
    * The Ethics of Liberty  ISBN 0-8147-7559-4. (1982)
    * The Mystery of Banking. ISBN 0-943940-04-4. (1983)
    * Ludwig von Mises: Scholar, Creator, Hero. OCLC 20856420. (1988)
    * Freedom, Inequality, Primitivism, and the Division of Labor. Full text (included as Chapter 16 in Egalitarianism above) (1991)
    * The Case Against the Fed. ISBN 0-945466-17-X. (1994)
    * An Austrian Perspective on the History of Economic Thought (2 vol.) ISBN 0-945466-48-X. (1995)
    * Wall Street, Banks, and American Foreign Policy. with an introduction by Justin Raimondo. (1995)
    * Making Economic Sense. ISBN 0-945466-18-8. (1995, 2006)
    * Logic of Action (2 vol.) ISBN 1-85898-015-1 and ISBN 1-85898-570-6. (1997)
    * The Austrian Theory of the Trade Cycle and Other Essays. ISBN 0-945466-21-8. (also by Mises, Hayek, & Haberler)
    * Irrepressible Rothbard: The Rothbard-Rockwell Report Essays of Murray N. Rothbard. (Full Text.) ISBN 1-883959-02-0. (2000)
    * History of Money and Banking in the United States. ISBN 0-945466-33-1. (2005)
    * The Complete Libertarian Forum (2 vol.)  ISBN 1-933550-02-3. (2006)
    * Economic Controversies (to be published 2007)
    * The Betrayal of the American Right ISBN 978-1-933550-13-8 (2007)

Visit Ludwig von Mises Institute Website

The Ludwig von Mises Institute is the research and educational center of classical liberalism, libertarian political theory, and the Austrian School of economics.

Working in the intellectual tradition of Ludwig von Mises (1881-1973) and Murray N. Rothbard (1926-1995), with a vast array of publications, programs, and fellowships, the Mises Institute, with offices in Auburn, Alabama, seeks a radical shift in the intellectual climate as the foundation for a renewal of the free and prosperous commonwealth.

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