Talk about great timing. Rothbard's extraordinary book unravels the mystery of banking: What is legitimate enterprise and what is a government-backed shell game that can't last? His explanation is clear enough for anyone to follow and yet precise and rigorous enough to be the best textbook for college classes on the topic. This is because its expository clarity - in its history and theory - is essentially unrivaled.
Most notably, he uses the T-account method of explaining the relationship between deposits and loans, showing the inherent instability of fractional reserve banking and how it sets the stage for centralization, inflation, and the boom-bust cycle.
But there is more here. It is an explanation of money's origins and its meaning in the free market. The abstract theory is here but always with real application in history and in modern banking practice. Never does a paragraph go by without an example drawn from his massive knowledge of the subject.
Even further, he explains the integration between microeconomics and the business cycle. As Douglas French writes in the introduction: "Although first published 25 years ago, Murray Rothbard's The Mystery of Banking continues to be the only book that clearly and concisely explains the modern fractional reserve banking system, its origins, and its devastating effects on the lives of every man, woman, and child. It is especially appropriate in a year that will see: a surge in bank failures, central banks around the globe bailing out failed commercial and investment banks, double-digit inflation rates in many parts of the world and hyperinflation completely destroying Zimbabwe's economy, that a new edition of Rothbard's classic work be published and made available through the efforts of Lew Rockwell and the staff at the Ludwig von Mises Institute. Priced affordably for students and laymen interested in the vagaries of banking and how inflation and business cycles are created."
©1983, 2008 Ludwig von Mises Institute (P)2016 Ludwig von Mises Instiutute
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"Takes a long time to say some simple things"
This centers on the case for 100 percent gold-backed banking and currency. It is painstaking (and for me, somewhat pain-inflicting, due to ponderousness and length) in explaining the way today's fractional-reserve banking works. Yes ladies and gentlemen, banks have a permit to invent money from thin air. This does weird things to the stability of the currency (thus prices), especially when the money distributed through fanciful and imprudent loans is not paid back (as, at turns out, it inevitably will be). And this drags government and the printing press into the picture, to pump up the self-damaged patient as if with steroids. And the patient gets addicted and whines for more. And the savers who put their faith in that money are punished, and the sinners are helped, and enabled again on their road to perdition. I get it. And it is no laughing matter for people like me, who are thrifty (in my case, even puritanical) sacrificers and savers and have paid for this, lately, while the careless have been propped up. But it remains my view that this rickety, laughable, cronyist mess is not the worst of all possible worlds. There, I depart from Mr Rothbard. I respect him for laying the case out, though I think all this could have been said in a half-hour. Or less, as I have demonstrated above. This is a sad world for those with great rectitude. But I just can't don the sack-cloth and live like that, quite, railing at all the sinners walking by on the sidewalk. Best to share a little and live for another day, imperfect as it all is. Mr Rothbard will remain eternally popular for staking out the argument here, Let these be our epitaphs, respectively.
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