PREFACE TO THE FOURTH ENGLISH EDITION

I am pleased to present this fourth English edition of Money, Bank Credit, and Economic Cycles. This new edition has been thoroughly revised and includes, among other minor modifications and additions, references to the most relevant literature published on the subject since the previous English edition appeared in 2012. In this respect, we should note the growing number of economists, even in the “neoclassical mainstream,”who are ultimately recognizing the full theoretical validity of the Austrian approach as an explanatory paradigm for the economic and financial crisis which began to grip the world in 2008 and the consequences of which are still far from being definitively overcome. In any case, I have made sure that the improvements and bibliographic comments added do not significantly affect the pagination of the work, so that new references scholars and specialists make to it will be consistent with earlier editions.

Since the appearance of the most recent edition seven years ago, economic events have unfolded entirely in line with the analysis contained in this book. Perhaps the main changes have been the massive quantitative easing program launched by the US Federal Reserve and the yielding of the European Central Bank, in an environment of anti-deflationist paranoia,to the pressures of the Federal Reserve. The ECB was joined in giving in by all of those interested in ending the policies of austerity and discipline that have so benefited the countries which, like Spain, were among the most affected by the crisis. In fact, the introduction in March 2015 of the European program of purchasing public and private financial debt at the rate of eighty billion euros a month blocks the necessary reforms (particularly in France and Italy), threatens to Japanize the economy of the European Union, and above all, jeopardizes the future of the euro as the common currency of European countries.Finally, we must touch upon the bursting of the speculative bubble which has affected China in recent years and which, regardless of the more or less desperate political and economic measures that may be taken, will make the necessary restructuring of the Chinese economy unavoidable in order to detect and abandon the many unsound investments made during the years of artificial credit expansion and to permit the market, free from harmful interference and regulations, to uncover the sustainable projects aimed at satisfying, properly and in a timely manner, the true desires of consumers.

Finally, it also gives me great pleasure to note that the Austrian analysis is awakening greater interest worldwide, and one of the most surprising signs of this is the number of completed and published translations of this book. In all, the book has already appeared in seventeen different languages (including seven editions in Spanish, four in English, as well as editions in German, French, Italian, Portuguese, Arabic, Japanese, Chinese, Russian, Polish, Czech, Hungarian, Romanian, Dutch, Turkish, and Brazilian Portuguese). Further translations (into Hindi, Korean, Swedish, Greek, Finnish, Bulgarian, and Serbian) have been completed and are pending publication. This is a publishing phenomenon for a work of the Austrian School. Nevertheless, the book’s success is due, more than to the author’s merit, to the great scientific tradition he has inherited, and especially, to the undeniable fact that the noble Austrian approach has managed to answer the theoretical, historical, and ethical conundrums we face.

Jesús Huerta de Soto

Madrid

January 2, 2020

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The most relevant literature is cited, for instance, in footnote 118 of chapter 6, p. 505.

See Jesús Huerta de Soto, “Anti-Deflationist Paranoia,” in Banking and Monetary Policy from the Perspective of Austrian Economics, ed. Annette Godart-van der Kroon and Patrik Vonlanthen (Cham, Switzerland: Springer, 2018), pp. 195-206. Deflation rooted in an increase in productivity pushes up real wages, encourages saving, and fosters investment sustainable in the long term, and all in an environment that curbs the lack of discipline and the financial irresponsibility of authorities, unions, and interest groups.

See Jesús Huerta de Soto, “The Japanization of the European Union,” Mises Wire, December 11, 2019. The program of purchasing European government and private bonds on a massive scale removes any incentive for the governments involved to carry out the needed economic austerity and liberalization reforms they have yet to adopt. On top of that, the program causes addiction, hinders the necessary restructuring and the sustainable growth which was already beginning to emerge in Europe, and therefore sets the stage for a new speculative bubble fueled by excess liquidity and virtually zero or even negative real interest rates. This bubble will create all sorts of perverse incentives that will lead to widespread malinvestment and encourage all kinds of speculative projects devoid of long-term sustainability.