PREFACE TO THE THIRD ENGLISH EDITION

The three years since the publication of the previous English edition of Money, Bank Credit, and Economic Cycles have seen a continuation of the economic recession process set in motion after the 2007 financial crisis. This process has consisted of the inevitable microeconomic readjustment and realignment of a real productive structure which the credit expansion of the prior “speculative bubble” years had rendered unsustainable. Though governments’ fiscal and monetary policies have on many occasions been erratic and counterproductive, in the end, enormous growth in public deficits has brought on a sovereign public debt crisis in international markets. This crisis has been so severe that one by one, the different governments have been forced to take measures, even if timid ones, in the right direction, measures to reduce public spending, interventionism, and regulation of the economy, and to liberalize factor markets and make them more flexible, especially the labor market.

With this in mind, we must consider the situation of those countries, like Spain, which for the first time in their history have had to face a profound economic crisis without the ability to implement monetary policy on their own, as they now belong to the European Monetary Union. For these countries, the euro has played a role similar to that once played by the gold standard: it has put an end to monetary nationalism and to the possibility of reacting to a crisis by expanding the money supply, depreciating or devaluing the currency, and postponing indefinitely the necessary structural, austerity reforms in the public sector and economic liberalization. Oddly enough, for the first time, European politicians have had no choice but to finally tell citizens the truth about the seriousness of the situation, and to undertake reforms which until now seemed utterly impossible politically. Moreover, even if only for this reason, at least those members of the monetary union which until now have tended to follow less austere and more irresponsible economic policies should be particularly grateful to the euro.

In this economic and political context, the analysis this book contains of the causes of the crisis and the reforms which must be applied to the current banking and financial system to prevent the predictable reemergence of these causes in the future could not be more timely or important. As a case in point, we have the presentation before the British Parliament by two Tory MPs of a bill designed to bring about the culmination of Peel’s Bank Charter Act of July 19, 1844 (which, curiously, is still in effect) by extending the requirement of a 100-percent reserve to demand deposits and their equivalents. This action is in perfect keeping with one of the three prescriptions found in this book (the other two being the elimination of central banks and a return to the classical gold standard), the author of which they expressly cited in their presentation before the House of Commons.In any case, the very fact that this reform proposal is being discussed on a political level is, in and of itself, extremely significant, and it raises the hope that we may now be moving in the right direction.

Another source of hope, and also satisfaction, for the author of these lines, is the growing number of foreign language translations of this book which have appeared in the short time since the last edition was published in 2009. To be specific, during this period, the book has come out in Polish, Czech, Romanian, Dutch, French, German, and Italian. In short, at the time of this writing, the book has been translated into thirteen different languages and published in ten different countries.

At any rate, whether or not these signs are in the future confirmed and our efforts crowned with success, our inalienable responsibility as university students and economic theorists is to focus all our efforts on research and the quest for scientific truth, and thus to pass on to future generations a body of knowledge and principles which permits them to further, without limits or hindrance, the advancement of humanity and civilization.

Jesús Huerta de Soto

Madrid

April 21, 2011

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Without a doubt, Germany has a different perspective, since its traditional monetary austerity is in danger of becoming destabilized by the euro. See Philipp Bagus, The Tragedy of the Euro (Auburn, Ala.: Ludwig von Mises Institute, 2011).

See the Financial Services (Regulation of Deposits and Lending) Bill presented before the British Parliament on September 15, 2010 by the Tory MPs for Clacton and Wycombe, Douglas Carswell and Steve Baker. Their presentation speech appears in the official record of parliamentary debates, Hansard, for the above date (vol. 515, no. 46, pp. 904–05). [On the same footing the 100 percent reserve requirement Referendum held in Switzerland on June 10, 2019, under the name of Vollgeld Initiative.]

The author wishes to express his sincere gratitude to the translators and publishers of the following editions: Polish (translation by Grzegorz Luczkiewicz, published in Warsaw by the Instytut Ludwiga von Misesa in 2009); Czech and Slovak (translation by M. Fronĕk, A. Tuma, D. Vořechovský, J. Havel, and M. Janda, published in Prague by ASPI-Wolters Kluwer in 2009); Romanian (translation by Diana Costea and Tudor Smirna, published in Iaşi by the Universitatea “Alexandru Ioan Cuza” in 2010); Dutch and Flemish (translation by Tuur Demeester and Koen Swinkels, published in Leuven and the Hague by ACCO in 2011); French (translation by Professor Rosine Létinier, published in Paris by L’Harmattan in 2011); German (translation by Professor Philipp Bagus, published by Lucius & Lucius in 2011); and Italian (translation by Giancarlo Ianulardo, published by Rubbettino in 2011). The Chinese, Portuguese, Japanese, and Arabic translations have been completed and, God willing, will soon be published. Finally, Serbian, Hungarian, Greek, Turkish, Swedish, Finnish, Bulgarian, Hindi and Korean translations are currently under preparation.