Economics Dictionary of Arguments

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Credit: In economics, credit refers to the agreement where a lender provides funds, goods, or services to a borrower with the expectation of future repayment, often with interest. It facilitates deferred payment and supports economic activity by enabling consumption, investment, and business operations without immediate cash outlay, playing a vital role in financial systems and economic growth. See also Money supply, Interest rates.
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Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments.

 
Author Concept Summary/Quotes Sources

Ludwig von Mises on Credit - Dictionary of Arguments

Rothbard IV 16
Credit/inflation/Mises/Rothbard: (…) the attraction of inflation is that the government and other groups in the economy can silently but effectively benefit at the expense of groups of the population lacking political power. Inflation - an expansion of the money supply - Mises showed, is a process of taxation and redistribution of wealth. In a developing free-market economy unhampered by government-induced increases in the money supply, prices will generally fall as the supply of goods and services expands. And falling prices and costs were indeed the welcome hallmark of industrial expansion during most of the nineteenth century.
>Money/Mises
, >Money supply/Mises, >Marginal utility/Mises.
Rothbard IV 55
(…) Mises became convinced that, contrary to prevailing opinion, monetary inflation was the cause of balance of payments deficits instead of the other way round, and that bank credit should not be “elastic” to fulfill the alleged needs of trade.
Rothbard IV 61
Central Banks/inflation/Mises/Rothbard: In addition to his feat in integrating the theory of money with general economics and placing it on the micro-foundations of individual action, Mises, in Money and credit(1), transformed the existing analysis of banking.
Returning to the Ricardian-Currency School tradition, he demonstrated that they were correct in wishing to abolish inflationary fractional-reserve credit. Mises distinguished two separate kinds of functions undertaken by banks: channeling savings into productive credit ("commodity credit"), and acting as a money-warehouse in holding cash for safekeeping. Both are legitimate and non-inflationary functions; the trouble comes when the money-warehouses issue and lend out phony warehouse receipts (notes or demand deposits) to cash that does not exist in the bank's vaults ("fiduciary credit").
These "uncovered" demand liabilities issued by the banks expand the money supply and generate the problems of inflation. Mises therefore favored the Currency School approach of 100 percent specie reserves to demand liabilities. He pointed out that Peel's Act of 1844, established in England on Currency School principles, failed and discredited its authors by applying 100 percent reserves only to bank notes, and not realizing that demand deposits were also surrogates for cash and therefore functioned as part of the money supply. Mises wrote his book at a time when much of the economics profession was still not sure that demand deposits constituted part of the money supply.
>Money/Mises, >Regression theorem/Mises.
Rothbard IV 62
Central banks/Mises/Rothbard: Not wishing to trust government to enforce 100 percent reserves, however, Mises advocated totally free banking as a means of approaching that ideal. Money and credit demonstrated that the major force coordinating and promoting bank credit inflation was each nation's central bank, which centralized reserves, bailed out banks in trouble, and made sure that all banks inflated together. Eight years before C.A. Phillips's famous demonstration, Money and credit showed that an individual bank enjoyed very little room to expand credit.

1. Ludwig von Mises. 1912. The Theory of Money and Credit (Theorie des Geldes und der Umlaufsmittel, Translated by H.E. Batson in 1934; reprinted with “Monetary Reconstruction» (New
Haven, Conn.: Yale University Press, 1953). Reprinted by the Foundation for Economic Education, 1971; reprinted with an Introduction by Murray N. Rothbard, Liberty Press Liberty Classics, 1989.

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Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments
The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition.

EconMises I
Ludwig von Mises
Die Gemeinwirtschaft Jena 1922

Rothbard II
Murray N. Rothbard
Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995

Rothbard III
Murray N. Rothbard
Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009

Rothbard IV
Murray N. Rothbard
The Essential von Mises Auburn, Alabama 1988

Rothbard V
Murray N. Rothbard
Power and Market: Government and the Economy Kansas City 1977


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