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The Mystery of Banking Hardcover – September 10, 2008
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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 expositional clarity--in its hitosry 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 boost-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 republished 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."
Further, Joseph Salerno explains in the Foreword: "The Mystery of Banking is perhaps the least appreciated work among Murray Rothbard s prodigious body of output. This is a shame because it is a model of how to apply sound economic theory, dispassionately and objectively, to the origins and development of real-world institutions and to assess their consequences. It is institutional economics at its best. In this book, the institution under scrutiny is central banking as historically embodied in the Federal Reserve System the Fed for short the central bank of the United States.
"Rothbard s presentation of the basic principles of money-and-banking theory in the first eleven chapters of the book guides the reader in unraveling the mystery of how the central bank operates to create money through the fractional-reserve banking system and how this leads to inflation of the money supply and a rise in overall prices in the economy. But he does not stop there. In the subsequent five chapters he resolves the historical mystery of how an inherently inflationary institution like central banking, which is destructive of the value of money and, in the extreme case of hyperinflation, of money itself, came into being and was accepted as essential to the operation of the market economy."
Incredibly, both authors correctly anticipate the current crisis -- and Rothbard explains it all and shows the way out. This is certainly the book for today, more essential than ever before.
- Print length298 pages
- LanguageEnglish
- PublisherLudwig von Mises Institute
- Publication dateSeptember 10, 2008
- ISBN-101933550287
- ISBN-13978-1933550282
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Product details
- Publisher : Ludwig von Mises Institute; 2nd edition (September 10, 2008)
- Language : English
- Hardcover : 298 pages
- ISBN-10 : 1933550287
- ISBN-13 : 978-1933550282
- Item Weight : 2.4 ounces
- Best Sellers Rank: #1,058,724 in Books (See Top 100 in Books)
- #665 in Money & Monetary Policy (Books)
- Customer Reviews:
About the author

Murray Newton Rothbard (/ˈmʌri ˈrɑːθbɑːrd/; March 2, 1926 – January 7, 1995) was an American heterodox economist of the Austrian School, a revisionist historian, and a political theorist(pp11, 286, 380) whose writings and personal influence played a seminal role in the development of modern libertarianism. Rothbard was the founder and leading theoretician of anarcho-capitalism, a staunch advocate of historical revisionism, and a central figure in the twentieth-century American libertarian movement. He wrote over twenty books on political theory, revisionist history, economics, and other subjects. Rothbard asserted that all services provided by the "monopoly system of the corporate state" could be provided more efficiently by the private sector and wrote that the state is "the organization of robbery systematized and writ large." He called fractional reserve banking a form of fraud and opposed central banking. He categorically opposed all military, political, and economic interventionism in the affairs of other nations.(pp4–5, 129) According to his protégé Hans-Hermann Hoppe, "There would be no anarcho-capitalist movement to speak of without Rothbard."
Rothbard was a heterodox economist. Economist Jeff Herbener, who calls Rothbard his friend and "intellectual mentor", wrote that Rothbard received "only ostracism" from mainstream academia. Rothbard rejected mainstream economic methodologies and instead embraced the praxeology of his most important intellectual precursor, Ludwig von Mises. To promote his economic and political ideas, Rothbard joined Llewellyn H. "Lew" Rockwell, Jr. and Burton Blumert in 1982 to establish the Ludwig von Mises Institute in Alabama.
Bio from Wikipedia, the free encyclopedia. Photo by Ludwig von Mises Institute [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons.
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Q - So should you buy this book?
A - Yes.
Q - But really, I wasn't a finance major; who should buy this book?
A - Anyone who hasn't read it, but is capable of doing so. You do not need to be versed in finance or macroeconomics. Murray will teach the necessary economics along the way, or point you to related sources for further understanding when necessary. (Side note - for those who are truly unfamiliar with "Austrian" theory or would like a wonderful primer on economics, I can think of no better place to start than Henry Hazlitt's timeless classic "Economics in One Lesson".) As far financial literacy goes, understanding this book would deal quite a blow to many who may think of themselves as so called financial experts. For how could one truly be a financial expert, but yet have no real understanding of money whatsoever.
Q - What will you learn?
A - Why money in itself is so important. Why the current central banking system is so harmful to those of us not employed on Wall Street, at the Fed, or in the upper echelon of the Washington élite. What fractional reserve banking is, how it works, and why it couldn't exist in a truly free market. You will also learn a great deal of the history of banking in the United States (as well as Great Britain), and will quickly see the utter fallacy in criticisms of Austrian Business Cycle theory (don't worry if you don't know what this is) on grounds that attempt to argue that monetary inflation couldn't have caused nineteenth century business cycles, as obviously the Fed didn't exist yet.
Q - Is this really just a long drawn case for the Gold Standard?
A - Some reviewers thought so. I would say that interpretation fails to see a thing for what it is, and is a 10 foot view of 30,000 foot subject. To paraphrase Albert J. Nock, that understanding implies literacy without the true ability to read. Without making the whole case here, I would simply state that the real point centers on the evils of government control of money and interference in the financial system, and more directly the evils of fiat government money not backed by production. Assuming this simply was an argument for the gold standard on its face, this still wouldn't be a real knock against the book. Even simply explaining the gold standard, requires some thorough treatment, as the term "gold standard" used by Steve Forbes is very different from the system Ron Paul would be referencing by the same (or similar) terminology. Now, all that being said, gold and silver are the historical examples we have of how the government's ability to inflate can be severely limited or controlled. (Debasing metal doesn't offer the ability to create trillions from thin air). Does that mean money would have to be gold in a truly free market? Nope.
Murray Rothbard is plain spoken, easy to understand, and most importantly a true polymath genius. He takes what should be an absolutely powder dry subject, and makes it not only understandable, but interesting. I always shiver a bit when I read book reviews with statements along the line of "this should be required reading for students, voters, citizens, etc.", yet it is difficult to overemphasize the true importance of the ramifications of this subject. A nefarious magic trick has been played on most of the world to convince us that bank notes are money, and do not have to be backed by anything other than the full faith in credit of the central government. Wealth requires production, you can't spend your way to riches, and microeconomics is economics. We have paid, and will continue to pay a burdensome price for our failure to understand the mystery of banking.
One deficiency is the books sole focus on American finance ( the Fed ). I would have liked an analysis of the disastrous developments of the Euro zone, in particular the enormous unemployment level and the accompanying destruction of savings. Also, the book could be more convincing if graphical demonstrations of various statistics would have been used.
Reading the book, I became interested in the so-called Austrian school of economics, whch is associated with names like Mises and Hayek. Professor Rothbard is the outstanding modern representative of this school, which apparently tries to develop economic theory from a set of basic and simple axioms, and build around it. The difference to most current approaches seems to me that it is axiomatic, and therefore similar in ansatz to Newtons mechanics, while the non-axiomatic approaches are like the Ptolemaic approach of fitting data to some observations.The difference is that Newtons theory applies to any planetary and any solar system, even to galaxies, whereas Ptolemaic epicycles fit well the movement of just one body; any other body must be fitted anew. The mainstream of economists seem to follow the Ptolemean procedure, and every decade or so we get a new set of gurus with a new aspect to pop up, and a new set of proposed fittings. ( like the sudden plethora of money supplys M1, M2, M3,.. ). You may disagree with some axioms and theorems of Rothbard, but at least there you have a hard logical base for argument.
Top reviews from other countries
> no information about the author, original publication date, etc.
> multiple fonts, blurry images, horrific text spacing which is often unreadable
This is probably worse than printing a PDF yourself on a home printer.
Reviewed in Germany on October 23, 2019
> no information about the author, original publication date, etc.
> multiple fonts, blurry images, horrific text spacing which is often unreadable
This is probably worse than printing a PDF yourself on a home printer.








