Ludwig von Mises on Money and Inflation.pdf - The Ludwig von ...

CHAPTER
EIGHTEEN
Inter-bank Liquidity; Bank Reserves
Now we have another problem which is usually regarded as an ordinary
monetary matter. Various government committees of professors and representatives
of various central banks are studying a problem sometimes referred
to as that of inter-bank liquidity, or as the problem of bank reserves.
What exactly is this problem I think the easiest way to understand this
problem is to refer to the conditions as they existed in world money markets
from the second half of the nineteenth century until the outbreak of
the First World War. At that time the economically leading nations of the
world were all on the gold or gold exchange standard and they were interested
in preserving the gold parity of their domestic national currency. At
the same time they wanted to maintain a low rate of interest in the money
markets of their respective countries and to expand credit, to have credit
expansion, in order to encourage business and bring about a “boom.”
e governments became interested in entering the market and destroying
the market because the governments wanted to spend money,
more money than the citizens were prepared to pay. I am not talking
about the United States but about almost all other countries in the world.
It was for the government always a problem to tell the citizens, especially
if they already were paying high taxes: “We want more money.” And for
what purpose “To pay the deficits of our enterprises. Don’t forget the
problem of the government enterprises.” In the second part of the 19th
century, there was a great man, one of the most important and most influential
statesmen in the world—the German Prince Bismarck, who favored
nationalization. And Bismarck nationalized the Prussian railroads.
Why Because this was considered a simple thing. What do these railroad
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