The Theory of Money and Credit

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Theorie des geldes und der Umlaufsmittel
(1st original edition)  
Theorie des geldes und der Umlaufsmittel 2005 edition cover.jpg
2005 edition cover
Author(s) Ludwig von Mises
Country Weimar Germany
Language German
Subject(s) Monetary theory, Economics
Genre(s) Non-fiction, Treatise
Publisher Duncker & Humblot
Publication date 1912
Media type Print
Pages 476 p.
OCLC Number 491288879
The Theory of Money and Credit
(1st translated edition)  
The Theory of Money and Credit (2009 ed) cover.jpg
2009 edition cover
Author(s) Ludwig von Mises
Original title Theorie des Geldes und der Umlaufsmittel
Translator H. E. Batson
Country United Kingdom
Language English
Series Bedford series of economic handbooks
Subject(s) Monetary theory, Economics
Genre(s) Non-fiction, Treatise
Publisher Jonathan Cape
Publication date 1912
Published in
Pages 445 p. illus.
OCLC Number 317802102

The Theory of Money and Credit, by Ludwig von Mises, contains an explanation of the quantity theory of money based on the subjective, marginal utility theory. It describes the origin of money, the development and nature of banking, the cause and consequences of inflation and credit expansion, the differences in the value of different moneys, as well as the reason for "cyclical" economic fluctuations.[1]


This is Ludwig von Mises' first major work, originally published in German in 1912 as Theorie des Geldes und der Umlaufsmittel. It has ever since been recognized as a basic textbook of monetary theory. The most important theoretical contribution was to integrate monetary theory with general utility theory. This had been considered an impossible accomplishment, since money is (aside from its value as a commodity) valued for its purchasing power. How then can it have a utility of its own? Mises solved this problem through the monetary regression theorem, developing the earlier work of Carl Menger. He showed that the purchasing power of money at a particular period or "day" stems from its value the preceding "day." This process goes back until one arrives at a value due entirely to the monetary commodity's value as a non-monetary commodity. Money was then originally a commodity like any other.

Mises claimed that money can only have originated in this way. Only the market, not the fiat of the state, can give rise to money. In the course of integrating monetary theory into general economics, Mises criticized the quantity theory of money. Equations do not explain the individual actions of people in reacting to changes in the supply and demand of money. The work also includes a discussion of "forced saving" that exerted considerable influence. In addition, of course, the book discusses the standard issues of monetary theory, since it was intended for use as a comprehensive textbook on money and banking

Development history

The German word Umlaufsmittel literally translates as "means of circulation" and was translated into the text of the English version as "fiduciary media". The first English publisher thought the unusual terminology would irritate readers and substituted "money and credit" in the title, thereby losing the specific distinction Mises had made in selecting his original term. This failed to honor the fact that even in the original German version the expression was unusual. Mises was hostile to innovations in language that were not justified by the analysis of hitherto neglected phenomena. The difference between money certificates on the one hand, and Umlaufsmittel on the other was such a neglected phenomenon, to the point that established scientific terminology even lacked the means for expressing this difference. Mises thus introduced the expression Umlaufsmittel for this purpose and even used it in the title of his book to highlight its importance.[2]

The newer 1953 edition includes an essay on monetary reconstruction. Here Mises strongly supports a full return to the gold standard, as the only means of avoiding inflation. The operation of the system is virtually "automatic": nothing depends on the decision of particular government administrators. Here, it is important to note, Mises has in mind the "pure" gold standard, rather than the gold exchange standard. Although the views in this essay are entirely consistent with the earlier part of the book, Mises expresses himself in a distinctly more vehement way here.


John Maynard Keynes, although generally complimentary, criticized the book as unoriginal in his review of the German edition in Economic Journal XXIV:417-19. This was in spite of his later admission that he could not understand original contributions if written in German.


Part One: The Nature of Money

1. The Function of Money
2. On the Measurement of Value
3. The Various Kinds of Money
4. Money and the State
5. Money as an Economic Good
6. The Enemies of Money

Part Two: The Value of Money

7. The Concept of the Value of Money
8. The Determinants of the Objective Exchange Value, or Purchasing Power, of Money
9. The Problem of the Existence of Local Differences in the Objective Exchange Value of Money
10. The Exchange Ration Between Money of Different Kinds
11. The Problem of Measuring the Objective Exchange Value of Money
12. The Social Consequences of Variations in the Objective Exchange Value of Money
13. Monetary Policy
14. The Monetary Policy of Etatism

Part Three: Money and Banking

15. The Business of Banking
16. The Evolution of Fiduciary Media
17. Fiduciary Media and the Demand for Money
18. The Redemption of Fiduciary Media
19. Money, Credit, and Interest
20. Problems of Credit Policy

Part Four: Monetary Reconstruction

21. The Principle of Sound Money
22. Contemporary Currency Systems
23. The Return to Sound Money

Appendix A. On the Classification of Monetary Theories

Publication history

  • Theorie des Geldes und der Umlaufsmittel / Theory of Money and the Means of Circulation, Munich & Leipzig: Duncker & Humblot, 1912.
  • 2nd edition in German, 1924.
  • London: Jonathan Cape Ltd. First translation (by Harold E. Batson) into English from the original German, 1934.
  • New Haven, Conn.: Yale University Press. Expanded edition with an essay on Monetary Reconstruction appearing in Part Four, 1953.
  • Indianapolis,. Ind. Liberty Fund. ISBN 0-913966-70-3. 541 pages. Hardcover. (Softcover ISBN 0-913966-71-1), 1981.
  • Auburn, Al. Ludwig von Mises Institute. ISBN 9781933550558. 493 pages. Hardcover, 2009.

Full publication history, including translations to Chinese, Japanese and Spanish.

See also


  1. Chronological Bibliography of Mises' Work
  2. Hülsmann, Jörg Guido, 2007. Mises: The Last Knight of Liberalism. p. 217, note 7.


  • Theorie des geldes und der Umlaufsmittel, 1912 edition (original German):