THE ERRORS OF J. R. RALLO’S MONETARY THEORY: PART II
DOI:
https://doi.org/10.52195/pm.v20i2.889Abstract
In his work Una crítica a la teoría monetaria de Mises, Juan Ramón Rallo (2019) criticizes Mises’s theory of money as developed in Mises’s (1971) Theory of Money and Credit. In this paper, I show that Rallo and his predecessor Antal Fekete do not advance Austrian monetary theory, but rather defend an idiosyncratic variant of the banking school. The neo-banking school approach
suffers from the same shortcomings as the traditional banking school, most notably its failure to consider capital theory. To address the pertinent issues, we need to return to and develop some of the foundations of economic theory. I will discuss
the nature of money, ideal money, real savings, the demand for money, falling prices, the meaning of the interest rate and its determination, etc. I show that the credit expansion of a fractional reserve banking system based on real bills triggers an Austrian business cycle. Moreover, I show that in a free market maturity mismatching does not trigger a business cycle. Part I of my work was published in Procesos de Mercado, Vol. XX, nº1, Spring 2023. The present article is Part II of my work and should be read as a continuation of Part I.
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