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[This article is part of the  Understanding Money Mechanics  series, by Robert P. Murphy. The series will be published as a book in 2021.] In chapter 5 we reviewed the textbook analysis of how a central bank buys government debt in “open market operations” to add reserves to the banking system, with which commercial banks can then advance loans to

[This article is part of the  Understanding Money Mechanics  series, by Robert P. Murphy. The series will be published as a book in 2021.] In chapter 9 we presented Ludwig von Mises’s circulation credit theory of the trade cycle, or what is nowadays referred to as Austrian business cycle theory. In the present chapter, we will apply the general

The Understanding Money Mechanics series by Robert P. Murphy, is a comprehensive overview of the theory, history, and practice of money and banking, with a focus on the United States.  The full book is available at the Mises Store , and free on mises.org in html and pdf versions . Also available on Amazon .  [The table of contents below is from an

[This article is part of the  Understanding Money Mechanics  series, by Robert P. Murphy. The series will be published as a book in 2021.] To fully understand our current global monetary system, in which all of the major powers issue unbacked fiat money, it is helpful to learn how today’s system emerged from its earlier form. Before fiat money,

[This article is part of the  Understanding Money Mechanics  series, by Robert P. Murphy. The series will be published as a book in 2021.] In chapter 5 we reviewed the textbook analysis of how a central bank buys government debt in “open market operations” to add reserves to the banking system, with which commercial banks can then advance loans to

[This article is part of the  Understanding Money Mechanics  series, by Robert P. Murphy. The series will be published as a book in 2021.] Although it conjures up scary imagery, shadow banking is simply a term for banking operations that occur through financial intermediaries that are not traditional commercial banks. The term was coined in 2007

[This article is part of the  Understanding Money Mechanics series , by Robert P. Murphy. The series will be published as a book in 2021.] In this chapter we will define some of the conventional “monetary aggregates,” such as M1 and M2. Then we will summarize the textbook description of how the Federal Reserve and commercial banking system “create

[This article is part of the  Understanding Money Mechanics  series, by Robert P. Murphy. The series will be published as a book in 2021.] Starting with Carl Menger’s undisputed role in the “marginal revolution,” which ushered in subjective value theory, the Austrian school has made important contributions that have been absorbed into standard

[This article is part of the  Understanding Money Mechanics  series, by Robert P. Murphy. The series will be published as a book in 2021.] In chapter 7 we summarized some of the major changes in how central banks have operated since the 2008 financial crisis. In the present chapter, we detail some of the even more recent changes in Federal Reserve

[This article is part of the Understanding Money Mechanics series, by Robert P. Murphy. The series will be published as a book in 2021.] This chapter explains the connection between the quantity of money and the height of prices quoted in that money. The chapter therefore deals with the phenomenon of “inflation,” but as we shall see, the very