Articles on Issue Theme
Jesus HUERTA DE SOTO
Universidad Rey Juan Carlos, Madrid
The logic of the historical evolution of the wrong institutional design that affects the financial and monetary system of the so called free market economies up to day is somehow easy to understand: bubbles did continue, financial crisis and economic recessions were not avoided, the bail out of banks was regularly demanded, the lender of last resort or central bank was created precisely to bail out the banks, and in order to allow the creation of the needed liquidity in the moments of crisis, gold was abandoned and legal tender laws and a purely fiduciary system were introduced all over the world. As we see the result of this historical process explains the wrong institutional design and financial mess that incredibly is still affecting the world at the beginning of the second decade of the 21st century. In this paper I will concentrate on the recent financial crisis and the current worldwide economic recession which I consider to be the most challenging problem we as economists must now cope with.
ŒCONOMICA no. 1/2011
Keywords: state, market, central banking, fractional reserve banking, fiduciary media, economic crisis
JEL: B13, H11, H20, O10
Financial Crisis and Economic Recession
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