Gottfried Haberler, “Albert Hahns „Volkswirtschaftliche Theorie des Bankkredits“” (1927)

Haberler’s review examines Hahn’s reconstruction of monetary theory around banks’ creation of credit. He begins by acknowledging Hahn’s importance:

Albert Hahn gebührt zweifellos ein hervorragender Platz in der Geschichte der neuesten deutschen Geldtheorie.

English translation: Albert Hahn undoubtedly deserves an outstanding place in the history of the most recent German monetary theory.

This recognition frames a sustained critique rather than an endorsement. Hahn radicalizes Schumpeter’s account of credit creation, reviving ideas associated with Law and Macleod. Haberler appreciates Hahn’s early opposition to inflation but disputes the inference that banks’ capacity to create purchasing power makes lending independent of institutional constraints or capital formation independent of saving.

The first section considers Hahn’s model of a wholly cashless economy, in which bank lending creates deposits. Haberler accepts the mechanism while questioning its explanatory reach. An account of the origin of bank money does not by itself explain its nature or establish the limits of its creation. He reduces the priority of money creation to a narrower proposition:

Er bedeutet nämlich nichts anderes, als daß Geldschöpfung vor Geldleihe geht, daß das Geld erst da sein, geschaffen worden sein muß, bevor es zirkulieren und angelegt werden kann.

English translation: For it means nothing other than that the creation of money precedes the lending of money, that money must first exist, must have been created, before it can circulate and be invested.

That money must exist before it circulates says little about how much banks can create. Similarly, the legal characterization of deposit holders as creditors does not make ordinary purchases economically distinctive transfers of goods without compensation. Transferable claims can perform monetary functions without changing the underlying character of exchange.

Haberler presses this distinction between credit’s form and the conditions of its provision when discussing banks’ granting of claims:

Denn wenn man von Gelddarlehen, die ja in einer bargeldlosen Wirtschaft nicht in Betracht kommen, absieht, gibt es keinen Fall der Krediteinräumung und ist keiner denkbar, wo die Bank nicht ein Forderungsrecht einräumte.

English translation: For if one disregards loans of cash, which after all do not come into consideration in a cashless economy, there is no case of the granting of credit, nor is any conceivable, in which the bank did not grant a claim.

Granting a claim does not explain the resources or institutional relationships supporting a loan. Haberler accordingly defends purchasing power as a meaningful description of what borrowers receive, rather than treating the language of claims as a theoretical replacement for it.

The second section reconstructs the established banking theory Hahn attacks. That theory already recognizes credit creation beyond deposited savings; the dispute concerns its scope. A single bank encompassing an entirely cashless economy would face no interbank settlement constraint. An individual bank among competing institutions, however, risks adverse clearing balances when it expands lending. Its latitude depends on cashless payments, banking concentration, coordination, and accommodation from other banks or the central bank.

This distinction undermines Hahn’s separation of “primary” lending banks from “secondary” deposit-receiving banks. The former depend on the latter’s willingness to postpone settlement. Interbank accommodation is therefore not simply a subsequent extension of credit already created: its anticipated availability helps determine the initial lending decision. Hahn’s categories obscure this interdependence and exaggerate commercial banks’ independence from the central bank.

The third section addresses banking as the mediation of trust. Haberler distinguishes motives for accepting bank money from the economic consequences of acceptance: whatever motivates acceptance, borrowers obtain purchasing power. He also rejects Hahn’s suggestion that universal creditworthiness would eliminate interest. Cashless payment does not turn interest into compensation exclusively for risk, although Haberler does not develop a complete alternative theory here.

The fourth section turns to production and capital formation. Credit may precede entrepreneurs’ purchases of productive inputs, but that sequence does not establish that longer production processes require no prior saving. Lower interest rates can make such processes appear profitable without supplying the real resources needed to sustain them. Neither technological possibilities nor unused labor automatically removes this constraint.

Investments dependent on artificially cheap credit become unprofitable when expansion stops and interest returns to its natural level; continued expansion instead threatens monetary disorder. Haberler nevertheless allows qualified benefits when expansion offsets falling prices in a growing economy or helps overcome inertia obstructing independently profitable innovations. These qualifications do not make credit creation a substitute for saving. Against Hahn’s claim that saving interrupts consumption and produces stagnation, Haberler argues that invested savings are spent again: demand changes direction rather than disappearing.

The conclusion credits Hahn with stimulating monetary research while rejecting his theoretical reconstruction. Haberler calls for closer attention to the coexistence of cash and cashless payments. His central contribution is to combine acceptance of bank-created money with insistence on settlement constraints, real-resource limits, and the distinction between sustainable investment and investment dependent on continuing monetary expansion.