L. Albert Hahn’s economic theory of bank credit

In the mid-1920s L. Albert Hahn’s Economic Theory of Bank Credit (1920) had become one of the most influential and certainly the most controversial book on monetary theory in the German language area. Hahn wanted to overcome the orthodox view that every credit has to be financed by means of savings deposited by the banks. Banks are producers of credit which is not limited by the amount of saving. Capital was seen by Hahn as the result of credit creation and not of saving. Over time Hahn moderated some exaggerations of the first two editions of The Economic Theory of Bank Credit, such as the idea of a permanent boom. The paper also compares Hahn’s views on the role and effects of credit with those of Schumpeter and investigates Hahn’s claim to have anticipated essential ideas of Keynes’ General Theory.