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The theoretical foundation for the book comes from Ludwig von Mises, the great Austrian economist, who pointed out that credit is a claim on resources. Tamny reasons that if credit is a claim on resources, then new credit cannot be created unless new resources are created. This renders the idea of ‘excess credit’ an oxymoron. And if there cannot be more credit than output than there cannot be an excess of credit over output.

Tamny makes the argument that new credit can only be created if there are new resources that are also created. This argument is incorrect.

Credit is a claim on resources and when credit increases and there is no increase in resources, the price paid for those resources also rises. Therefore there is no necessity for an expansion in resources, for there to be an expansion in credit. This is why a credit expansion leads to inflation.

Credit, when newly created, is not distributed evenly. Certain institutions and people receive that credit first and the new credit gradually disperses throughout the economy over time.