The Theory of Money and Credit
Summary
Mises's first major work and the book that extended Carl Menger's marginal-utility framework to monetary theory. Two contributions made it foundational. First, the regression theorem: an explanation of how money obtains its purchasing power — by regressing back to the date when the underlying commodity was valued for non-monetary uses. This solved the apparent circularity of marginal-utility theory applied to money. Second, the seeds of Austrian Business Cycle Theory: when banks expand credit beyond genuine savings, interest rates fall below their natural level, malinvestment ensues, and the resulting structure of production cannot be sustained — a bust corrects the misallocation. Hayek would later refine this framework into his Nobel-winning work, but Mises wrote it first. The book is demanding (its English translation didn't appear until 1934) but it is the source of nearly every Austrian argument about money for the next century.
Why It Matters for Bitcoin
Mises's regression theorem was for decades cited as a barrier to Bitcoin succeeding as money: critics argued that Bitcoin had no prior commodity use-value to regress to and therefore could never become a generally accepted medium of exchange. The careful response (developed most rigorously by Konrad Graf in 2013) is that Bitcoin satisfies the theorem in a different way — its earliest users derived non-monetary value from its censorship resistance, programmability, and self-sovereignty before it became transactional money. Either way, the framework matters: Mises's insistence that money cannot be created by decree, that it must emerge from voluntary use, is the philosophical scaffolding under every modern Bitcoin Standard argument. The book also contains the earliest rigorous statement of why credit expansion above savings creates bust cycles — directly applicable to Bitcoin advocates' critique of post-1971 fiat regimes.