Banking demystified; The Mystery of Banking, by Murray Rothbard. New York: Richardson & Snyder. 1983. 286 pp. and index. $19.95.

In a time when Federal Reserve chairman Paul Volcker is widely perceived as being the second most powerful individual in the United States (after the president) and bank failures are occurring at a rate exceeding that of the Great Depression, there must be many readers today who wish that someone would explain clearly the arcane world of money and banking in layman's terms. Prof. Murray Rothbard has done exactly that - in spades - in ''The Mystery of Banking.''

Unlike other books that set out to explain money and banking, this one has no rhetorical sleights of hand, no artful obfuscations of crucial points, no soporific droning on about organizational trivia and inconsequential minutiae. Instead, Professor Rothbard leads the reader, patiently and never condescendingly, from A to Z, unraveling myth and mystery each step of the way. Furthermore, he does so with warmth and wit. Here is a rare economist who both sees the forest as well as the trees and cares enough about his readers to ensure that they see forest and trees, too.

For those of you unacquainted with him, Murray Rothbard is a controversial scholar. His political viewpoints are extreme (''anarcho-capitalist'' seems a fair label). He is also a brilliant economist, erudite historian, and pellucid writer. The latter three facets of Rothbard predominate here, and the result may be the best introduction to money and banking ever written.

Starting with the definitive explanation of the nature and origin of money, which was first introduced in Carl Menger's pathbreaking ''Principles'' (1871), and then incorporating the best of Ludwig von Mises' ''The Theory of Money and Credit'' (1912) with his own extensive knowledge of the history of banking, Rothbard demystifies banking as it has never been demystified before.

Much of what Rothbard has to say flies in the face of the conventional wisdom and vested interests, but any open-minded individual who desires to solve ''the mystery of banking'' owes it to himself to ponder the penetrating presentation of this powerful thinker.