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Ludwig von Mises on money and inflation : a synthesis of several lectures PDF

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Preview Ludwig von Mises on money and inflation : a synthesis of several lectures

LUDWIG  MISES  MONEY AND INFLATION A Synthesis of Several Lectures LUDWIG  MISES  MONEY AND INFLATION A Synthesis of Several Lectures BettinaBienGreaves Copyright©2010bytheLudwigvonMisesInstitute 10987654321 PublishedundertheCreativeCommonsAttributionLicense3.0. http://creativecommons.org/licenses/by/3.0/ LudwigvonMisesInstitute 518WestMagnoliaAvenue Auburn,Alabama 36832 mises.org ISBN:978-1-933550-75-6 CONTENTS Introduction iii  HumanCooperation   eMediumofExchange—Money   eRoleoftheCourtsandJudges   GoldasMoney   GoldInflation   Inflation   InflationDestroysSavings   InflationandGovernmentControls   Money,Inflation,andWar   eConstitutionalSideofInflation   Capitalism,theRichandthePoor   CurrencyDebasementinOldenTimes   Many Economics Professors Believe the Quantity of Money ShouldbeIncreased  i  TwoMonetaryProblems   DeficitFinancingandCreditExpansion   CreditExpansionandtheTradeCycle   Balance of Payments Doctrine, Purchasing Power Parity and ForeignTrade   Inter-bankLiquidity;BankReserves   DoestheWorldNeedaWorldBankandMoreMoney?   Conclusion  ii Introduction UpontheestablishmentoftheFoundationforEconomicEducation(FEE) in, LudwigvonMisesbecameapart-timeadviser, andheservedin that capacity until his death in . Whenever FEE held a seminar in Irvington,ifhewasintownhewoulddriveoutfromNewYorkCity,where helivedwithhiswife,Margit,tospeaktotheparticipants. Histopicwas quite often inflation. I attended all those lectures, took them down in shorthand and later transcribed them. e thought occurred to me that eight to ten of his lectures on inflation, delivered in the s, might be integrated, with the duplications deleted, and turned into a single piece. Hencethispaper. Mises did not like to have his oral remarks quoted or published be- cause,obviously,theydidnotrepresentthecareandprecisionhedevoted to his writings. However, it does not seem to me that these lectures, as I have edited them, misrepresent his ideas in any way. Moreover, they re- vealhisunpretentiousmannerandtheinformalsimplestyleheusedwhen talkingtostudents. Heoftenrephrasedanideainseveraldifferentways, repeating it for emphasis. He was frequently accused of being “simplis- tic,”ofmakingeconomicsubjectsappeartooclearandsimple,butitwas this very approach that made it possible for persons, even those without anybackgroundineconomics,tounderstandandappreciatewhathewas saying. BettinaBienGreaves iii CHAPTER ONE Human Cooperation Humancooperationisdifferentfromtheactivitiesthattookplaceunder prehumanconditionsintheanimalkingdomandamongisolatedpersons orgroupsduringtheprimitiveages. especifichumanfacultythatdis- tinguishesmanfromanimaliscooperation. Mencooperate. atmeans that, intheiractivities, theyanticipatethatactivitiesonthepartofother people will accomplish certain things in order to bring about the results theyareaimingatwiththeirownwork. emarketisthatstateofaffairs underwhichIamgivingsomethingtoyouinordertoreceivesomething from you. I don’t know how many of you have some inkling, or idea, of theLatinlanguage,butinaLatinpronouncement,yearsagoalready, there was the best description of the market—do ut des—I give in order that you should give. I contribute something in order that you should contribute something else. Out of this there developed human society, themarket,peacefulcooperationofindividuals. Socialcooperationmeans thedivisionoflabor. evariousmembers,thevariousindividuals,inasocietydonotlive theirownliveswithoutanyreferenceorconnectionwithotherindividuals. ankstothedivisionoflabor,weareconnectedwithothersbyworking forthemandbyreceivingandconsumingwhatothershaveproducedfor us. As a result, we have an exchange economy which consists in the co- operationofmanyindividuals. Everybodyproduces,notonlyforhimself alone,butforotherpeopleintheexpectationthattheseotherpeoplewill produceforhim. issystemrequiresactsofexchange. e peaceful cooperation, the peaceful achievements of men are ef- fected on the market. Cooperation necessarily means that people are ex-  changing services and goods, the products of services. ese exchanges bringaboutthemarket. emarketispreciselythefreedomofpeopleto produce,toconsume,todeterminewhathastobeproduced,inwhatever quantity, inwhateverquality, andtowhomevertheseproductsaretogo. Such a free system without a market is impossible; such a free system is themarket. We have the idea that the institutions of men are either () the mar- ket, exchange between individuals, or () the government, an institution which, in the minds of the many people, is something superior to the marketandcouldexistintheabsenceofthemarket. etruthisthatthe government—that is the recourse to violence, necessarily the recourse to violence—cannotproduceanything. Everythingthatisproducedispro- duced by the activities of individuals and is used on the market in order toreceivesomethinginexchangeforit. It is important to remember that everything that is done, everything thatmanhasdone,everythingthatsocietydoes,istheresultofsuchvolun- tary cooperation and agreements. Social cooperation among men—and thismeansthemarket—iswhatbringsaboutcivilizationanditiswhathas broughtaboutalltheimprovementsinhumanconditionsweareenjoying today.  CHAPTER TWO e Medium of Exchange—Money e definition of money is very simple. Money is the general medium of exchange used on the market. Money, the medium of exchange, is something that individuals choose in order to facilitate the exchange of commodities. Money is a market phenomenon. What does that mean? Itmeansthatmoneydevelopedonthemarket, andthatitsdevelopment anditsfunctioninghavenothingtodowiththegovernment,thestate,or withtheviolenceexercisedbygovernments. e market developed what is called indirect exchange. e man whocouldn’tgetwhathewantedonthemarketthroughdirectexchange, throughbarter,tooksomethingelse,somethingthatwasconsideredmore easilynegotiable,somethingwhichheexpectedtotradelaterforwhathe reallywanted. emarket,thepeopleonthemarket,thepeopleinorga- nizing the division of labor and bringing about the system in which one man produces shoes and another produces coats, brought about the sys- tem in which coats can be exchanged against shoes, but only practically on account of the difference of the importance and the value, by the in- termediaryofmoney. usthemarketsystemmadeitpossibleforpeople whocouldnotgettodaywhattheyneeded, whattheywantedtobuyon themarket,totake,inreturnforwhattheybroughttotrade,amediumof exchange—that means something that was more easily used on the mar- ket than what they brought to the market to exchange. With a medium ofexchange,theoriginatorsoftheexchangecanattainsatisfactionfinally byacquiringthosethingswhichtheythemselveswanttoconsume. Moneyisamediumofexchangebecausepeopleuseitassuch. People don’t eat the money; they ask for the money because they want to use it 

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