On the manipulation of money and credit : three treatises on trade-cycle theory

224 Pages·2011·3.11 MB·English

by  Ludwig Von Mises, Percy L Greaves, Jr., Bettina Bien Greaves

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On the Manipulation of Money and Credit
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The Liberty Fund Library of the Works of Ludwig von Mises
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The Anti-capitalistic Mentality
Bureaucracy
Economic Freedom and Interventionism: An Anthology
of Articles and Essays
Economic Policy: Thoughts for Today and Tomorrow
Human Action: A Treatise on Economics
Interventionism: An Economic Analysis
Liberalism: The Classical Tradition
Nation, State, and Economy: Contributions to the Politics
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Omnipotent Government: The Rise of the Total State and Total War
On the Manipulation of Money and Credit: Three Treatises on
Trade-Cycle Theory
Planning for Freedom: Let the Market System Work
A Collection of Essays and Addresses
Socialism: An Economic and Sociological Analysis
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The Ultimate Foundation of Economic Science: An Essay
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Selected Writings of Ludwig von Mises
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Volume 2: Between the Two World Wars: Monetary Disorder,
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On the Manipulation
of Money and Credit
Three Treatises on Trade-Cycle Theory
• Ludwig von Mises

Translated and with a Foreword by Bettina Bien Greaves
Edited by Percy L. Greaves, Jr.
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This book is published by Liberty Fund, Inc., a foundation established
to encourage study of the ideal of a society of free and responsible
individuals.
The cuneiform inscription that serves as our logo and as the design
motif for our endpapers is the earliest-known written appearance of the
word “freedom” (amagi), or “liberty.” It is taken from a clay document
written about 2300 b.c. in the Sumerian city-state of Lagash.
© 1978 by Liberty Fund, Inc.
New foreword and index © 2011 by Liberty Fund, Inc.
All rights reserved
On the Manipulation of Money and Credit was originally published in
1978 by Free Market Books.
Front cover photograph of Ludwig von Mises used by permission of the
Ludwig von Mises Institute, Auburn, Alabama.
Frontispiece courtesy of Bettina Bien Greaves.
Printed in the United States of America
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Library of Congress Cataloging-in-Publication Data
Von Mises, Ludwig, 1881–1973.
On the manipulation of money and credit: three treatises on
trade-cycle theory / Ludwig von Mises; translated and with a fore-
word by Bettina Bien Greaves; edited by Percy L. Greaves, Jr.
p. cm.
Includes bibliographical references and index.
isbn 978-0-86597-761-7 (hardcover: alk. paper)—
isbn 978-0-86597-762-4 (pbk.: alk. paper)
1. Monetary policy. 2. Credit. 3. Business cycles.
I. Greaves, Percy L. II. Greaves, Bettina Bien. III. Title.
hb3723 .v664 2011
332.4′6—dc22 2009024020
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Contents
Foreword xiii
STABILIzATION OF THE MONETARy UNIT—
FROM THE VIEWPOINT OF THEORy (1923) 1
Introduction 3
chapter I The Outcome of Inflation
1 Monetary Depreciation 5
2 Undesired Consequences 8
3 Effect on Interest Rates 9
4 The Run from Money 10
5 Effect of Speculation 11
6 Final Phases 12
7 Greater Importance of Money to a Modern Economy 13
chapter II The Emancipation of Monetary Value
from the Influence of Government
1 Stop Presses and Credit Expansion 15
2 Relationship of Monetary Unit to World Money—Gold 16
3 Trend of Depreciation 17
chapter III The Return to Gold
1 Eminence of Gold 19
2 Sufficiency of Available Gold 20
chapter IV The Money Relation S
1 Victory and Inflation 22 N
2 Establishing Gold “Ratio” 23 L
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chapter V Comments on the “Balance
of Payments” Doctrine
1 Refined Quantity Theory of Money 26
2 Purchasing Power Parity 27
3 Foreign Exchange Rates 28
4 Foreign Exchange Regulations 30
chapter VI The Inflationist Argument
1 Substitute for Taxes 32
2 Financing Unpopular Expenditures 33
3 War Reparations 34
4 The Alternatives 35
5 The Government’s Dilemma 37
chapter VII The New Monetary System
1 First Steps 39
2 Market Interest Rates 41
chapter VIII The Ideological Meaning of Reform
1 The Ideological Conflict 43
Appendix. Balance of Payments and Foreign Exchange Rates 45
MONETARy STABILIzATION AND
CyCLICAL POLICy (1928) 51
Preface 53
Part I Stabilization of the Purchasing Power of the
Monetary Unit
chapter I The Problem
1 “Stable Value” Money 59
2 Recent Proposals 60
chapter II The Gold Standard
S 1 The Demand for Money 62
N 2 Economizing on Money 64
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3 Interest on “Idle” Reserves 66
4 Gold Still Money 68
chapter III The “Manipulation” of the Gold Standard
1 Monetary Policy and Purchasing Power of Gold 69
2 Changes in Purchasing Power of Gold 71
chapter IV “Measuring” Changes in the Purchasing
Power of the Monetary Unit
1 Imaginary Constructions 73
2 Index Numbers 76
chapter V Fisher’s Stabilization Plan
1 Political Problem 79
2 Multiple Commodity Standard 80
3 Price Premium 81
4 Changes in Wealth and Income 83
5 Uncompensatable Changes 85
chapter VI Goods-induced and Cash-induced Changes
in the Purchasing Power of the Monetary Unit
1 The Inherent Instability of Market Ratios 87
2 The Misplaced Partiality to Debtors 89
chapter VII The Goal of Monetary Policy
1 Liberalism and the Gold Standard 92
2 “Pure” Gold Standard Disregarded 93
3 The Index Standard 94
Part II Cyclical Policy to Eliminate Economic Fluctuations
chapter I Stabilization of the Purchasing Power of the
Monetary Unit and Elimination of the
Trade Cycle
1 Currency School’s Contribution 99
2 Early Trade Cycle Theories 100 S
3 The Circulation Credit Theory 102 N
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chapter II Circulation Credit Theory
1 The Banking School Fallacy 105
2 Early Effects of Credit Expansion 107
3 Inevitable Effects of Credit Expansion on Interest Rates 109
4 The Price Premium 110
5 Malinvestment of Available Capital Goods 110
6 “Forced Savings” 112
7 A Habit-forming Policy 113
8 The Inevitable Crisis and Cycle 114
chapter III The Reappearance of Cycles
1 Metallic Standard Fluctuations 117
2 Infrequent Recurrences of Paper Money Inflations 118
3 The Cyclical Process of Credit Expansions 119
4 The Mania for Lower Interest Rates 121
5 Free Banking 123
6 Government Intervention in Banking 125
7 Intervention No Remedy 126
chapter IV The Crisis Policy of the Currency School
1 The Inadequacy of the Currency School 128
2 “Booms” Favored 130
chapter V Modern Cyclical Policy
1 Pre–World War I Policy 131
2 Post–World War I Policies 132
3 Empirical Studies 133
4 Arbitrary Political Decisions 135
5 Sound Theory Essential 137
chapter VI Control of the Money Market
1 International Competition or Cooperation 139
2 “Boom” Promotion Problems 141
3 Drive for Tighter Controls 142
chapter VII Business Forecasting for Cyclical Policy
and the Businessman
S 1 Contributions of Business Cycle Research 145
N 2 Difficulties of Precise Prediction 146
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