Table Of ContentLUDWIG MISES
MONEY AND INFLATION
A Synthesis of Several Lectures
LUDWIG MISES
MONEY AND INFLATION
A Synthesis of Several Lectures
BettinaBienGreaves
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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
