Ludwig von Mises Quote #1
A government always finds itself obliged to resort to inflationary measures when it cannot negotiate loans and dare not levy taxes, because it has reason to fear that it will forfeit approval of the policy it is following if it reveals too soon the financial and general economic consequences of that policy. Thus inflation becomes the most important psychological resource of any economic policy whose consequences have to be concealed; and so in this sense it can be called an instrument of unpopular, i.e. of anti-democratic, policy, since by misleading public opinion it makes possible the continued existence of a system of government that would have no hope of the consent of the people if the circumstances were clearly laid before them. That is the political function of inflation. It explains why inflation has always been an important resource of policies of war and revolution and why we also find it in the service of socialism.
Ludwig von Mises Quote #2
A lasting order cannot be established by bayonets.
Ludwig von Mises Quote #3
A metallic money, the augmentation or diminution of the quantity of metal available for which is independent of deliberate human intervention, is becoming the modern monetary ideal. The significance of adherence to a metallic-money system lies in the freedom of the value of money from State influence that such a system guarantees.
Ludwig von Mises Quote #4
A new type of superstition has got hold of people's minds, the worship of the
state. People demand the exercise of the methods of coercion and compulsion,
of violence and threat. Woe to anybody who does not bend his knee to the
fashionable idols!Ludwig von Mises Quote #5
A society that chooses between capitalism and socialism does not choose between two social systems; it chooses between social cooperation and the disintegration of society.
Ludwig von Mises Quote #6
A third group of inflationists do not deny that inflation involves serious disadvantages. Nevertheless, they think that there are higher and more important aims of economic policy than a sound monetary system. They hold that although inflation may be a great evil, yet it is not the greatest evil, and that the State might under certain circumstances find itself in a position where it would do well to oppose greater evils with the lesser evil of inflation.
Ludwig von Mises Quote #7
a variation in the objective exchange-value of money can arise only when a force is exerted in one direction that is not cancelled by a counteracting force in the opposite direction. If the causes that alter the ratio between the stock of money and the demand for it from the point of view of an individual consist merely in accidental and personal factors that concern that particular individual only, then, according to the law of large numbers, it is likely that the forces arising from this cause, and acting in both directions in the market, will counterbalance each other.
Ludwig von Mises Quote #8
According to the current view, the maintenance of sound monetary conditions is only possible with a 'credit balance of payments'.
The confutation of this and related objections is implicit in the Quantity Theory and in Gresham's Law. The Quantity Theory shows that money can never permanently flow abroad from a country in which only metallic money is used (the 'purely metallic currency' of the Currency Principle). The tightness in the domestic market called forth by the efflux of part of the stock of money reduces the prices of commodities, and so restricts importation and encourages exportation, until there is once more enough money at home. The precious metals which perform the function of money are distributed among individuals, and consequently among separate countries, according to the extent and intensity of the demand of each for money. State intervention to assure to the community the necessary quantity of money by regulating its international nlovements is supererogatory.Ludwig von Mises Quote #9
Against what is stupid, nonsensical, erroneous, and evil, [classical] liberalism fights with the weapons of the mind, and not with brute force and repression.
Ludwig von Mises Quote #10
All index-number systems, so far as they are intended to have a greater significance for monetary theory than that of mere playing with figures, are based upon the idea of measuring the utility of a certain quantity of money. The object is to determine whether a gramme of gold is more or less useful to-day than it was at a certain time in the past. As far as objective use-value is concerned, such an investigation may perhaps yield results. We may assume the fiction, if we like, that, say, a loaf of bread is always of the same utility in the objective sense, always comprises the same food value. It is not necessary for us to enter at all into the question of whether this is permissible or not.
Ludwig von Mises Quote #11
All that the State need do, and can do, in order to preserve the monetary system undisturbed, is to refrain from such intervention. That is the essence of the monetary theory of the classical economists and their immediate successors, the Currency School. It is possible to refine and amplify this doctrine with the aid of the modern subjective theory; but it is impossible to overthrow it, and impossible to put anything else in its place. Those who are able to forget it only show that they are unable to think as economists.
Ludwig von Mises Quote #12
All varieties of the producers' policy are advocated on the ground of their alleged ability to raise the party members' standard of living. Protectionism and economic self-sufficiency, labor union pressure and compulsion, labor legislation, minimum wage rates, public spending, credit expansion, subsidies, and other makeshifts are always recommended by their advocates as the most suitable or the only means to increase the real income of the people for whose votes they canvass. Every contemporary statesman or politician invariably tells his voters: My program will make you as affluent as conditions may permit, while my adversaries' program will bring you want and misery.
Ludwig von Mises Quote #13
Alterations in real prices occur slowly as a rule. But this stability of prices has its cause in the stability of the price-determinants, not in the Law of Price-determination itself. Prices change slowly because the subjective valuations of human beings change slowly. Human needs, and human opinions as to the suitability of goods for satisfying those needs, are no more liable to frequent and sudden changes than are the stocks of goods available for consumption, or the manner of their social distribution;
Ludwig von Mises Quote #14
An attempt is sometimes made to demonstrate the desirability of measures directed against speculation by reference to the fact that there are times when there is nobody in opposition to the bears in the foreign-exchange market so that they alone are able to determine the rate of exchange. That, of course, is not correct. Yet it must be noticed that speculation has a peculiar effect in the case of a currency whose progressive depreciation is to be expected while it is impossible to foresee when the depreciation will stop, if at all. While, in general, speculation reduces the gap between the highest and lowest prices without altering the average price-level, here, where the movement will presumably continue in the same direction, this naturally can not be the case. The effect of speculation here is to permit the fluctuation, which would otherwise proceed more uniformly, to proceed by fits and starts with the interposition of pauses.
Ludwig von Mises Quote #15
Any intervention, such as that of the German Reichsbank in the Spring of 1923, in which only a small part of the increasing note-expansion was recovered by the banks through the sale of foreign bills, would necessarily be unsuccessful. Led by the idea of opposing speculation, inflationistic governments have allowed themselves to become involved in measures whose meaning is hardly intelligible. Thus at one time the importation of notes, then their exportation, then again both their exportation and importation, have been prohibited. Exporters have been forbidden to sell for their own country's notes, importers to buy with them.
Ludwig von Mises Quote #16
As a rule, however, an increase in the value of money spreads only gradually. The first of those who have to content themselves with lower prices than before for the commodities they sell, while they still have to pay the old higher prices for the commodities they buy, are those who are injured by the increase in the value of money. Those, however, who are the last to have to reduce the prices of the commodities they sell, and have meanwhile been able to take advantage of the fall in the prices of other things, are those who profit by the change.
Ludwig von Mises Quote #17
As regards the social apparatus of repression and coercion, the government, there cannot be any question of freedom. Government is essentially the negation of liberty. It is the recourse to violence or threat of violence in order to make all people obey the orders of the government, whether they like it or not. As far as the government’s jurisdiction extends, there is coercion, not freedom. Government is a necessary institution, the means to make the social system of cooperation work smoothly without being disturbed by violent acts on the part of gangsters whether of domestic or of foreign origin. Government is not, as some people like to say, a necessary evil; it is not an evil, but a means, the only means available to make peaceful human coexistence possible. But it is the opposite of liberty. It is beating, imprisoning, hanging. Whatever a government does it is ultimately supported by the actions of armed constables.
Ludwig von Mises Quote #18
At one time, this gave rise to the question of whether the legal validity of the money was determined by the stamp of the ruler of the country or by the metal content of the coin; later, to the question of whether the command of the law or the free usage of business was to settle if the money was legal tender or not. The answer of public opinion, grounded on the principles of private property and the protection of acquired rights, ran the same in both cases: Prout quidque eontraetum est, ita et solvi debet; ut cum re eontraximus, re solvi debet, veluti cum mutuum dedimus, ut Tetro pecuniae tantundem solvi debeat.
Ludwig von Mises Quote #19
Before it was usual to acquire goods in the market, not for personal consumption, but simply in order to exchange them again for the goods that were really wanted, each individual commodity was only accredited with that value given by the subjective valuations based on its direct utility. It was not until it became customary to acquire certain goods merely in order to use them as media of exchange that people began to esteem them more highly than before, on account of this possibility of using them in indirect exchange. The individual valued them in the first place because they were useful in the ordinary sense, and then additionally because they could be used as media of exchange. Both sorts of valuation are subject to the law of marginal utility.
Ludwig von Mises Quote #20
Big variations in the value of money give rise to the danger that commerce will emancipate itself from the money which is subject to State influence and choose a special money of its own. But without matters going so far as this it is still possible for all the consequences of variations in the value of money to be eliminated if the individuals engaged in economic activity clearly recognize that the purchasing power of money is constantly sinking and act accordingly. If in all business transactions they allow for what the objective exchange-value of money will probably be in the future, then all the effects on credit and commerce are finished with. In proportion as the Germans began to reckon in terms of gold, so was further depreciation rendered incapable of altering the relationship between creditor and debtor or even of influencing trade. By going over to reckoning in terms of gold, the community freed itself from the inflationary policy of the government. Thus it checkmated this inflationary policy, and eventually even the government was obliged to acknowledge gold as a basis of reckoning.
Ludwig von Mises Quote #21
But even though questions of currency policy are never more than questions of the value of money, they are sometimes disguised so that their true nature is hidden from the uninitiated. Public opinion is dominated by erroneous views on the nature of money and its value, and misunderstood slogans have to take the place of clear and precise ideas. The fine and complicated mechanism of the money and credit system is wrapped in obscurity, the proceedings on the Stock Exchange are a mystery, the function and significance of the banks elude interpretation. So it is not surprising that the arguments brought forward in the conflict of the different interests often missed the point altogether. Counsel was darkened with cryptic phrases whose meaning was probably hidden even from those who uttered them. Americans spoke of 'the dollar of our fathers' and Austrians of 'our dear old gulden note'; silver, the money of the common man, was set up against gold, the money of the aristocracy. Many a tribune of the people, in many a passionate discourse, sounded the loud praises of silver, which, hidden in deep mines, lay awaiting the time when it should come forth into the light of day to ransom miserable humanity, languishing in its wretchedness.
Ludwig von Mises Quote #22
But here again it must be observed that this is a matter of a variation brought about through dynamic agencies. The static state, for which the contention attributed to the adherents of the mechanical version of the Quantity Theory would be valid, is disturbed by the fact that the exchange-ratios between individual commodities are necessarily modified. Under certain conditions, the technique of the market may have the effect of extending this modification to the exchange-ratio between money and other economic goods also.
Ludwig von Mises Quote #23
But it must be observed that as the depreciation of money proceeds, the demand for money (i.e. for the kind of money in question) gradually begins to fall. When loss of wealth is suffered in proportion to the length of time money is kept on hand, endeavours are made to reduce cash holdings as much as possible. N ow if every individual, even if his circumstances are otherwise unchanged, no longer wishes to maintain his cash holding at the same level as before the beginning of the inflation, the demand for money in the whole community, which can only be the sum of the individuals' demands, decreases too. There is also the additional fact that as commerce gradually-begins to use foreign money and actual gold in place of notes, individuals begin to hold part of their reserves in foreign money and in gold and no longer in notes.
Ludwig von Mises Quote #24
But there are nevertheless three conclusions that seem to follow from our critical examination of the possibilities of inflationary policy. In the first place, all the aims of inflationism can be secured by other sorts of intervention in economic affairs, and secured better, and without undesirable incidental effects. If it is desired to relieve debtors, moratoria may be declared or the obligation to repay loans may be removed altogether; if it is desired to encourage exportation, export premiums may be granted; if it is desired to render importation more difficult, simple prohibition may be resorted to, or import duties levied. All these measures permit discrimination between classes of people, branches of production, and districts, and this is impossible for an inflationary policy. Inflation benefits all debtors, including the rich, and injures all creditors, including the poor; adjustment of the burden of debts by special legislation allows of differentiation. Inflation encourages the exportation of all commodities and hinders all importation; premiums, duties, and prohibitions can be employed discriminatorily.
Ludwig von Mises Quote #25
But when States did debase the coinage, it was always from purely fiscal motives. The government needed financial help, that was all; it was not concerned with questions of currency policy.
Ludwig von Mises Quote #26
By 'the objective exchange-value of money' we are accordingly to understand the possibility of obtaining a certain quantity of other economic goods in exchange for a given quantity of money; and by 'the price of money' this actual quantity of other goods.
Ludwig von Mises Quote #27
Common man does not speculate about the great problems. With regard to them he relies upon other people's authority, he behaves as every decent fellow must behave,'' he is like a sheep in the herd. It is precisely this intellectual inertia that characterizes a man as a common man. Yet the common man does choose. He chooses to adopt traditional patterns or patterns adopted by other people because he is convinced that this procedure is best fitted to achieve his own welfare. And he is ready to change his ideology and consequently his mode of action whenever he becomes convinced that this would better serve his own interests.
Ludwig von Mises Quote #28
Consistently and uninterruptedly continued inflation must eventually lead to collapse. The purchasing power of money will fall lower and lower, until it eventually disappears altogether. It is true that an endless process of depredation can be imagined. We can imagine the purchasing power of money getting continually lower without ever disappearing altogether, and prices getting continually higher without it ever becoming impossible to obtain commodities in exchange for notes. Eventually this would lead to a situation in which even retail transactions were in terms of millions and billions and even higher figures; bu t the monetary system itself would remain. But such an imaginary state of affairs is hardly within the bounds of possibility. In the long run, a money which continually fell in value would have no commercial utility. It could not be used as a standard of deferred payments. For all transactions in which commodities or services were not exchanged for cash, another medium would have to be sought. In fact, a money that is continually depreciating becomes useless even for cash transactions. Everybody attempts to minimize his cash reserves, which are a source of continual loss.
Ludwig von Mises Quote #29
Depreciation of money can benefit debtors only when it is unforeseen. If inflationary measures and a reduction of the value of money are expected, then those who lend money will demand higher interest in order to compensate their probable loss of capital, and those who seek loans will be prepared to pay the higher interest because they have a prospect of gaining on capital account.
Ludwig von Mises Quote #30
Determinants of prices have their effect only through the medium of the subjective estimates of individuals; and the extent to which any given factor influences these subjective estimates can never be predicted.
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