I apologize for my honesty.
TY Danny, I was waiting.
And though I don’t think his understanding is superior to mine, but inferior, as I have provided evidence for, you are entitled to your opinion.
A quick shout out to those think my quotes are out of context. How 'bout if you read the book? After all any quote can be laughed off as out of context. But that’s not enough. You have to PROVE that it is out of context. And also say what it really means.
And Mises isn’t bipolar, because there are no quotes where he says inflation is harmless, or that deflation is bad. Not one.
All the quotes are very relevant to those who said here that Mises didn’t “pay attention” to price inflation, and to Esuric who said it’s “not a problem”, as I have gathered 7 quotes from him earlier from this thread alone saying so.
I don’t know why I’m still responding to you but,
… I’ve never seen someone this lost…
Mises’ wouldn’t use such clumsy terminology but he devotes an entire section in TMC towards refuting deflationists, and claims (again in chapter 17),
Also, and I’ve said this to you about 15 times now, there are two different types of deflation. One is considered “good,” while the other is considered “bad.”
what are these undesirable consequences?
I don’t think this is Mises’s finest moment, the community has ‘decreased’ welfare because they mined gold and not steel? because more steel is useful to them but more gold isn’t… well then… why did they dig up the gold? are we going to second guess consenting capitalist acts between adults under free trade where force are fraud are nowhere to be seen? Is minting coins from gold when there already exist some coins in circulation a case of ‘market failure’?
for more scholarly investigation than I can offer see Barnett and Block https://mises.org/journals/qjae/pdf/qjae7_1_4.pdf
The contest for the Misesian legacy wages evermore!
I must say I am disappointed across the board by quite how mean-spirited the ‘discussion’ here has become. Lighten up peoples, we are all friends here apart from those of us that are enemies, and those of us that are enemies never have to look at each others faces and are many miles apart. life is good.
First of all, all your quotes are from TMC, his earliest work, and he is known to have changed his mind in later works about this very question, whether you have to keep the money supply at some arbitrary high.
From the book Money and Inflation [1969] [which I quoted before, but you are reluctant to address]:
Now there is a doctrine that says there is not enough gold. The rea-
son why these critics of gold are against the gold standard is due to their
belief that the quantity of moneymust be increased. Now the quantity of
money adjusts itself necessarily through prices to the demands of the pub-
lic.
Yet, there are authors, professors, textbook writers, who tell us there is
not enough money and they suggest a paper currency and regular yearly
increases in the quantity of money.They don’t know what they are talking
about.
Second of all, as I pointed out before but you are reluctant to address for some reason, he is not talking about increased demand for money in the sense you were using. I told you about this before, and you were reluctant to address it. See page 300-1 of TMC.
Third, Chapter 17 is not about refuting deflationists. What sophistry to make such an absurd claim.
Finally, your last quote is a cheap attempt at deception, as I will show. Either you did not bother reading the very next sentence, or you intentionally omitted it. I think I caught you at this once before, in fact with this very piece of quote from TMC. But maybe it wasn’t you. Maybe two people tried the same piece of sophistry.
Because Mises goes on to describe what the horrific consequences are: People will start mining for gold, instead of working at their jobs. Less gold would be available for dentists to fill teeth. Stuff like that.
He then goes on to say that none of those disadvantages of deflation exist with fiat money*.*
Thank you for agreeing with me, at least partially. I count not 15, but zero times you have made any such distinction
And as your reward, look at this:
Many famous professors of economics think that the supply of money is
insufficient. It’s unbelievable but we have now already for a long time,
for many years, textbooks that say, in every new edition, that the quan-
tity of moneymust increase by 2%, or 5%, or 7%. They change it from
year to year—this is without any importance, what quantity they recom-
mend is not so important—what is important is that they say that such
an increase is good from the point of view of their policies. Wonderful!
The government, the banks, can distribute more money, but they cannot
distribute more goods. And this is the problem. As this additional money
will raise the prices of goods, those who do not get any of this additional
money are hurt. And this is what people don’t realize, what they don’t see.
Still not a word about the trade cycle yet.
Man, that Mises was something else. They keep on coming:
An increase in the quantity of many things is very good—yes, an in-
crease in the supply of those things whichareuseful. But an increase in the
supply of, let us say rats and mice, would not be very useful. Fortunately
this is not a problem men have to decide because the interests of all people
agree in this regard.
But their interests do not agree with regard to money.
What misleads the thinking of many people, and unfortunately also the
thinking of those peoplewho are operating our governmental and politi-
cal activities, is the idea that the quantity ofmoney counts. It is certainly
better for the individual to have more money than less. But it isnot better
for the whole economic system to havemore money than less. Money is
a medium of exchange. And that means, first of all, that its quantity is
without any importance for the perfection of its functions. If you increase
the total quantity of money, the total quantityof the medium of exchange,
you do not improve conditions generally; you only change exchange ratios
between the individuals’ evaluations of goods and services and of the thing
used as money.
Can it be any clearer?
This is one undesirable consequence, but Mises’s explicitly says, “all of the undesirable consequences.”
When did I make this claim? He has a small part devoted to deflationism/restrictionism. Also, you continuously conflate price-stabilization mandates with monetary equilibrium theory. The latter does not intend to stabilize prices, and it does not oppose general price deflation. But I can’t expect you to understand such subtleties. This will be my last response because I’ve literally had more fruitful conversations with my 3 year old niece.
The major and most profound problem associated with inflation, i.e., an expansion in the supply of money beyond the demand for money, is not that “prices go up,” but rather that some prices go up faster than others, while some prices remain unchanged, or actually fall. This is what causes a misallocation of resources towards ultimately untenable productions and an arbitrary distribution of wealth from those who receive the money later, towards those who receive it earlier.
The focus on the relative structure of prices, and the uneven adjustments, is a major Austrian insight that is lost amongst many mainstream economists. Additionally, this uneven adjustment process occurs for deflationary episodes as well:
Now there are other effects of inflation, which I’ve already mentioned. The most serious of which (if we exclude the influence it exerts over relative prices) is inflationary expectations which elevates yields and may lead to a hyperinflation (when the demand for money collapses). The other effects, namely menu costs and shoe leather costs, are, when compared to the other affects, relatively inconsequential. Now it’s important to keep this in mind because many neoclassical economists, who are unfamiliar with Austrian insights, actually believe that inflation is a minor problem, a mere nuisance (they are aware of hyperinflations but believe that they are highly improbable).
Next, to claim that deflation is “good” because it “lowers prices” is not only overly simplistic, but entirely ignores monetary theory altogether. It is armchair economics. If this were true, than central banks would be extremely efficient social institutions which could intentionally pursue perpetual deflationary mandates, and make all of society wealthier. Additionally, the 30% deflation rates during the great depression should have acted as a major economic stimulus, promoting general economic activity.
A few other ridiculous accusations that I will now address:
- I don’t support inflation and I don’t support government control of the monetary system. I support a free banking system free from arbitrary regulations.
- I’m fully aware of the fact that inflation is solely caused by an expansion in the supply of money.
- I don’t believe that Ben Bernanke should print more money (he’s already done way too much).
Okay so stop saying that “mises never claimed” x. And your endless appeals to authority reveal how intellectually feeble you are, not only because you fail to see that you’re consistently engaging in an argumentative fallacy, but because you don’t understand the quotes that you’re providing (Mises is attacking the Monetarists and their price-stabilization mandate in almost all of those quotes).
Man, that Mises was something else. They keep on coming:
An increase in the quantity of many things is very good—yes, an in-
crease in the supply of those things whichareuseful. But an increase in the
supply of, let us say rats and mice, would not be very useful. Fortunately
this is not a problem men have to decide because the interests of all people
agree in this regard.
But their interests do not agree with regard to money.
What misleads the thinking of many people, and unfortunately also the
thinking of those peoplewho are operating our governmental and politi-
cal activities, is the idea that the quantity ofmoney counts. It is certainly
better for the individual to have more money than less. But it isnot better
for the whole economic system to havemore money than less. Money is
a medium of exchange. And that means, first of all, that its quantity is
without any importance for the perfection of its functions. If you increase
the total quantity of money, the total quantityof the medium of exchange,
you do not improve conditions generally; you only change exchange ratios
between the individuals’ evaluations of goods and services and of the thing
used as money.
Can it be any clearer?
Where is this quote from?
Oh happy day. Mises goes out of his way to explain to all why changing the quantity of money doesn’t achieve anything:
The most outspoken defender and preacher of inflation in our age,
Lord Keynes, was right from his point of view when he attacked what is
called “Say’s Law.”Now Say’s Law is one of the great achievements of the
early days of economic theory. The Frenchman, Jean-Baptiste Say, in
the so-called Say’s Law, said you can’t improve conditions by increasing
the quantity of money generally; when business is not good, it is not be-
cause there isn’t enough money. What Say had in mind, what he said
when he criticized the doctrine that there should be more money, was
that everything that somebody produces is at the same time a demand for
other things. If there are more shoes produced, these shoes are something
that is offered on the market in exchange for other goods. Ultimately
goods are not exchanged against money—money is only a mediumof ex-
change—goods are exchanged against other commodities. And if you in-
crease the quantity of money you do not improve anybody’s situation ex-
cept the definite man to whom you give it; this man can then buy more,
can then withdraw more things from the market.
Couldn’t have said it better meself.
Smiling Dave, you’re not helping things with the cheeky swagger. Quote your quotes and make your case without the needling.
All the quotes are from the free book, Money and Inflation, available right here at mises.org
Ok no more needling
OOPs, my bad. You said an entire section, not an entire chapter. But of course that section said clearly that all the problems of deflation do not exist with fiat money.
It comes from a person who claims to have heard Mises say this in a lecture at the FEE in the 1960s. She promises that Mises actually said this:
Either way, whether Mises said it or not is entirely inconsequential; it’s simply incorrect.
Even if all prices were to go up in unison and uniformly, this would present a redistribution from money-holders to debtors – a problem for the former and a benefit for the latter. The second bolded section above (“arbitrary distribution”) occurs regardless of whether the prices had risen uniformly or not.
EDIT: How would a free market discern this mythical “demand for money” so it knows when to stop expanding the money supply? At some point, everyone just stops demanding more money (“Had enough!”) and banks just stop printing right then and there?
Z.
Aren’t all those quotes given in a context of Mises commenting on fiat money?
The redistribution caused by altered monetary conditions, either inflation or deflation, between creditors and debtors, is well understood even amongst the mainstream. Mises’ goes beyond this and reveals that this redistribution process occurs throughout the entire economy. This process could not exist if prices rise simultaneously and uniformly. All would increase their nominal cash balances proportionately. This (Cantillon effects) can only occur when there are uneven and delayed price adjustments.