Either way, you haven’t addressed a single argument from that article or my “list of grievances” (that the quantity theory expresses causal relationships between variables that do not exist/are meaningless (such as the average price of money, goods, and the notion of velocity) without the existence of any constants–which is impossible. Or the fact that each variable is dependent upon the other variables, or that mechanical quantity theorists confuse the the role of money (medium of exchange vs means of payment)). Your argument now is quite typical, namely that Austrians do not understand the quantity theory of money. Okay, cool, thanks for your time.
Of course, but only after you attack an entire school of thought.
it looks like esuric dropped his line about velocity being subjective and impossible to add across individuals so i guess i will drop this:
there is nothing subjective about the percentage of your income you hold as money. once i set on a definition of money (maybe m1 or m2) and a defintion of income (maybe dollars earned per month), i can measure it easily. what is subjective is what factors lead you to hold that percentage.
anyways, you say i have not directly addressed your arguments? i thought i was directly addressing your idea that velocity was meaningless and could not be independently defined (out of your list this seemed like the biggest complaint to me, since if the terms composing the equation of exchange are meaningless, what can we say?). if you have problems with my argument thats one thing, but to claim i never addressed those points at all? i wonder if you are reading my posts fully.
and i never said austrians don’t understand the quantity theory of money. i was only saying you and the guy posting at mises daily were suffering from a misunderstanding. in fact, i said aloud i doubted your confusion was shared by all austrians (though even if it were, we can correct this with better communication). but lets not get into the “i am suffering form a great internet injustice” song and dance.
but i gotta say i don’t like where this going. lets go ahead and leave this on amiable terms. : until we meet again, fair esuric!
Your translation / comparison / contrast between mainstream and Austrian perspectives is top notch. It requires a mastery of two schools of thought, difficult indeed.
And to you and Student, this thread has been very productive, even though it has gotten a little dicey lately.
I hope I’m not too late here, but I think the missing words of clarification(without yet touching on the subject of the money relation and interest rates), would be “Cantillon effects.” These are the primary reasons why some prices may even fall preciptuosly while a government is debasing a currency and attempting to produce cash induced changes in its purchasing power. You desired quotes, I found the following from pg 409 of Human Action quite helpful:
"Let us assume that the government issues an additional quantity of paper money. The government plans either to buy commodities and services or to repay debts incurred or to pay interest on such debts. However this may be, the treasury enters the market with an additional demand for goods and services; it is now in a position to buy more goods than it could buy before. The prices of the commodities it buys rise. If the government had expended in its purchases money collected by taxation, the taxpayers would have restricted their purchases and, while the prices of goods bought by the government would have risen, those of other goods would have dropped. But this fall in the prices of the goods the taxpayers used to buy does not occur if the government increases the quantity of money at its disposal without reducing the quantity of money in the hands of the public. The prices of some commodities–viz., of those the government buys–rise immediately, while those of the other commodities remain unaltered for the time being. But the process goes on. Those selling the commodities asked for by the government are now themselves in a position to buy more than they used previously. The prices of the things these people are buying in larger quantities therefore rise too. Thus the boom spreads from one group of commodities and services to other groups until all prices and wage rates have risen. The rise in prices is thus not synchronous for the various commodities and services.
When eventually, in the further course of the increase in the quantity [p. 413] of money, all prices have risen, the rise does not affect the various commodities and services to the same extent. For the process has affected the material position of various individuals to different degrees. While the process is under way, some people enjoy the benefit of higher prices for the goods or services they sell, while the prices of the things they buy have not yet risen or have not risen to the same extent. On the other hand, there are people who are in the unhappy situation of selling commodities and services whose prices have not yet risen or not in the same degree as the prices of the goods they must buy for their daily consumption. For the former the progressive rise in prices is a boon, for the latter a calamity. Besides, the debtors are favored at the expense of the creditors. When the process once comes to an end, the wealth of various individuals has been affected in different ways and to different degrees. Some are enriched, some impoverished. Conditions are no longer what they were before. The new order of things results in changes in the intensity of demand for various goods. The mutual ratio of the money prices of the vendible goods and services is no longer the same as before. The price structure has changed apart from the fact that all prices in terms of money have risen. The final prices to the establishment of which the market tends after the effects of the increase in the quantity of money have been fully consummated are not equal to the previous final prices multiplied by the same multiplier."