The Theory of Money and Credit - Ludwig von Mises [85]
3 Social Consequences of Variations in the Value of Money When Only One Kind of Money Is Employed
If we disregard the exchange of present goods for future goods, and restrict our considerations for the time being to those cases in which the only exchanges are those between present goods and present money, we shall at once observe a fundamental difference between the effects of an isolated variation in a single commodity price, emanating solely from the commodity side, and the effects of a variation in the exchange ratio between money and other economic goods in general, emanating from the monetary side. Variations in the price of a single commodity influence the distribution of goods among individuals primarily because the commodity in question, if it plays a part in exchange transactions at all, is ex definitione not distributed among individuals in proportion to their demands for it. There are economic agents who produce it (in the broadest sense of the word, so as to include dealers) and sell it, and there are economic agents who merely buy it and consume it. And it is obvious what effects would result from a displacement of the exchange ratio between this particular good and the other economic goods (including money); it is clear who would be likely to benefit by them and who to be injured.
The effects in the case of money are different. As far as money is concerned, all economic agents are to a certain extent dealers. [12] Every separate economic agent maintains a stock of money that corresponds to the extent and intensity with which he is able to express his demand for it in the market. If the objective exchange value of all the stocks of money in the world could be instantaneously and in equal proportion increased or decreased, if all at once the money prices of all goods and services could rise or fall uniformly, the relative wealth of individual economic agents would not be affected. Subsequent monetary calculation would be in larger or smaller figures; that is all. The variation in the value of money would have no other significance than that of a variation of the calendar or of weights and measures.
The social displacements that occur as consequences of variations in the value of money result solely from the circumstance that this assumption never holds good. In the chapter dealing with the determinants of the objective exchange value of money it was shown that variations in the value of money always start from a given point and gradually spread out from this point through the whole community. And this alone is why such variations have an effect on the social distribution of income.
It is true that the variations in market exchange ratios that emanate from the commodity side are also not as a rule completed all at once; they also start at some particular point and then spread with greater or less rapidity. And because of this, price variations of this sort too are followed by consequences that are due to the fact that the variations in prices do not occur all at once but only gradually. But these are consequences that are encountered in a marked degree by a limited number of economic agents only namely, those who, as dealers or producers, are sellers of the commodity in question. And further, this is not the sum of the consequences of variations in the objective exchange value of a commodity. When the price of coal falls because production has increased while demand has remained unaltered, then, for example, those retailers are involved who have taken supplies from the wholesale dealers at the old higher price but are now able to dispose of them only at the new and lower price. But this alone will not account for all the social changes brought about by the increase of production of