The Theory of Money and Credit - Ludwig von Mises [91]
[6] See Walsh, The Measurement of General Exchange Value (New York, 1901), pp. 80 ff.; Zizek, Die statistischen Mittelwerte (Leipzig, 1908), pp. 183 ff.
[7] See Mügel, Geldentwertung und Gesetzgebung (Berlin, 1923), p. 24.
[8] [It should be remembered that all this was written in 1924. H.E.B.]
[9] At Vienna in March 1892 at the sessions of the Currency Inquiry Commission, which was appointed in preparation for the regulation of the Austrian currency, Carl Menger remarked: "I should like to add that not only legislators, but all of us in our everyday life, are in the habit of disregarding the fluctuations in the purchasing power of money. Even such distinguished bankers as yourselves, gentlemen, draw up your balance sheet at the end of the year without inquiring whether by any chance the sum of money representing the share capital has gained or lost in purchasing power." These remarks of Menger's were not understood by the director of the Bodenkreditanstalt, Theodor von Taussig, the most outstanding of all Austrian bankers. He replied: "A balance sheet is a balancing of the property or assets of a company or individual against its liabilities, both expressed in terms of the accepted measure of value or monetary standard, that is, for Austria in gulden. Now I cannot see how, when we are thus expressing property and indebtedness in terms of the standard (which we have assumed to be homogeneous), we are to take account of variations in the standard of measurement instead of taking account of variations in the object to be measured, as is customary." Taussig completely failed to see that the point at issue concerned the estimation of the value of goods and the amount of depreciation to be written off, and not the balancing of monetary claims and monetary obligations, or that a profit and loss account, if it is not to be hopelessly inexact, must take account of variations in the value of money. Menger had no occasion to raise this point in his reply, since he was rather concerned to show that his remarks were not to be interpreted, as Taussig was inclined to interpret them, as an accusation of dishonest practice on the part of the bank directors. Menger added: "What I said was merely that all of us, not only the directors of the banks (I said even such men as are at the head of the banks), make the mistake of not taking account in everyday life of changes in the value of money" (Stenographische Protokolle über die vom 8. bis 17. März 1892 abgehaltenen Sitzungen der nach Wien einberufenen Währungs-Enquete- Kommission [Vienna, 2892], pp. 221, 257, 270).
[10] See my book, Nation, Staat und Wirtschaft (Vienna, 1919), pp. 129 ff. A whole series of writings dealing with these questions has since appeared in Germany and Austria.
[11] Cf. further pp. 401 ff. below.
[12] See Ricardo, Letters to Malthus, ed. Bonar (Oxford, 1887), p. 10.
[13] See Hume, Essays, ed. Frowde (London), p. 294 ff.
[14] Auspitz and Lieben, Untersuchungen über die Theorie des Preises (Leipzig, 1889), p. 65.
Chapter 13. Monetary Policy
1. Monetary Policy Defined. 2. The Instruments of Monetary Policy. 3. Inflationism. 4. Restrictionism or Deflationism. 5. Invariability of the Objective Exchange-Value of Money as the Aim of Monetary Policy. 6. The Limits of Monetary Policy. 7. Excursus: The Concepts, Inflation and Deflation
1 Monetary Policy Defined[1]
The economic consequences of fluctuations in the objective exchange value of money have such important bearings on the life of the community and of the individual that as soon as the state had abandoned the attempt to exploit for fiscal ends its authority in monetary matters, and as soon as the large-scale development of the modern economic community had enabled the state to exert a decisive influence on the kind of money chosen by the market, it was an obvious step to think of attaining certain sociopolitical aims by influencing these consequences in a systematic manner Modern currency policy is something essentially new; it differs fundamentally from earlier