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Monetary Theory
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Murphy Gives Post-Game Analysis of ZeroHedge Dollar Debate
Feb 16, 2024Tap to summarizeOn February 13, 2024, Bob participated (with Jim Rickards, Brent Johnson, and Michael Every) in a ZeroHedge debate on the fate of the USD. In this episode of the Human Action podcast, Bob highlights some of the key issues and explains why he thinks his side won. The ZeroHedge Debate: Mises.org/HAP435a Brent Johnson's Milkshake Theory: Mises.org/HAP435b Egert's Article on the Public Debt Threshold: Mises.org/HAP435c Bob's Article on the Latest CBO Federal Debt Report: Mises.org/HAP435d Human Action Podcast listeners can get a free copy of Dr. Guido Hülsmann's How Inflation Destroys Civilization: Mises.org/HAPodFree
Transcribe →The Myth of the Unchanging Value of Gold
Feb 12, 2024Tap to summarizeAccording to mainstream economics textbooks, one of the primary functions of money is to measure the value of goods and services exchanged on the market. A typical statement of this view is given by Frederic Mishkin in his textbook on money and banking. “[M]oney ... is used to measure value in the economy,” he claims. “We measure the value of goods and services in terms of money, just as we measure weight in terms of pounds and distance in terms of miles.” When money is conceived as a measure of value, the policy implication is that one of the primary objectives of the central bank should be to maintain a stable price level. This supposedly will remove inflationary noise from the economy and ensure that any changes in money prices that do occur tend to reflect a change in the relative values of goods and services to consumers. Thus, for mainstream economists, stabilizing a price index based on a basket of arbitrarily selected and weighted consumer goods, e.g., the CPI, the core CPI, the Personal Consumption Expenditure (CPE), etc., is a prerequisite for rendering money a more or less fixed yardstick for measuring value. This idea — that a series of acts involving interpersonal exchange of certain sums of money for quantities of various goods by diverse agents over a given period of time somehow yields a measure of value — is another ancient fallacy that can be traced back to John Law. Law repeatedly referred to money as “the measure by which goods are valued.” This fallacy has been refuted elsewhere and rests on the assumption that the act of measurement involves the comparison of one thing to another thing that has an objective existence, and whose relevant physical dimensions and causal relationships with other physical phenomena are absolutely fixed and invariant to the passage of time, like a yardstick or a column of mercury. In fact, the value an individual attaches to a given sum of money or to any kind of good is based on a subjective judgment and is without physical dimensions. As such the value of money varies from moment to moment and between different individuals. The price paid for a good in a concrete act of exchange does not measure the good’s value; rather it expresses the fact that the buyer and the seller value the money and the price paid in inverse order. For this reason neither money nor any other good can ever serve as a measure of value. Unfortunately, advocates of a gold-price target wholeheartedly embrace this mainstream doctrine while giving it an odd twist. They begin with the wholly unsupported assumption that one commodity, gold, is stable in value and that, therefore it can serve as the lone guiding star — or “The Monetary Polaris” as Nathan Lewis terms it — for Fed monetary policy. According to Steve Forbes, writing in the introduction to Lewis’s Gold: The Monetary Polaris, real gold standards have one thing in common: “They use gold as a measuring rod to keep the value of money sta...
Transcribe →The Real Meaning of Inflation and Deflation
Jan 2, 2024Tap to summarize[Excerpted from Chapter 17 of Human Action.] The services money renders are conditioned by the height of its purchasing power. Nobody wants to have in his cash holding a definite number of pieces of money or a definite weight of money; he wants to keep a cash holding of a definite amount of purchasing power. As the operation of the market tends to determine the final state of money's purchasing power at a height at which the supply of and the demand for money coincide, there can never be an excess or a deficiency of money. Each individual and all individuals together always enjoy fully the advantages which they can derive from indirect exchange and the use of money, no matter whether the total quantity of money is great or small. Changes in money's purchasing power generate changes in the disposition of wealth among the various members of society. From the point of view of people eager to be enriched by such changes, the supply of money may be called insufficient or excessive, and the appetite for such gains may result in policies designed to bring about cash-induced alterations in purchasing power. However, the services which money renders can be neither improved nor impaired by changing the supply of money. There may appear an excess or a deficiency of money in an individual's cash holding. But such a condition can be remedied by increasing or decreasing consumption or investment. (Of course, one must not fall prey to the popular confusion between the demand for money for cash holding and the appetite for more wealth.) The quantity of money available in the whole economy is always sufficient to secure for everybody all that money does and can do. From the point of view of this insight one may call wasteful all expenditures incurred for increasing the quantity of money. The fact that things which could render some other useful services are employed as money and thus withheld from these other employments appears as a superfluous curtailment of limited opportunities for want satisfaction. It was this idea that led Adam Smith and Ricardo to the opinion that it was very beneficial to reduce the cost of producing money by resorting to the use of paper printed currency. However, things appear in a different light to the students of monetary history. If one looks at the catastrophic consequences of the great paper-money inflations, one must admit that the expensiveness of gold production is the minor evil. It would be futile to retort that these catastrophes were brought about by the improper use which the governments made of the powers that credit money and fiat money placed in their hands and that wiser governments would have adopted sounder policies. As money can never be neutral and stable in purchasing power, a government's plans concerning the determination of the quantity of money can never be impartial and fair to all members of society. Whatever a government does in the pursui...
Transcribe →Inflationary Expectations Do Not Cause Inflation
Dec 14, 2023Tap to summarizeAccording to mainstream economists, the expectation of inflation leads to higher prices. That is impossible, however, because actual inflation involves real increases in the money supply. Original Article: Inflationary Expectations Do Not Cause Inflation
Transcribe →The Fed and the Fate of the Dollar
Nov 10, 2023Tap to summarizeRecorded at the Mises Circle in Fort Myers, Florida, 4 November 2023. Special thanks to Murray and Florence M. Sabrin for making this event possible. Read Bob's book Understanding Money Mechanics: Mises.org/Mechanics
Transcribe →The Radical Uncertainty of a Polymorphic Fed
Nov 8, 2023Tap to summarizeRecorded at the Mises Circle in Fort Myers, Florida, 4 November 2023. Includes audience question and answer period. Special thanks to Murray and Florence M. Sabrin for making this event possible.
Transcribe →The Oil Price-Stock Market Connection, the 100 Year Financial Cycle, and the Next Crash
Nov 8, 2023Tap to summarizeRecorded at the Mises Circle in Fort Myers, Florida, 4 November 2023. Special thanks to Murray and Florence M. Sabrin for making this event possible.
Transcribe →The Phony Debate on Fiat Money: Rules versus Discretion
Oct 18, 2023Tap to summarizeRecorded at the Mises Institute Supporters Summit in Auburn, Alabama, 12-14 October 2023. Sponsored by Wilfried and Barbara Puscher Download the slides from this lecture at Mises.org/SS23_PPT_2
Transcribe →Inflation in Money or Prices? The Definition Matters
Oct 6, 2023Tap to summarizeAndreas Granath is a recovering socialist who discovered the truth and beauty of Austrian economics and libertarianism. He joins Bob to discuss his recent article explaining the different definitions of "inflation" and why it matters. Andreas' Mises Wire Article on CPI: Mises.org/HAP416a The Silly IMF Tutorial on Inflation: Mises.org/HAP416b Bob's Mises University Lecture on Price Inflation: Mises.org/HAP416c Yaron Brook & Łukasz Dominiak Debate on Minarchy vs. Anarchy: Mises.org/HAP416d Join us in Fort Myers on November 4 to cut through the campaign talking points and offer an uncompromising look at what is coming next. Use Code "FL2023" for $10 off admission: Mises.org/FL23 Human Action Podcast listeners can get a free copy of Per Bylund's How to Think About the Economy: Mises.org/HAPodFree
Transcribe →How Is the Fed Insolvent and Why Should We Care?
Sep 30, 2023Tap to summarizeAlex Pollock has decades of experience in financial markets, including a position as President of the Federal Home Loan Bank of Chicago. He explains to Bob the mechanics of the Fed's current insolvency and its implications for ordinary Americans. Join us in Fort Myers on November 4 to cut through the campaign talking points and offer an uncompromising look at what is coming next. Use Code "FL2023" for $10 off admission: Mises.org/FL23
Transcribe →
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