Economics Dictionary of ArgumentsHome
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| Money supply: Money supply refers to the total amount of money in circulation within an economy at a given time. It includes physical currency, such as coins and notes, along with demand deposits and other liquid assets. Central banks regulate money supply to influence economic conditions and manage inflation. See also Money, Monetarism, Demand for money, Inflation, Central bank._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Ludwig von Mises on Money Supply - Dictionary of Arguments
Rothbard IV 15 Money supply/Mises/Rothbard: Mises was (…) able to show(1) that an early and long forgotten insight of Ricardo and his immediate followers was eminently correct: that, apart from the industrial or consumption uses of gold, an increase in the supply of money confers no social benefit whatsoever. For in contrast to such factors of production as land, labor, and capital, the increase of which will bring about greater production and a higher standard of living, an increase in the supply of money can only dilute its purchasing power; it will not increase production. If everyone’s supply of money in his wallet or bank account were magically tripled overnight, society would not improve. But Mises showed that the great attraction of “inflation” (an increase in the quantity of money) is precisely that not Rothbard IV 16 everyone gets the new money at once and in the same degree; instead the government and its favored recipients of purchases or subsidies are the first to receive the new money. Their income increases before many prices have gone up; while those unfortunate members of society who receive the new money at the end of the chain (or, as pensioners, receive none of the new money at all) lose because the prices of the things they buy go up before they can enjoy an increased income. >Inflation/Mises, >Money/Mises. Rothbard IV 57 An increase in the quantity of money only serves to dilute the exchange effectiveness of each franc or dollar; it confers no social benefit whatever. In fact, the reason why the government and its controlled banking system tend to keep inflating the money supply, is precisely because the increase is not granted to everyone equally. Instead, the nodal point of initial increase is the government itself and its central bank; other early receivers of the new money are favored new Rothbard IV 58 borrowers from the banks, contractors to the government, and government bureaucrats themselves. These early receivers of the new money, Mises pointed out, benefit at the expense of those down the line of the Chain, or ripple effect, who get the new money last, or of people on fixed incomes Who never receive the new influx of money. In a profound sense, then, monetary inflation is a hidden form of taxation or redistribution of wealth, to the government and its favored groups and from the rest of the population. Mises's conclusion, then, is that, once there is enough of a supply of a commodity to be established on the market as money, there is no need ever to increase the supply of money. This means that any supply of money whatever is "optimal"; and every change in the supply of money stimulated by government can only be pernicious.(2) >Quantity theory/Mises. 1. Ludwig von Mises. 1912. The Theory of Money and Credit (Theorie des Geldes und der Umlaufsmittel, Translated by H.E. Batson in 1934; reprinted with “Monetary Reconstruction» (New Haven, Conn.: Yale University Press, 1953). Reprinted by the Foundation for Economic Education, 1971; reprinted with an Introduction by Murray N. Rothbard, Liberty Press Liberty Classics, 1989. 2. When gold or some other useful commodity is money, an increase in the stock of gold does confer a social benefit in its non-monetary uses; for now there is more gold available for jewelry, for industrial and dental uses, etc. Only in its monetary uses is any supply of gold optimal. When fiat paper is the monetary standard, in contrast, there are no non-monetary uses to render palatable an increase in its supply._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. "Vs" indicates differences in content, not necessarily the chronological progression of a controversy. If a German edition is specified, the page numbers refer to this edition. |
EconMises I Ludwig von Mises Die Gemeinwirtschaft Jena 1922 Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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