Cite articles as: Author, “Title,” Libertarian Papers [volume #], [article number] (year). Example: Jan Narveson, “Present Payments, Past Wrongs: Correcting Loose Talk about Nozick and Rectification,” Libertarian Papers 1, 1 (2009).
43. “The Definition of Inflation According to Mises: Implications for the Debate on Free Banking”
by Nicolás Cachanosky
Abstract: The discussion of what is and what is not inflation has become central among the Austrian economists in their debate between free banking with fractional reserves versus banking with 100-percent reserve. Many Austrians also turn to the writings of Mises to find out what the dean of Austrian Economics thought about inflation, but there is no agreement on the interpretation of his writings either. This article tries to contribute to the interpretation of Mises’ concept of inflation.
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“Inflation may be defined as any increase in the economy’s supply of money not consisting of an increase in the stock of the money metal.” – What has Government Done to Our Money? p. 43. Murray N. Rothbard
[...] Libertarian Papers article: “The Definition of Inflation According to Mises: Implications for the Debate on Free Banking,” by Nicolás [...]
It seems to me this article points to the real issue of what are the correct symantics when trying to debate the issue of fractional reserve currency vs. “real” money. Money (whether paper or metal) has no intrinsic value except as a medium of storage and exchange. If a change in money supply had no effect on the exchange, who would care how much money existed?
The issue is not inflation or deflation of the supply but the devaluation of the medium. Inflating the supply without a supporting increase in assets necessarily devalues the unit of exchange. Where the fractional reserve currency causes havoc is in its ability to generate this “inflation” just as any occurrence that allowed an unrestricted supply of gold to be created would devalue its unit of exchange.
Thus “Inflation” is not a sufficiently correct term to use in this debate. “Devaluation” more precisely frames the issue.
While you are correct philosophically, the term “devaluation” is usually reserved to describe the action of the currency issuer (usually a government) once it becomes painfully obvious to everyone that “inflation” of the currency by the government has led to a clear decline in the “value” of the currency as a medium of exchange. Mexico, for example, has gone through numerous official “devaluations” of the Peso.
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Estimado amigo, como puede Usted denominar socialista a M N. Rothbard en su conferencia en el Instituto de Empresa de Madrid. Yo creo que a Rothbard se le puede llamar de todo menos Socialista. Es una pena que los pocos amantes de la libertad economica usen su tiempo para atacar o insultar a los defensores de la libertad