Notes Chapter 1 STABILIZATION OF THE MONETARY UNIT—FROM THE VIEWPOINT OF THEORY (1923)

Adapted from the introduction to Ludwig von Mises, On the Manipulation of Money and Credit, edited by Percy L. Greaves, translated by Bettina Bien Greaves (Dobbs Ferry, N.Y.: Free Market Books, 1978).

Die geldtheoretische Seite des Stabilisierungsproblems (Schriften des Vereins für Sozialpolitik 164, part 2 [Munich and Leipzig: Duncker and Humblot, 1923]). The original manuscript for this essay was completed and submitted by the author to the printer in January 1923, more than eight months before the final breakdown of the German mark.

¹ [Following the terminology of Carl Menger, Mises wrote here of changes in the “internal objective exchange value” of the monetary unit. However, in this translation, the more familiar English term, later adopted by Mises, will be used—i.e, changes in the value of the monetary unit arising on the money side or, simply, “cash-induced changes.” Menger's term for changes in the monetary unit's “external exchange value” will be rendered as “changes from the goods side” or “goods-induced changes.” See below p. 76, note 17. Also Mises's Human Action (1949; 1963 [Chicago: Contemporary Books, 1966], p. 419; Scholar's Edition [Auburn, Ala.: Ludwig von Mises Institute, 1998], p. 416).—Ed.]

² [Mises uses the term “inflation” in its historical and scientific sense as an increase in the quantity of money.—Ed.]

³ [Here in the German text Mises used, without special comment, the English term “standard of deferred payments.” For his reasons, see below, p. 58, note 3.—Ed.]

⁴Bourse (French). A continental European stock exchange, on which trades are also made in commodities and foreign exchange.

⁵ The Treaty of Versailles at the end of World War I (1914–1918) reduced German controlled territory considerably, restored Alsace-Lorraine to France, ceded large parts of West Prussia and Posen to Poland, ceded small areas to Belgium and stripped Germany of her former colonies in Africa and Asia.

⁶ [The post World War I inflation in Austria is not as well known as the German inflation of 1923. The Austrian crown depreciated disastrously at that time, although not to the same extent as the German mark. The leader of the Christian-Social Party and Chancellor of Austria (1922–1924 and 1926–1929), Dr. Ignaz Seipel (1876–1932), acting on the advice of Professor Mises and some of his associates, succeeded in stopping the Austrian inflation in 1922.—Ed.]

⁷ Moneys issued by no longer existing governments. The Romanovs were thrown out of power in Russia by the Communist Revolution in 1917; Hungary's post World War I Communist government lasted only from March 21, to August 1, 1919.

⁸ Horace White, Money and Banking: Illustrated by American History (Boston, 1895), p. 142. [NOTE: We could not locate a copy of the 1895 edition to verify this quotation. However, it appears, without the last sentence, in the 5th (1911) edition, p. 99.—Ed.]

⁹ Louis Adolphe Thiers, Histoire de la Revolution Française, 7th ed., vol. V (Brussels, 1838), p. 171. The interpretation placed on these events by the “School” of G.F. Knapp is especially fantastic. See H. Illig's Das Geldwesen Frankreichs zur Zeit der ersten Revolution bis zum Ende der Papiergeldwährung [The French monetary system at the time of the first revolution to the end of the paper currency] (Strassburg, 1914), p. 56. After mentioning attempts by the state to “manipulate the exchange rate of silver,” he points out: “Attempts to reintroduce the desired cash situation began to succeed in 1796.” Thus, even the collapse of the paper money standard was a “success” for the State Theory of Money. [NOTE: The “State Theory of Money” has been the basis of the monetary policies of most governments in this century. Mises frequently credited the book of Georg Friedrich Knapp (3rd German edition, 1921; English translation by H.M. Lucas and J. Bonar, State Theory of Money, London, 1924) for having popularized it among German-speaking peoples. Knapp held that money was whatever the government decreed to be money—individuals acting and trading on the market had nothing to do with it. See Mises's The Theory of Money and Credit (New Haven, Conn.: Yale University Press, 1953), pp. 463–69; and (Indianapolis, Ind.: LibertyClassics, 1980), pp. 506–12.—Ed.]

¹⁰ Foreign currencies and similar legal claims could possibly be classed as foreign money. However, foreign money here obviously means only the money of countries with at least fairly sound monetary conditions.

¹¹ [Mises later developed his position on these matters more fully. He withdrew his endorsement of even such a carefully prescribed legal exemption as this to his general thesis that money and banking should be free of legislative interference. Even clearing arrangements among the banks should be left to the vicissitudes of the market. See his plea for free banking in Monetary Stabilization and Cyclical Policy (1928) in this volume especially pp. 124–25 below. Also in Human Action, chapter XVII, section 12 on “Indirect Exchange” and the essay on “Monetary Reconstruction” written for publication as the Epilogue to the 1953 (and later) editions of The Theory of Money and Credit.—Ed.]

¹² In power from March 21, to August 1, 1919, only.

¹³ Carl A. Schaefer, Klassische Valutastabilisierungen (Hamburg, 1922), p. 65.

¹⁴ [By 1928, when Mises wrote “Monetary Stabilization and Cyclical Policy,” the second essay in this volume, he had rejected the flexible (gold exchange) standard (see below, pp. 60ff.) pointing out that the only hope of curbing the powerful political incentives to inflate lay in having a “pure” gold coin standard. He “confessed” this shift in views in Human Action (1st ed., 1949, p. 780; 2nd and 3rd eds., 1963 and 1966, p. 786; Scholar's Edition 1998, p. 780).—Ed.]

¹⁵ Chartism, an English working class movement, arose as a revolt against the Poor Law of 1835 which forced those able to work to enter workhouses before receiving public support. The movement was endorsed by both Marx and Engels and accepted the labor theory of value. Its members included those seeking inconvertible paper money and all sorts of political interventions and welfare measures. The advocates of various schemes were unified only in the advocacy of a charter providing for universal adult male suffrage, which each faction thought would lead to the adoption of its particular nostrums. Chartists's attempts to obtain popular support failed conspicuously and after 1848 the movement faded away.

¹⁶ [Mises later came to prefer the term “final rate” or the rate that would prevail if a “final state of rest,” reflecting the final effects of all changes already initiated, were actually reached. See Human Action, chapter XIV, section 5.—Ed.]

¹⁷ [For a later elaboration of this position, see Mises's “Monetary Reconstruction,” epilogue to the 1953 (and later) editions of The Theory of Money and Credit.—Ed.]

¹⁸ [See Mises's The Theory of Money and Credit, pp. 180–86; 1980, pp. 207–13.—Ed.]

¹⁹ See my paper “Zahlungsbilanz und Valutenkurse,” Mitteilungen des Verbandes österreichischer Banken und Bankiers II (1919): 39ff. [NOTE: Pertinent excerpts from this explanation of the “balance of payments” fallacy have been translated and appear here in the Appendix, pp. 44–51. See also Human Action, 1966, pp. 450–58; 1998, pp. 447–55.—Ed.]

²⁰ From the tremendous literature on the subject, I will mention here only T.E. Gregory's Foreign Exchange Before, During and After the War (London, 1921).

²¹ Karl Helfferich, Die Politik der Erfüllung (Munich, 1922), p. 22. [NOTE: Helfferich (1872–1924), as Minister of the German Imperial Treasury, 1915–1916, and later in various official and unofficial capacities, was instrumental in promoting inflation and opposing reparations payments.—Ed.]

²² Thus, raising a foreign loan falls within this category too.

²³ See Walter Rathenau's addresses—January 12, 1922, before the Senate of the Allied Powers at Cannes, and March 29, 1922, to the Reichstag (Cannes und Genua, Vier Reden zum Reparationsproblem [Berlin 1922], pp. 11ff. and 34ff.). [NOTE: Rathenau (1867–1922), a German industrialist, became an official in the post-World War I German government—Minister of Reconstruction (1921) and Foreign Minister (1922).—Ed.]

²⁴ See p. 26 above. [NOTE: The German term is “Giroguthaben.” In Germany the “giro” banking system prevailed whereby depositors, instead of writing checks, authorized their banks to transfer specified sums to the accounts they wished paid.—Ed.]

²⁵ [In view of Mises's comments here, it appears that he then intended that the Reichsbank redeem at this point only larger sums of marks in gold and foreign exchange. Mises's insistence in later years on a gold coin standard, with gold coins in daily use, even in the early stages of monetary reform, represents a significant refinement of these earlier recommendations. See Human Action, chapter XXXI, section 3, and his 1953 essay, “Monetary Reconstruction,” the Epilogue to The Theory of Money and Credit, 1953, pp. 448–52; 1980, pp. 490–95. Also above, p. 20, note 14.—Ed.]

²⁶ [In The Theory of Money and Credit (1953, pp. 377ff.; 1980, pp. 416ff.), Mises describes the “gold premium policy” of making it difficult and expensive to obtain gold—by hampering its export through the manipulation of discount rates and by limiting the redemption of domestic money in gold.—Ed.]

²⁷ [Apparently works of Friedrich Bendixen (1864–1920) are not available in English language translations.—Ed.]

²⁸ [In his later works, Mises would have covered all these ideas, except “socialism,” with the terms “interventionism” or “hampered market.”—Ed.]

²⁹ Originally published as “Zahlungsbilanz und Devisenkurse” in Mitteilungen des Verbandes Oesterreichischer Banken und Bankiers 2, nos. 3–4 (1919). This translated excerpt represents about one-third of the original article.

³⁰ For the sake of completeness only, it should be mentioned that the adherents of this theory attribute domestic price increases, not to the inflation, but to the shortage of goods exclusively.

³¹ See Hertzka, Das Wesen des Geldes (Leipzig, 1887), pp. 44ff.; Wieser, “Der Geldwert und seine Veränderungen,” Schriften des Vereins für Sozialpolitik 132 (Leipzig, 1910): 530ff.

Chapter 2
MONETARY STABILIZATION AND CYCLICAL POLICY (1928)

Geldwertstabilisierung und Konjunkturpolitik (Jena: Gustav Fischer, 1928).

¹ Sixteen years ago when I presented the circulation credit theory of the crisis in the first German edition of my book on The Theory of Money and Credit (1912); [English editions, New London, Conn.: Yale University Press, 1953; Indianapolis, Ind.: LibertyClassics, 1980], I encountered ignorance and stubborn rejection everywhere, especially in Germany. The reviewer for Schmoller's Yearbook [Jahrbuch für Gesetzgebung, Verwaltung und Volkswirtschaft] declared: “The conclusions of the entire work [are] simply not discussable.” The reviewer for Conrad's Yearbook [Jahrbuch für Nationalökonomie und Statistik] stated: “Hypothetically, the author's arguments should not be described as completely wrong; they are at least coherent.” But his final judgment was “to reject it anyhow.” Anyone who follows current developments in economic literature closely, however, knows that things have changed basically since then. The doctrine which was ridiculed once is widely accepted today.

²Zeitschrift für Volkswirtschaft, Sozialpolitik und Verwaltung VII, p. 132.

³ [In the German text Mises uses the English term, “Standard of deferred payments,” commenting in a footnote: “Standard of deferred payments is ‘Zahlungsmittel’ in German. Unfortunately this German expression must be avoided nowadays. Its meaning has been so compromised through its use by Nominalists and Chartists that it brings to mind the recently exploded errors of the state theory of money.” See above for comments on “state theory of money,” p. 12, n. 9, and “chartism,” p. 20, n. 15.—Ed.]

⁴ William Stanley Jevons, Money and the Mechanism of Exchange, 13th ed. (London, 1902), pp. 328ff.

⁵ John Maynard Keynes, A Tract on Monetary Reform (London, 1923; New York, 1924), pp. 177ff.

⁶ Irving Fisher, Stabilizing the Dollar (New York, 1925), pp. 79ff.

⁷ [This is not the place to examine further the theory of the formation of the purchasing power of the monetary unit. In this connection, see The Theory of Money and Credit; 1953, pp. 97–165; 1980, pp. 117–85.—Ed.]

⁸ The quantity of “money in the broader sense” is equal to the quantity of money proper [i.e., commodity money] plus the quantity of fiduciary media [i.e., notes, bank deposits not backed by metal, and subsidiary coins].

⁹ Fritz Machlup, Die Goldkernwährung (Halberstadt, 1925), p. xi.

¹⁰ [A monetary standard based on a unit with a flexible gold parity; Golddevisenkernwährung, literally a standard based on convertibility into a foreign monetary unit, in effect a “flexible gold exchange standard.” In later writings, Professor Mises shortened this to “flexible standard” and this term will be used henceforth in this translation. See Human Action (1949; 3rd rev. ed. (New Haven, Conn.: Yale University Press, 1966); Scholar's Edition (Auburn, Ala.: Ludwig von Mises Institute, 1998), chapter XXXI, section 3.—Ed.]

¹¹ I employ the term “liberal” in the sense attached to it everywhere in the nineteenth century and still today in the countries of continental Europe. This usage is imperative because there is simply no other term available to signify the political and intellectual movement that substituted free enterprise and the market economy for the precapitalistic methods of production; constitutional representative government from the absolutism of kings or oligarchies; and freedom of all individuals from slavery, serfdom, and other forms of bondage. (“Foreword to the Third Edition,” Human Action [New Haven, Conn.: Yale University Press, 1963], p. v)

¹² Gustav Cassell, Währungsstabilisierung als Weltproblem (Leipzig, 1928), p. 12.

¹³ [Eduard Suess (1831–1914) published a study in German (1877) on “The Future of Gold.”—Ed.]

¹⁴ [The Theory of Money and Credit, 1953, pp. 116ff.; 1980, pp. 138ff.—Ed.]

¹⁵ Hans Vaihinger (1852–1933), author of The Philosophy of As If (German, 1911; English translation, 1924).

¹⁶ [The Theory of Money and Credit, 1953, pp. 239ff; 1980, pp. 271ff.—Ed.]

¹⁷ [At this point, in a footnote, Professor Mises commented on a controversy he had had with a student over terminology. He again recommended, as he had in 1923 (see above, p. 1, n. 1), continuing to use Menger's terms which enjoyed general acceptance. The simpler English terms, which Mises developed and adopted later—notably in Human Action (3rd rev. ed., 1966, pp. 419–24; 1998, pp. 416–21), where he describes “goods-induced” or “cash-induced” changes in the value of the monetary unit—are used in this translation. For those who may be interested in this controversy, the original footnote follows:

Carl Menger referred to the nature and extent of the influence exerted on money/goods exchange ratios [prices] by changes from the money side as the problem of the “internal” exchange value (innere Tauschwert) of money [translated in this volume as “cash-induced changes”]. He referred to the variations in the purchasing power of the monetary unit due to other causes as changes in the “external” exchange value (aussere Tauschwert) of money [translated as “goods-induced changes”]. I have criticized both expressions as being rather unfortunate—because of possible confusion with the terms “extrinsic and intrinsic value” as used in Roman canon doctrine, and by English authors of the seventeenth and eighteenth centuries. (See the German editions of my book on The Theory of Money and Credit, 1912, p. 132; 1924, p. 104). Nevertheless, this terminology has attained scientific acceptance through its use by Menger and it will be used in this study when appropriate.

There is no need to discuss an expression which describes a useful and indispensable idea. It is the concept itself, not the term used to describe it, which is important. Serious mischief is done if an author chooses a new term unnecessarily to express a concept for which a name already exists. My student, Gottfried Haberler, has criticized me severely for taking this position, reproaching me for being a slave to semantics. (See Haberler, Der Sinn der Indexzahlen [Tübingen, 1927], pp. 109ff.). However, in his relevant remarks on this problem, Haberler says nothing more than I have. He too distinguishes between price changes arising on the goods and money sides. Beginners should seek to expand knowledge and avoid spending time on useless terminological disputes. As Haberler points out, it would obviously be wasted effort to “seek internal and external exchange values of money in the real world.” Ideas do not belong to the “real world” at all, but to the world of thought and knowledge.

It is even more astonishing that Haberler finds my critique of attempts to measure the value of the monetary unit “inexpedient,” especially as his analysis rests entirely on mine.—Ed.]

¹⁸ [See The Theory of Money and Credit, 1953, pp. 38ff.; 1980, pp. 51ff.—Ed.]

¹⁹ [See Socialism (New Haven, Conn.: Yale University Press, 1951), pp. 121ff. and (Indianapolis, Ind.: Liberty Fund, 1981), pp. 104.—Ed.]

²⁰ [See The Theory of Money and Credit, 1953, pp. 139ff.; 1980, pp. 161ff.—Ed.]

²¹ Irving Fisher, The Rate of Interest (New York, 1907), pp. 77ff.

²² Hermann Heinrich Gossen, Entwicklung der Gesetze des menschlichen Verkehrs und der daraus fliessenden Regeln für menschliches Handeln (new ed.; Berlin, 1889), p. 206.

²³ See also my critique of Fisher's proposal in The Theory of Money and Credit, pp. 403ff.; 1980, pp. 442ff.

²⁴ Whether this is considered a change of purchasing power from the money side or from the commodity side is purely a matter of terminology.

²⁵ I.E., “classical liberalism.” See above, p. 68, note 11.

²⁶ [In conversation, Professor Mises explained that this is a Greek term, meaning “shaking off of burdens.” It was used in the seventh century B.C. and later to describe measures enacted to cancel public and private debts, completely or in part. Creditors then had to bear the burden, except to the extent that they might be indemnified by the government.—Ed.]

²⁷ Keynes's 1923 proposal, A Tract on Monetary Reform.

²⁸ [Lord Samuel Jones Loyd Overstone (1796–1883) was an early opponent of inconvertible paper money and a leading proponent of the principles of the Peel's Act of 1844.—Ed.]

²⁹ [See Theory and History (1957; 1969; Auburn, Ala.: Ludwig von Mises Institute, 1985).—Ed.]

³⁰ [Regarding the theories of William Stanley Jevons, Henry L. Moore and William Beveridge, see Wesley Clair Mitchell's Business Cycles (New York: National Bureau of Economic Research, 1927), pp. 12ff.—Ed.]

³¹ As mentioned above, the most commonly used name for this theory is the “monetary theory.” For a number of reasons the designation “circulation credit theory” is preferable.

³² If expressions such as cycle, wave, etc., are used in business cycle theory, they are merely illustrations to simplify the presentation. One cannot and should not expect more from a simile which, as such, must always fall short of reality.

³³ [For further explanation of the distinction between “commodity credit” and “circulation credit” see Mises's 1946 essay “The Trade Cycle and Credit Expansion: The Economic Consequences of Cheap Money” included later in this volume, especially, pp. 193–94.—Ed.]

³⁴ [In 1928, fiduciary media were issued only by discounting what Mises called commodity bills, or short-term (90 days or less) bills of exchange endorsed by a buyer and a seller and constituting a lien on the goods sold.—Ed.]

³⁵ Albert Hahn and Joseph Schumpeter have given me credit for the expression “forced savings” or “compulsory savings.” See Hahn's article on “Credit” in Handwörterbuch der Staatswissenschaften (4th ed., vol. V, p. 951) and Schumpeter's The Theory of Economic Development (2nd German language ed., 1926 [English translation, Harvard University Press, 1934), p. 109n.]). To be sure, I described the phenomenon in 1912 in the first German language edition of The Theory of Money and Credit [see 1953, pp. 208ff. and 347ff.; 1980, pp. 238ff. and 385ff. of the English translations]. However, I do not believe the expression itself was actually used there.

³⁶ In the language of Knut Wicksell and the classical economists.

³⁷ I believe this should be pointed out here again, although I have exhausted everything to be said on the subject (pp. 105–07) and in The Theory of Money and Credit [1953, pp. 361ff.; 1980, pp. 400ff.]. Anyone who has followed the discussions of recent years will realize how important it is to stress these things again and again.

³⁸ To avoid misunderstanding, it should be pointed out that the expression “long-waves” of the trade cycle is not to be understood here as it was used by either Wilhelm Röpke or N.D. Kondratieff. Röpke (Die Konjunktur [Jena, 1922], p. 21) considered “long-wave cycles” to be those which lasted 5–10 years generally. Kondratieff (“Die langen Wellen der Konjunktur” in Archiv für Sozialwissenschaft 56, pp. 573ff.) tried to prove, unsuccessfully in my judgment, that, in addition to the 7–11 year cycles of business conditions which he called medium cycles, there were also regular cyclical waves averaging 50 years in length.

³⁹ [The German term, “Sanierungskrise,” means literally “restoration crisis,” i.e., the crisis which comes at the shift to more “healthy” monetary relationships. In English this crisis is called the “stabilization crisis.”—Ed.]

⁴⁰ Lord Samuel Jones Loyd Overstone, “Reflections Suggested by a Perusal of Mr. J. Horsley Palmer's Pamphlet on the Causes and Consequences of the Pressure on the Money Market,” 1837. (Reprinted in Tracts and Other Publications on Metallic and Paper Currency [London, 1857], p. 31.)

⁴¹ See Theorie des Geldes und der Umlaufsmittel (1912), pp. 433ff. I had been deeply impressed by the fact that Lord Overstone was also apparently inclined to this interpretation. See his “Reflections,” pp. 32ff. [NOTE: These paragraphs were deleted from the 2nd German edition (1924) from which was made the H.E. Batson English translation, The Theory of Money and Credit, published 1934, 1953, and 1971.—Ed.]

⁴² William Douglass (1691–1752), a renowned physician, came to America in 1716. His “A Discourse Concerning the Currencies of the British Plantations in America” (1739) first appeared anonymously.

⁴³ [See the examples cited in The Theory of Money and Credit (pp. 387ff.; 1980, pp. 426ff.).—Ed.]

⁴⁴ Even the countries that have followed different procedures in this respect have, for all practical purposes, placed no obstacle in the way of the development of fiduciary media in the form of bank deposits.

⁴⁵ [According to Professor Mises, the “three European empires” were Austria-Hungary, Germany and Russia. This designation probably comes from the “Three Emperors’ League” (1872), an informal alliance among these governments. Its effectiveness was declining by 1890, and World War I dealt it a final blow.—Ed.]

⁴⁶ [Mises undoubtedly refers here to the way the Federal Reserve System reacted to the post World War I boom, when it brought an end to credit expansion by raising the discount rate, thus precipitating the 1920–1921 correction period, popularly called a “recession.”—Ed.]

⁴⁷ [Frédéric Bastiat (1801–1850) replied to an open letter addressed to him by an editor of Voix du Peuple (October 22, 1849). Then the Socialist, Pierre Jean Proudhon (1809–1865), answered. Proudhon, an advocate of unlimited monetary expansion by reduction of the interest rate to zero, and Bastiat, who favored moderate credit expansion and only a limited reduction of interest rates, carried on a lengthy exchange for several months, until March 7, 1850. (Oeuvres Completes de Frédéric Bastiat, 4th ed., vol. 5 [Paris, 1878], pp. 93–336.)—Ed.]

⁴⁸ This Harvard barometer was developed at the University by the Committee on Economic Research from three statistical series which are presumed to reveal (1) the extent of stock speculation, (2) the condition of industry and trade and (3) the supply of funds.

⁴⁹ [See above p. 41, note 26.—Ed.]

⁵⁰ [See above p. 68, note 11.—Ed.]

⁵¹ Austria-Hungary, Germany, and Russia. [See above p. 130, note 45.—Ed.]

⁵² Also, as a result of this, it became easier to distinguish crises originating from definite causes (wars and political upheavals, violent convulsions of nature, changes in the shape of supply or demand) from cyclically-recurring crises.

⁵³ [The Post Office Savings Institution, established in Austria in the 1880s and copied in several other European countries, played a significant, if limited, role in monetary affairs. See Mises's comments in Human Action, pp. 445–46.—Ed.]

⁵⁴ John Maynard Keynes, A Tract on Monetary Reform (London, 1923; New York, 1924), pp. 156ff.

Chapter 3
THE CAUSES OF THE ECONOMIC CRISIS: AN ADDRESS (1931)

[Die Ursachen der Wirtschaftskrise: Ein Vortrag (Tübingen: J.C.B. Mohr, Paul Siebeck, 1931). Presented February 28, 1931, at Teplitz-Schönau, Czechoslovakia, before an assembly of German industrialists (Deutscher Hauptverband der Industrie).—Ed.]

¹ [This address to German industrialists was given in 1931.—Ed.]

Chapter 4
THE CURRENT STATUS OF BUSINESS CYCLE RESEARCH AND ITS PROSPECTS FOR THE IMMEDIATE FUTURE (1933)

[Mises's contribution to a Festschrift for Arthur Spiethoff, Die Stellung und der nächste Zukunft der Konjunkturforschung, pp. 175–80 (Munich: Duncker and Humblot, 1933). All the contributors were asked to address themselves to the same topic. Another translation of this article, by Joseph R. Stromberg, then a doctoral candidate in history at the University of Florida, appeared in The Libertarian Forum (June 1975). This is a completely different translation, made by Bettina Bien Greaves and edited by Percy L. Greaves.—Ed.]

¹ [The more modern term for what Mises apparently meant by “re-deflation” is undoubtedly “reflation.”—Ed.]

² That has always been so; public opinion has always sided with the debtors. (See Jeremy Bentham, Defence of Usury, 2nd ed. [London, 1790], pp. 102ff.). The idea that the creditors are the idle rich, hardhearted exploiters of workers, and that the debtors are the unfortunate poor, has not been abandoned even in this age of bonds, bank deposits and savings accounts.

³ An extreme example: the discount policy of the German Reichsbank in the time of inflation. See Frank Graham, Exchange, Prices and Production in Hyper-Inflation Germany, 1920–1923 (Princeton, N.J., 1930), pp. 65ff.

Chapter 5
THE TRADE CYCLE AND CREDIT EXPANSION: THE ECONOMIC CONSEQUENCES OF CHEAP MONEY (1946)

[From a memorandum, dated April 24, 1946, prepared in English by Professor Mises for a committee of businessmen for whom he served as a consultant.—Ed.]

¹Paper of the British Experts (April 8, 1943).

² [See note on p. 185, note 1.—Ed.]