Inflation versus Deflation: Deflation Has to Be Deliberated
by Ed Bugos
Feb 26, 2004
[Russ: this echoes your points]
/ jim
gold-eagle.com
an excerpt:
In developing the theory of the value of money, Ludwig von Mises observed that at the point where people finally see that the policy of inflation is endless, the "crack up boom" begins, and ends in the abandonment of the current medium as money:
"But then finally the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears. Everybody is anxious to swap his money against "real" goods, no matter whether he needs them or not, no matter how much money he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap pater. Nobody wants to give away anything against them. It was this that happened with the Continental currency in America in 1781, with the French mandats territoriaux in 1796, and with the German Mark in 1923. It will happen again whenever the same conditions appear. If a thing has to be used as a medium of exchange, public opinion must not believe that the quantity of this thing will increase beyond all bounds. Inflation is a policy that cannot last" - Ludwig von Mises, Human Action, Chapter 17, "Indirect Exchange, the anticipation of expected changes in purchasing power
The comment that "inflation is a policy that cannot last," does not mean that it results in deflation; it means that eventually the currency is no longer money. |
