Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Heinz Blasnik- Views You Can Use -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (2396)	6/11/2003 11:29:09 AM
From: yard_man	Read Replies (2) \| Respond to of 4905

>>If the money supply grows without a subsequent rise in the general price level then almost no one would refer to that as inflation<< You misunderstand why Austrians use the definition they use regarding inflation -- just because there isn't a rise in a general price level when they are inflating the money in circulation does not mean that damage is not being done -- it most certainly is doing damage -- the measuring stick is all wrong. >>So what does Mises say about the difficulty of counting that which constitutes money? << Money for Mises and Austrians is a medium of exchange against which goods are bought and sold. If it were taken out of the hands of government or if there were very strict controls (having nothing to do with price levels) placed on the ability of governments to inflate either currency in circulation or debts denominated in the same -- we'd all be better off -- Mises from the same section: >>The first aim of monetary policy must be to prevent governments from embarking upon inflation and from creating conditions which encourage credit expansion on the part of banks. But this program is very different from the confused and self-contradictory program of stabilizing purchasing power. For the sake of economic calculation all that is needed is to avoid great and abrupt fluctuations in the supply of money. Gold and, up to the middle of the nineteenth century, silver served very well all the purposes of economic calculation. Changes in the relation between the supply of and the demand for the precious metals and the resulting alterations in purchasing power went on so slowly that the entrepreneur's economic calculation could disregard them without going too far afield. Precision is unattainable in economic calculation quite apart from the shortcomings emanating from not paying due consideration to monetary changes[6]. The planning businessman cannot help employing data concerning the unknown future; he deals with future prices and future costs of production. Accounting and bookkeeping in their endeavors to establish the result of past action are in the same position as far as they rely upon the estimation of fixed equipment, inventories, and receivables. In spite of all these uncertainties economic calculation can achieve its tasks. For these uncertainties do not stem from deficiencies of the system of calculation. They are inherent in the essence of acting that always deals with the uncertain future. << inflation (Austrian definition -- whether credit expansion or money in circulation) frustrates economic calculation of alll the individuals involved in the market ... consumers who are deciding whether to purchase a given good now or wait as well as entrepreneurs who are trying to guage whether deploying capital on a venture will be profitable in a given period of time. It doesn't matter whether there is a rise or a fall in a general price level -- it is simply focusing on the wrong thing. The aim at price stability is wrong-headed from the start. Mises pedagogical definition of a "progressing economy," one in which capital formation is positive going foward -- naturally gives rise to falling prices if the money supply is relatively fixed and there is no "fractional reserve" banking. There is nothing scary or pernicious about constantly falling prices -- the whole deflation scare comes from the fear that an "inflationary (credit expansion) cycle" will abort and we will face the liquidation of "bubble induced malinvestements."