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• Foreword
• On the Manipulation of Money and Credit Three Treatises On Trade-cycle Theory
• Stabilization of the Monetary Unit— From the Viewpoint of Theory
• Introduction *
• I: The Outcome of Inflation
• II: The Emancipation of Monetary Value From the Influence of Government
• III: The Return to Gold
• IV: The Money Relation
• V: Comments On the “balance of Payments” Doctrine
• VI: The Inflationist Argument
• VII: The New Monetary System
• VIII: The Ideological Meaning of Reform
• Appendix: Balance of Payments and Foreign Exchange Rates *
• Monetary Stabilization and Cyclical Policy
• Preface *
• Part I: Stabilization of the Purchasing Power of the Monetary Unit
• I: The Problem
• II: The Gold Standard
• III: The “manipulation” of the Gold Standard
• IV: “measuring” Changes In the Purchasing Power of the Monetary Unit
• V: Fisher’s Stabilization Plan
• VI: Goods-induced and Cash-induced Changes In the Purchasing Power of the Monetary Unit
• VII: The Goal of Monetary Policy
• Part II: Cyclical Policy to Eliminate Economic Fluctuations
• I: Stabilization of the Purchasing Power of the Monetary Unit and Elimination of the Trade Cycle
• II: Circulation Credit Theory
• III: The Reappearance of Cycles
• IV: The Crisis Policy of the Currency School
• V: Modern Cyclical Policy
• VI: Control of the Money Market
• VII: Business Forecasting For Cyclical Policy and the Businessman
• VIII: The Aims and Method of Cyclical Policy
• The Causes of the Economic Crisis an Address
• I: The Nature and Role of the Market
• II: Cyclical Changes In Business Conditions
• III: The Present Crisis
• A.: Unemployment
• B.: Price Declines and Price Supports
• C.: Tax Policy
• D.: Gold Production
• IV: Is There a Way Out?
• The Current Status of Business Cycle Research and Its Prospects For the Immediate Future
• 1.: The Acceptance of the Circulation Credit Theory of Business Cycles *
• 2.: The Popularity of Low Interest Rates
• 3.: The Popularity of Labor Union Policy
• 4.: The Effect of Lower Than Unhampered Market Interest Rates
• 5.: The Questionable Fear of Declining Prices
• The Trade Cycle and Credit Expansion: the Economic Consequences of Cheap Money
• 1.: Introductory Remarks *
• 2.: The Unpopularity of Interest
• 3.: The Two Classes of Credit
• 4.: The Function of Prices, Wage Rates and Interest Rates
• 5.: The Effects of Politically Lowered Interest Rates
• 6.: The Inevitable Ending

III

The Return to Gold

1.

Eminence of Gold

In the years preceding and during the war, the authors who prepared the way for the present monetary chaos were eager to sever the connection between the monetary standard and gold. So, in place of a standard based directly on gold, it was proposed to develop a standard which would promise no more than a constant exchange ratio in foreign money. These proposals, insofar as they aimed at transferring control over the formulation of monetary value to government, need not be discussed any further. The reason for using a commodity money is precisely to prevent political influence from affecting directly the value of the monetary unit. Gold is not the standard money solely on account of its brilliance or its physical and chemical characteristics. Gold is the standard money primarily because an increase or decrease in the available quantity is independent of the orders issued by political authorities. The distinctive feature of the gold standard is that it makes changes in the quantity of money dependent on the profitability of gold production.

Instead of the gold standard, a monetary standard based on a foreign currency could be introduced. The value of the mark would then be related, not to gold, but to the value of a specific foreign money, at a definite exchange ratio. The Reichsbank would be ready at all times to buy or sell marks, in unlimited quantities at a fixed exchange rate, against the specified foreign money. If the monetary unit chosen as the basis for such a system is not on a sound gold standard, the conditions created would be absolutely untenable. The purchasing power of the German money would then hinge on fluctuations in the purchasing power of that foreign money. German policy would have renounced its influence on the creation of monetary value for the benefit of the policy of a foreign government. Then too, even if the foreign money, chosen as the basis for the German monetary unit, were on an absolutely sound gold standard at the moment, the possibility would remain that its tie to gold might be cut at some later time. So there is no basis for choosing this roundabout route in order to attain a sound monetary system. It is not true that adopting the gold standard leads to economic dependence on England, gold producers, or some other power. Quite the contrary! As a matter of fact, it is the monetary standard which relies on the money of a foreign government that deserves the name of a “subsidiary [dependent] or vassal standard.”1

2.

Sufficiency of Available Gold

There are no grounds for saying that there is not enough gold available to enable all the countries in the world to have the gold standard. There can never be too much, nor too little, gold to serve the purpose of money. Supply and demand are brought into balance by the formation of prices. Nor is there reason to fear that prices generally would be depressed too severely by a return to the gold standard on the part of countries with depreciated currencies. The world’s gold supplies have not decreased since 1914. They have increased. In view of the decline in trade and the increase in poverty, the demand for gold should be lower than it was before 1914, even after a complete return to the gold standard. After all, a return to the gold standard would not mean a return to the actual use of gold money within the country to pay for small-and medium-sized transactions. For even the gold exchange standard [Goldkernwährung] developed by Ricardo in his work, Proposals for an Economical and Secure Currency (1816), is a legitimate and adequate gold standard,2 as the history of money in recent decades clearly shows.

Basing the German monetary system on some foreign money instead of the metal gold would have only one significance: By obscuring the true nature of reform, it would make a reversal easier for inflationist writers and politicians.

The first condition of any real monetary reform is still to rout completely all populist doctrines advocating Chartism,3 the creation of money, the dethronement of gold and free money. Any imperfection and lack of clarity here is prejudicial. Inflationists of every variety must be completely demolished. We should not be satisfied to settle for compromises with them. The slogan, “Down with gold,” must be ousted. The solution rests on substituting in its place: “No governmental interference with the value of the monetary unit!”

[1. ]Schaefer, Carl A. Klassische Valutastabilisierungen. Hamburg, 1922, p. 65.

[2. ][By 1928, Mises had rejected the flexible (gold exchange) standard as adequate for curbing inflation and recommended a pure gold coin standard. See Mises’s 1928 treatise, below, pp. 62–67.—Ed.]

[3. ][Chartism, an English working class movement, arose as a revolt against the Poor Law of 1834 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’ attempts to obtain popular support failed conspicuously and after 1848 the movement faded away.—Ed.]