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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

B.

PRICE DECLINES AND PRICE SUPPORTS

1.

The Subsidization of Surpluses

The opposition to market determination of prices is not limited to wages and interest rates. Once the stand is taken not to permit the structure of market prices to work its effect on production there is no reason to stop short of commodity prices.

If the prices of coal, sugar, coffee or rye go down, this means that consumers are asking more urgently for other commodities. As a result of the decline in such prices, some concerns producing these commodities become unprofitable and are forced to reduce production or shut down completely. The capital and labor thus released are then shifted to other branches of the economy in order to produce commodities for which a stronger demand prevails.

However, politics interferes once again. It tries to hinder the adjustment of production to the requirements of consumption—by coming to the aid of the producer who is hurt by price reductions.

In recent years, capitalistic methods of production have been applied more and more extensively to the production of raw materials. As always, wherever capitalism prevails, the result has been an astonishing increase in productivity. Grain, fruit, meat, rubber, wool, cotton, oil, copper, coal, minerals are all much more readily available now than they were before the war [World War I] and in the early postwar years. yet, it was just a short while ago that governments believed they had to devise ways and means to ease the shortage of raw materials. When, without any help from them, the years of plenty came, they immediately took up the cudgels to prevent this wealth from having its full effect for economic well-being. The Brazilian government wants to prevent the decline in the price of coffee so as to protect plantation owners who operate on poorer soil or with less capital from having to cut down or give up cultivation. The much richer United States government wants to stop the decline in the price of wheat and in many other prices because it wants to relieve the farmer working on poorer soil of the need to adjust or discontinue his enterprise.

Tremendous sums are sacrificed throughout the world in completely hopeless attempts to forestall the effects of the improvements made under capitalistic production. Billions are spent in the fruitless effort to maintain prices and in direct subsidy to those producers who are less capable of competing. Further billions are indirectly used for the same goals, through protective tariffs and similar measures which force consumers to pay higher prices. The aim of all these interventions—which drive prices up so high as to keep in business producers who would otherwise be unable to meet competition—can certainly never be attained. However, all these measures delay the processing industries, which use capital and labor, in adjusting their resources to the new supplies of raw materials produced. Thus the increase in commodities represents primarily an embarrassment and not an improvement in living standards. Instead of becoming a blessing for the consumer, the wealth becomes a burden for him, if he must pay for the government interventions in the form of higher taxes and tariffs.

2.

The Need for Readjustments

The cultivation of wheat in central Europe was jeopardized by the increase in overseas production. Even if European farmers were more efficient, more skilled in modern methods and better supplied with capital, even if the prevailing industrial arrangement was not small and pygmy-sized, wasteful, productivity-hampering enterprises, these farms on less fertile soil with less favorable weather conditions still could not rival the wheat farms of Canada. Central Europe must reduce its cultivation of grain, as it cut down on the breeding of sheep decades ago. The billions which the hopeless struggle against the better soil of America has already cost is money uselessly squandered. The future of central European agriculture does not lie in the cultivation of grain. Denmark and Holland have shown that agriculture can exist in Europe even without the protection of tariffs, subsidies and special privileges. However, the economy of central Europe will depend in the future, to a still greater extent than before, on industry.

By this time, it is easy to understand the paradox of the phenomenon that higher yields in the production of raw materials and foodstuffs cause harm. The interventions of governments and of the privileged groups, which seek to hinder the adjustment of the market to the situation brought about by new circumstances, mean that an abundant harvest brings misfortune to everyone.

In recent decades, in almost all countries of the world, attempts have been made to use high protective tariffs to develop economic self-sufficiency (autarky) among smaller and middle-sized domains. Tremendous sums have been invested in manufacturing plants for which there was no economic demand. The result is that we are rich today in physical structures, the facilities of which cannot be fully exploited or perhaps not even used at all.

The result of all these efforts to annul the laws which the market decrees for the capitalistic economy is, briefly, lasting unemployment of many millions, unprofitability for industry and agriculture, and idle factories. As a result of all these, political controversies become seriously aggravated, not only within countries but also among nations.