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The Ludwig von Mises Institute

Advancing Austrian Economics, Liberty, and Peace

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Mises Made Easier
Percy L. Greaves Jr.


Fabianism. The socialist principles and policies of the Fabian Society founded in 1884 in order to introduce socialism into Great Britain slowly and slyly. The Society was named after the Roman general Quintus Fabius Maximus (died 203 B.C.) who avoided open and decisive confrontation with his opponents while wearing them down with delaying tactics, misleading maneuvers and continuous harassment. Prominent Fabians included Sidney and Beatrice Webb (1859-1947, 1858-1943), Bernard Shaw (1856-1950) and Harold J. Laski (1893-1950).

PF. 61.

Factor of production. A human service or material good that can be used to contribute to the success of a process of production. A constituent element of any production process. Examples would be labor, natural resources and capital goods (q.v.). NOTE: Factors of production can be classified as to (1) human (labor) or nonhuman (material) factors, or (2) original or produced factors. The term "factor of production," as used by Mises, does not include the time factor, although he has referred to time as an "immaterial factor of production."

Failure monopoly. A monopoly which depends upon the use of a prior malinvestment which it would be clearly unprofitable for anyone to duplicate. An example would be the operation of an already existing exclusive capital structure when consumers will buy the output at prices which exceed operating expenses but which fail to yield the sums which those with uncommitted savings can expect to earn from other investments open to them.

Fait accompli, (French). Accomplished fact; thing already done.

Fascism, Italian. The policies and principles of the Fascist Party of Italy providing for the complete regimentation of business and the suppression of all opposition. This Party, founded in 1919 by a former socialist editor, Benito Mussolini (1883-1945), marched on Rome in 1922. Mussolini then assumed control of the government and gradually expanded his power until he became an absolute dictator. After the successful Allied invasion of Italy, the Fascists were deposed in 1943 and Mussolini was assassinated by Italian opponents in 1945.

AC. 97, 109; B. 96, 108; S. 561, 572, 574-578; UF. 130.

Favorable balance of payments. See "Balance of payments."

Featherbedding. The labor union practice in a hampered market economy of forcing employers (1) to employ more persons than necessary for the efficient performance of a task, or (2) to pay persons for work they have not performed.

Federal Reserve Act of 1913. The law creating the Federal Reserve System with its 12 Federal Reserve Banks, which act as the American "Central bank" (q.v.). The Act has been amended many times. The underlying idea was to provide an "elastic currency through the creation of an American central bank, without arousing the then existing unpopularity of every centralization in the United States and the traditional hostility to the central bank idea due to the experience with two preceding Banks of the United States. See also "Credit expansion," "Depression" and "monetary theory of the trade cycle."

For helpful critiques of the role of the Federal Reserve System in American economic development, see Benjamin M. Anderson's Economics and the Public Welfare (N.Y.: Van Nostrand, 1949), Murray N. Rothbard's America's Great Depression (Princeton, N.J.: Van Nostrand, l963; Los Angeles: Nash, 1972) and PLG, 187-293.

Federal Reserve Notes. Legal tender notes of the American Federal Reserve System. From 1914 to June 21, 1917, these banknotes were secured by 100% short term rediscounted commercial paper, plus a reserve of not less than 40% in gold. In 1917, the reserve requirements were changed to not less than 40% in gold with the balance to 10O% consisting in private and public obligations meeting certain legal requirements. From 1914 to 1933, Federal Reserve notes were redeemable in gold upon presentation. In 1933, their redeemability ceased except for those presented by foreign governments, their central banks and certain international organizations. In 1945, during World War II, the gold reserve requirement was reduced to "not less than 25%." In the 1960's, as the actual gold reserves dropped, there was considerable agitation for the reduction or elimination of this requirement. In 1968, the gold reserve requirement was dropped. Since then they have been secured solely by evidences of private and public debts and have been issuable without limit against such debts. On August 15, 1971, President Nixon suspended their redeemability by foreign governments, their central banks and international organizations. They are now [1974] in effect fiat money (q.v.).

PLG. 188-193.

Feudalism. The social and political order of allegiance, land tenure and military service which gradually developed over large parts of Central and Western Europe after the collapse of the Roman Empire. The land was divided into fiefs or feuds, each with a manor occupied by a vassal or noble (member of the Second Estate) who was beholden for his tenancy to a superior lord, king or emperor to whom he owed tribute and military service. Below each vassal were the subtenants, known as serfs or villeins. Its main characteristic was that all political and military power was vested in the hands of the owners of the land. It slowly disappeared step by step as the modem ages replaced the Middle Ages.

B. 15.

Fiat, (Latin). Literally, let it be done. Order, command, decision, or statute of an authoritative power.

Fiat justitia, ne pereat mundus, (Latin). Let justice be done, (so) the world not be destroyed.

Fiat justitia, pereat mundus, (Latin). Let justice be done, (though) the world be destroyed.

Fiat money. A coin or piece of paper of insignificant commodity value that a government has declared to be money and to which the government has given "legal tender" quality. Fiat money neither represents nor is a claim for commodity money. Fiat money is issued without any set intention to redeem it and consequently no reserves are set aside for that purpose. The value of fiat money rests on the acceptance of political law or fiat. Fiat money is money in both the broader and narrower senses.

HA. 428-30; M. 60-62, 482-483.

Fiduciary media. Money-substitutes freely accepted at face value which consist in claims to payment on demand of specified sums of money in excess of the monetary reserves held for their redemption. Fiduciary money includes token money, bank or treasury notes and demand deposits (deposit currency or checkbook money) which exceed the amount of cash reserves immediately available for their conversion into money proper. Fiduciary media are money-substitutes (q.v.) and "Money in the broader senses (q.v.) but not "money in the narrower sense" (q.v.).

HA. 432-44; M. 52-54, 133; and Part III, particularly 263-97 and 319-39, 482-83.

Final price. In short, the price that would eventually emerge if no new data appeared to change the course of market actions and conditions. The hypothetical or imaginary price which would result with the passage of the time necessary to carry to completion all actions which are the consequence of using existing human knowledge and factors of production in attempts to satisfy presently held value scales in so far as human action can satisfy them. A final price is hypothetical or imaginary because it contemplates no change in human ideas, knowledge or value scales during the time needed to carry out the actions momentarily decided upon at any one time. This implies an actual impossibility?the absolute rigidity of the mental contents of human minds over a period of time sufficient to complete all actions contemplated at one time. The final price is a helpful concept for studying and understanding the formation of actual market prices.

HA. 244-50.

Final state of rest. An imagined or hypothetical state toward which every market action is a step but the attainment of which would mean that all market actions had ceased because man's attainable ends had all been attained and consequently there was no further cause for any more market actions. This state is never attained as man's ends are both unlimited and ever changing and every new end or shift in value scales sets off a new set of market actions tending toward a new and different final state of rest. Consequently, the final state of rest toward which all market actions are ever moving is constantly shifting before being reached. This imaginary construction is helpful as a guide to understanding current market movements at any specified time.

HA. 244-50.

Final wage rate. See "Final price," mutatis mutandis (q.v.).

Fineness. The proportion of the pure precious metal in gold or silver coins and bullion. American gold coins were 9/10th fine, while British gold coins were 11/12th fine.

Finite. Having determinable limits; having a limited height or boundary; neither infinite nor infinitesimal; measurable.

Flexible standard. Short for "Flexible gold exchange standard." A monetary system with a monetary unit for which the parity with gold is not fixed by law but is subject to instant change upon the order of some specified governmental agency. Under this standard, the movement of the unit's parity is almost always downward, since the primary purpose for adopting it is to hide or counteract the undesired ultimate effects of prior interventions, particularly those undertaken as the result of labor union pressures.

HA. 787-92; M. 429-30.

Flight into goods or real values. The frantic rush to spend all monetary savings and other available cash, buying goods, whether needed or not, in order to avoid holding, even for a short time, any rapidly depreciating monetary units. This occurs at that point in the development of inflation when the public is convinced that prices will continue to rise endlessly and at an accelerated pace. The flight into goods or real values is also known as a "Crack-up boom" (q.v.) and marks the complete breakdown of a monetary system.

HA. 427, 436,469-71,550,562562; M. 227-30; also PLG. 165-66.

Foreign exchange. The currencies or media of exchange of other countries. In general usage, foreign exchange also includes negotiable instruments used for the international transfer of funds, such as checks, drafts and bills of exchange, which are payable in the currencies of other countries.

Foreign exchange rates are the exchange ratios between the currency of one country and the currencies of other countries. They are the prices or quotations for the currencies of other countries and are usually expressed in terms of the domestic currency.

HA. 452-58; M. 180-86.

Foreign exchange equalization account. A government fund set up under a "gold exchange standard" (q.v.) for handling the foreign exchange operations of the country's residents. The fund is usually established by a government grant of a certain quantity of gold and/or foreign exchange for its operations, which are normally carried on in secret in an attempt to stifle and hide from the public the inevitable effects of a domestic inflation and/or credit expansion. The foreign exchange equalization account of the United States is known as the Exchange Stabilization Fund.

HA. 461,787; M. 429-30.

Free banking. A system in which banks would operate as private enterprises without any legal limitations, restrictions or privileges under such general laws, including those for bankruptcy, which are applicable to all types of free enterprise. Under such conditions banknotes would not be legal tender and the business of banks, including any issuance of banknotes, would be, like the business of other firms, solely dependent on their reputation and public acceptance.

HA. 443-48; M. 395-99.

French Revolution (1789). See "Revolution, French."

Frictional unemployment. See "Unemployment, frictional."

F?hrer, (German). Guide or leader, but not a pioneer. Title applied to Adolf Hitler (1889-1945),. German Chancellor and F?hrer (1933-1945). See "Nazi" and "National socialism."

S. 580-81.

F?hrertum, (German). Leadership.


Fungible, n. and adj. Capable of mutual substitution in use or satisfaction of a contract. A commodity or service whose individual units are so similar that one unit of the same grade or quality is considered interchangeable with any other unit of the same grade or quality. Examples?tin, grain, coal, sugar, money, etc.

Futures market. A market for trading contracts wherein one party, usually a specialist, pledges for a certain sum of money to deliver to or buy from another party, the holder of the contract, a specified quantity of specified fungible commodities, securities or foreign exchange on a specified future date. Such contracts are primarily an extension of the division of labor principle whereby the speculative incidence of interim price changes are shifted from parties unfamiliar with the causes of such price changes to those with a special knowledge and understanding of expected price changes. Thus processors or manufacturers in need of future raw materials can know immediately the costs of such materials and foreign traders can likewise know immediately the domestic monetary equivalent of future payments for their exports or imports priced in foreign currencies.

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