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Monetary Problems

  • Ludwig von Mises Archives
January 4, 2008

Tags Austrian Economics OverviewMonetary TheoryPhilosophy and Methodology

The monetary problem – the market problem – is the medium of exchange. The illusion is that one would be better off if only one had more money. Everybody should have more money. Therefore, make more money. This creates the system of inflation. This increase in the quantity of money brings about higher prices. Individuals are left with no real possibilities of acting.

So, in truth, the medium of exchange (money) must, first of all, be restricted in quantity. Why gold? Gold is scarce. Its quantity cannot be easily increased by governments.

Two models for society exist. One model is the absolute rule of one. All must obey. The totalitarian system produces order which is slavery.

Another model is individuals acting by their own ideas. The market system produces exchanges and social cooperation through everybody voluntarily making choices.

Recorded June 23,1970. Special thanks to Bettina Bien Greaves for making this important recording available.

Note: The views expressed on are not necessarily those of the Mises Institute.

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