The always perceptive investment manager John Hathawy has posted The “Real” Value of a Dollar on the Tocqueville web site. Hathaway makes a number of very Austrian-sounding points.First, the importance of money prices for economic calculation:
Whether or not to buy, hire, produce, or invest depends on millions of daily calculations measured in dollars.
The pretense of economic planners who believe that their judgments are superior to market outcomes as expressed in prices:
The enticing question is what information should the market utilize to assess the dollar? Should it use the price of gold? Not according to Gov. Bernanke. Should it use exchange rates? Again, the answer is no. Let us then turn to the mini-maestro for the correct answer. He concludes his January 4th speech: [...Bernanke speech omitted...] In other words, “trust us” to get it right. But is Bernanke’s confidence that the Fed will act appropriately to maintain the dollar’s value enough to dispel all doubts?
The inevitability that markets will prevail over the planners:
It is impossible for anyone to write tomorrow’s headlines. What is absolutely and irrefutably certain, however, is that oversupply, a term without which it would be impossible to describe the dollar, will be corrected by market forces in due course. The Fed, notwithstanding its privileged knowledge of the true value of the dollar, is powerless to dictate that the dollar will trade for one penny more than its market- clearing price.
A Misesean view of the purchasing power of money:
The value of money is fundamentally different from all other daily necessities. Money is useful both for its current transaction value and for its future purchasing power. While its transaction value can be known at any given moment, future purchasing power is a matter of speculation.
