Money is Not Neutral: Cantillon Effects
Money is Not Neutral: Cantillon Effects
The insight that money is a good in its own right and not just a placeholder for other goods led Mises to place special emphasis on the impact of money on the real economy. It was customary to highlight the impact of inflation and deflation on deferred payments. Inflation would entail higher money prices—that is, a lower purchasing power of money—in the future, which in turn benefited debtors at the expense of creditors. Inversely, deflation would benefit creditors at the expense of debtors. So far, so good.
Exchange Rate Determination: Purchasing Power Theory
Exchange Rate Determination: Purchasing Power Theory
Mises also took a position at odds with the mainstream view on another important issue: the factors determining the exchange rate between two monies. To do so, he revived an older doctrine that had been displaced by the prevailing veil-of-money myth.
Fractional-Reserve Banking and Business Cycles
Fractional-Reserve Banking and Business Cycles
Mises’s careful distinction between money proper and money substitutes naturally led to the question of the role of money substitutes. In the second part of his book, Mises showed that bank-issued money substitutes could not affect the value and purchasing power of money, as well as the distribution and allocation of resources as long as they were true representatives of a corresponding amount of money deposited with the bank—that is, in Mises’s terminology, as long as they were money certificates.
P ART III O FFICER , G ENTLEMAN , S CHOLAR
Officer, Gentleman, Scholar
7. The Great War
First Year in Battle
First Year in Battle
Early on a Saturday morning, Mises stood ready for departure at Vienna’s crowded Nordbahnhof station. He took the eight o’clock express to the city of Przemysl in his native Galicia, where he would join his unit, the field cannon regiment no. 30.
The Home Front
The Home Front
If Mises could have gotten away earlier, in any honorable manner, he would have welcomed the opportunity. He tried, in the fall of 1914, to use his Kammer affiliation to be transferred to some other duty. The Kammer had had to give up forty-five men for military service but some others were allowed to remain in their prewar functions or were transferred to the War Ministry, which cooperated very closely with the Kammer.34 Mises was not among the lucky few who never had to expose themselves to harm.
Back to the Front
Back to the Front
At the end of August 1916, Romania entered the war on the side of the Entente powers. With new vigor, the united Russian and Romanian forces pushed forward into Transylvania and started making their way into the Hungarian plains. But their success was short-lived. Within two months, the German armies of Falkenhayn and Mackensen halted the enemy, regained the lost territory, drove the Entente forces back into the Transylvanian Alps, and from there into the Romanian heartland around Bucharest.
New Life
New Life
By mid-November, Mises had left both the front and the Scientific Committee.89 The details of his departure from the latter are unknown, but it appears to have been part of a general improvement in his situation. From this point on, in fact, his life would continue to improve for quite a while.
A Last Mission
A Last Mission
After their overthrow of the Kerensky government in November 1917, the Bolsheviks called for an immediate end of the war on the Eastern Front on a status quo ante basis and without reparations for either side. Moreover, they began to make public highly secret prewar Entente plans for punishing Germany in case of victory. These revelations increased the political pressure on the Allies to seek an early peace as their reasons for going to war now appeared in a decidedly less saintly light.
