Mises — Geldwertstabilisierung und Konjunkturpolitik

Written amid interwar enthusiasm for monetary planning, Mises’s 1928 essay attacks two connected ambitions: stabilizing money’s purchasing power and abolishing cycles by central-bank technique. Its thesis is that both projects exaggerate what policy can know and do. Purchasing power cannot be measured with scientific exactness, and bank credit cannot create capital by forcing interest below the market rate. Policy can only narrow the damage: remove monetary sources of crisis by halting uncovered credit expansion.

Part I examines gold, index standards, Fisher’s compensated dollar, and money-side vs goods-side price changes. Gold is defended not as perfectly stable, but as comparatively protected from political manipulation. Its recent depreciation, Mises argues, was partly policy-made: gold-core and gold-exchange systems, cashless payments, and attempts to “save” gold increased money substitutes. Reformers thus blamed gold for effects of interventions that had already weakened it.

His decisive conceptual move is to deny that purchasing-power changes can be measured as stabilization schemes require. Index numbers depend on arbitrary choices of averages and weights. They may be useful in spectacular inflations, but they cannot furnish a scientific standard for contracts or policy. The idea of an unchanged “price level” presupposes a fictional stationary economy, or an impossible observer with unchanging valuations.

Die Vorstellung, es könnten die Veränderungen der Kaufkraft des Geldes gemessen werden, ist wissenschaftlich unhaltbar.

English translation: The notion that changes in the purchasing power of money can be measured is scientifically untenable.

For this reason Fisher’s plan, like older tabular standards, fails. It corrects after the fact and cannot prevent the uneven path by which new money reaches some groups and prices before others. It also treats “justice” in debt contracts as a neutral technical matter, although productivity changes and redistribution cannot be made harmless by an index. Mises’s rejection is not indifference to monetary disturbance, but a denial that stability has coherent policy content in a changing market.

doch Wertstabilität gibt es nicht und kann es nicht geben.

English translation: but stability of value does not exist and cannot exist.

Part II turns to cycles and insists that empirical observation alone cannot identify the phenomenon. What appears as alternating boom, crisis, and depression becomes intelligible only through theory, specifically the circulation-credit doctrine descending from the Currency School.

Erst die Konjunkturtheorie läßt uns in der wirren Fülle von Geschehnissen den Wellenzug der Konjunktur erkennen.

English translation: Only business-cycle theory enables us to discern, amid the confused abundance of events, the wave-motion of the cycle.

Mises revises the Currency School by treating uncovered banknotes and transferable demand deposits alike as “Umlaufsmittel,” money substitutes that expand the broader money supply. Issued as credit, they push the loan rate below the natural rate determined by real saving. Entrepreneurs then begin longer production processes that appear profitable only under artificially cheap credit. Since the economy lacks the necessary capital goods and subsistence fund, the boom falsifies calculation. The crisis does not create the loss; it reveals capital already misdirected.

Cycles recur for ideological reasons. Banks and governments repeat expansion because public opinion, businessmen, and politicians want “cheap money” and rising activity without grasping the reversal built into the policy. Privileged central banks, suspensions of redemption, and rescues blunt the discipline that would punish overissue. Hence his skepticism toward cycle institutes and Harvard-style barometers: statistics organize evidence, but cannot replace theory or dictate discount policy.

His policy conclusion is austere. An anti-cyclical policy would revive and extend the Currency School’s rule to deposits as well as notes: no further creation of uncovered fiduciary media, and no attempt to manufacture prosperity through bank credit. Free banking under ordinary commercial law may be the ultimate remedy, but his immediate demand is strict cover and the abandonment of artificial cheap-credit policy.

The essay’s relevance is its fusion of monetary theory, subjective value theory, and capital theory into a mature statement of Austrian cycle theory. Against technocratic stabilization, Mises argues that politicized money disguises redistribution, index management rests on pseudo-measurement, and credit expansion cannot substitute for saving. Its final message is that crises can be mitigated only by abandoning the illusion that banking technique can overcome scarcity.

Nur die Abkehr von diesem Wahn wird die periodische Wiederkehr der Konjunkturzyklen mit ihrer Peripetie, der Krise, beheben oder doch wenigstens mildern können.

English translation: Only turning away from this delusion will be able to remedy, or at least to mitigate, the periodic recurrence of the business cycles with their peripeteia, the crisis.