Mises's treatise of January 1923 is a crisis text on the German hyperinflation. It distinguishes its topic from the older search for money with unchanging exchange value: now the matter is more soberly the rescue of a functioning monetary system. The eight sections lead from the endpoint of inflation through stopping note issue, return to gold, choice of the stabilization ratio, and critique of balance-of-payments theory to inflationism, a new monetary constitution, and ideological diagnosis. The main thesis is that depreciation is not the fate of poverty or foreign trade, but the result of state-created monetary expansion.
In the first part Mises describes the endpoint of inflation as the loss of money's function. Permanently falling paper money is no longer fit for cash holding, credit transactions, and eventually not even ordinary exchange. Because everyone wants to get rid of notes immediately in exchange for goods, foreign exchange, or gold, the demand for money falls and accelerates the collapse. Panic buying is therefore not a marginal phenomenon, but the beginning of demonetization; the residual value of the note depends on expectation, not on compulsory tender.
Nur die Meinung, daß die Inflation zum Stillstande kommen wird, hält den Wert der Noten noch aufrecht.
English translation: Only the belief that the inflation will come to a halt still sustains the value of the banknotes.
From this follows the first step of reform: not foreign-exchange intervention, not import bans, not moral struggle against speculation, but an end to the printing press. Mises distinguishes stopping inflation from stabilization proper: if the money supply is fixed, fluctuations in the demand for money may still remain; only binding money to world money, that is, gold, creates durable external value.
Mit besonderem Nachdruck aber muß hervorgehoben werden, daß die Stabilisierung des Geldwertes nur erreicht werden kann, wenn man die Notenpresse still legt.
English translation: It must, however, be emphasized with particular force that the stabilization of the value of money can be achieved only if the printing press is shut down.
Mises defends gold as institutional discipline. Its quantity cannot be increased according to government need. He therefore rejects mere attachment to foreign paper currencies as well as chartalist theories of state money creation. The real opposition is between politically manipulable money and money withdrawn from politics.
An die Stelle des Schlagwortes „Los vom Golde“ muß die Lösung treten: „Los von der staatlichen Beeinflussung des Geldwertes“.
English translation: In place of the slogan "Away from gold" must be substituted the solution: "Away from state influence on the value of money."
On the question of the ratio, Mises rejects a prestige-driven return to the old gold mark. The rate already reached should be stabilized; a deflationary restoration would create new redistributions. Against balance-of-payments theory he sets quantity theory, Gresham's law, and purchasing-power parity: exchange rates ultimately follow the purchasing power of the monies, while foreign trade reacts to price differences. Foreign-exchange offices and prohibitions remain pseudo-remedies so long as inflation continues.
Nicht die Armut des einzelnen und der Gesamtheit, nicht die Verschuldung an das Ausland, nicht die Ungunst der Produktionsbedingungen treibt die Valutenkurse in die Höhe, sondern die Inflation.
English translation: It is not the poverty of the individual and of the whole, nor indebtedness abroad, nor unfavorable conditions of production that drives foreign-exchange rates upward, but inflation.
The analysis of "conditional inflationism" is especially sharp. War, social policy, and reparations create real burdens, but they do not explain depreciation; they explain the political incentive to conceal burdens. Inflation replaces visible taxes and open loans with covert expropriation, illusory profits, and capital consumption. Reparations, too, must be borne in real terms through exports of goods or capital; note printing only shifts the internal distribution of burdens and drives exchange rates upward.
So wird die Inflation zu dem wichtigsten psychologischen Hilfsmittel einer Wirtschaftspolitik, die ihre Folgen zu verschleiern sucht.
English translation: Thus inflation becomes the most important psychological expedient of an economic policy that seeks to disguise its consequences.
The new monetary constitution must therefore be strict: a maximum amount of uncovered notes, full gold or foreign-exchange cover for every additional issue, a fixed obligation of the Reichsbank to buy and sell gold, and no artificial lowering of interest by circulation credit. Mises thus adopts the hard core of the Currency tradition as an immediate barrier against the source of inflation. Yet the final point is intellectual-historical: the currency catastrophe arises from an etatist thinking that treats money as a creature of the state.
Das Übel ist geistiger Art.
English translation: The evil is of a spiritual nature.
The work remains relevant because it connects monetary-technical reform with political theory. For Mises, stabilization requires not only banking rules, but a rejection of imperialism, protectionism, etatism, and socialism; good money belongs to the liberal order in which the state does not use monetary value as an instrument of finance.
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