Ludwig von Mises, Aussprache: erster Beitrag von Prof. Dr. v. Mises-Wien (S. 275–280) (1925)

This published discussion intervention examines monetary reconstruction through replies to fellow participants, connecting the intellectual origins of inflation with the institutional requirements of stabilization. Mises distinguishes his oral contribution from the fuller written argument available to his audience:

Ich selbst bin ja in der angenehmen Lage, auf ein umfangreiches schriftliches Gutachten hinweisen zu können, das in den Vereinsschriften abgedruckt wurde und Ihnen allen zugekommen ist.

English translation: I myself am in the agreeable position of being able to refer to an extensive written expert opinion which was printed in the publications of the Association and has come into the hands of all of you.

The intervention moves from the practical influence of monetary theory to gold-exchange reserves, foreign lending, and Austria’s experience. Its governing concern is that stability requires both informed convictions and effective convertibility; formal arrangements cannot alone prevent policies grounded in inflationary doctrines.

Against Diehl’s skepticism about theoretical discussion when practice follows a worse course, Mises makes an emphatic claim:

Ich glaube, daß diese Skepsis nicht berechtigt ist; ich glaube, daß im Guten und Bösen die Idee und die Theorie allmächtig sind.

English translation: I believe that this scepticism is not justified; I believe that, for good and for ill, the idea and the theory are all-powerful.

Policy failure does not demonstrate theory’s impotence, because mistaken theories also guide action. Mises illustrates this through the Bank of France’s resistance to governmental demands in 1871. Institutional independence mattered, but he assigns greater explanatory weight to prevailing monetary convictions:

Entscheidend war, daß die währungspolitische Ideologie zu jener Zeit in Frankreich eine ganz andere war als 1914 und später in Deutschland und überhaupt in Europa.

English translation: What was decisive was that the ideology of currency policy at that time in France was an entirely different one from that of 1914 and later in Germany and in Europe generally.

He associates the earlier French outlook with Chevalier, Wolowski, and Ricardo’s influence on Thiers. Europe’s inflationary policies after 1914, by contrast, had been prepared intellectually by monetary writing. The comparison makes doctrines active causes of policy rather than retrospective justifications.

Mises also connects monetary understanding to inflation’s social effects. Belief in money’s stable value exposes people to depreciation, whereas recognition of instability and adoption of gold accounting counteract its broader economic consequences. Public understanding thus offers protection against renewed inflation. He reads the discussion’s movement away from protectionism, state theories of money, and balance-of-payments explanations of exchange rates as intellectual progress, although an audience interruption indicates disagreement.

The treatment of the Goldkernwährung turns to a system without domestic gold circulation and with reserves held largely in foreign exchange. So long as the United States maintains gold convertibility, Mises regards dollar reserves as performing the relevant monetary function while earning interest, unlike idle gold holdings. This economy nevertheless transfers the burden of holding gold to the United States. American financial predominance might enable it to require other countries to share that cost, potentially through non-interest-bearing gold accounts. He also qualifies the expectation that renewed European gold demand must depress commodity prices: American replacement of exported gold with fiduciary circulation could offset the effect on gold’s purchasing power.

Responding to fears that foreign loans could renew German inflation, Mises identifies unconditional redemption at parity as the decisive safeguard. Under metallic money or genuinely redeemable notes, an initial domestic expansion brings the international adjustment described by Ricardo’s quantity theory. Nationally confined inflation becomes possible when a central bank retains incoming foreign exchange but refuses unconditional redemption. Mises therefore opposes banking devices and exchange controls that weaken convertibility. Possession of reserves is not equivalent to making them available for redemption.

Austria provides the practical test. Against criticism that its central bank stabilizes the dollar exchange rate rather than commodity prices, Mises attributes rising prices to adjustment toward world-market levels and heavy taxation of production. Expanding note circulation need not itself establish inflation: with redemption maintained, returning confidence can increase demand for domestic money as it replaces foreign currency.

The conclusion returns to the intellectual causes of depreciation. Mises rejects explanations blaming imported goods and disputes the exclusively German identification of doctrines hostile to the quantity theory, emphasizing the imported Banking Theory. His recollection of idle Viennese factories alongside incessantly operating bank printing presses contrasts productive activity with inflationary monetary production. The intervention joins a defense of theory’s practical importance to an institutional argument: stabilization depends on genuine redemption, while changes in note circulation must be interpreted through monetary demand and international adjustment rather than treated automatically as evidence of inflation.