An Exchange Will Take Place When Two Commodity Units Are Placed in a Different Order on the Value-Scales of Two Different Persons

Acts of valuation are not susceptible of any kind of measurement. It is true that everybody is able to say whether a certain piece of bread seems more valuable to him than a certain piece of iron or less valuable than a certain piece of meat. And it is therefore true that everybody is in a position to draw up an immense list of comparative values;  a list which will hold good only for a given point of time, since it must assume a given combination of wants and commodities. If the individual’s circumstances change, then his scale of values changes also.

But subjective valuation, which is the pivot of all economic activity, only arranges commodities in order of their significance; it does not measure this significance. And economic activity has no other basis than the value-scales thus constructed by individuals. An exchange will take place when two commodity units are placed in a different order on the value-scales of two different persons. In a market, exchanges will continue until it is no longer possible for reciprocal surrender of commodities by any two individuals to result in their each acquiring commodities that stand higher on their value-scales than those surrendered. If an individual wishes to make an exchange on an economic basis, he has merely to consider the comparative significance in his own judgement of the quantities of commodities in question. Such an estimate of relative values in no way involves the idea of measurement. An estimate is a direct psychological judgement that is not dependent on any kind of intermediate or auxiliary process.

--Ludwig von Mises, The Theory of Money and Credit, trans. H. E. Batson (Indianapolis: Liberty Fund, 1981), 52-53.

Inflation Is the True Opium of the People and It Is Administered to Them by Anticapitalist Governments and Parties

The Marxian socialists once indulged in reveries concerning a fabulous increase in riches to be expected from the socialist mode of production. The truth is that every infringement of property rights and every restriction of free enterprise impairs the productivity of labor. One of the foremost concerns of all parties hostile to economic freedom is to withhold this knowledge from the voters. The various brands of socialism and interventionism could not retain their popularity if people were to discover that the measures whose adoption is hailed as social progress curtail production and tend to bring about capital decumulation. To conceal these facts from the public is one of the services inflation renders to the so-called progressive policies. Inflation is the true opium of the people and it is administered to them by anticapitalist governments and parties.

--Ludwig von Mises, The Theory of Money and Credit, trans. H. E. Batson (Indianapolis: Liberty Fund, 1981), 484-485.

Fiat Money! Let the State "Create" Money, and Make the Poor Rich, and Free Them from the Bonds of the Capitalists!

Inflationism is that monetary policy that seeks to increase the quantity of money.

Native inflationism demands an increase in the quantity of money without suspecting that this will diminish the purchasing power of the money. It wants more money because in its eyes the mere abundance of money is wealth. Fiat money! Let the state "create" money, and make the poor rich, and free them from the bonds of the capitalists! How foolish to forgo the opportunity of making everybody rich, and consequently happy, that the state's right to create money gives it! How wrong to forgo it simply because this would run counter to the interests of the rich! How wicked of the economists to assert that it is not within the power of the state to create wealth by means of the printing press!--You statesmen want to build railways, and complain of the low state of the exchequer? Well, then, do not beg loans from the capitalists and anxiously calculate whether your railways will bring in enough to enable you to pay interest and amortization on your debt. Create money, and help yourselves.

--Ludwig von Mises, The Theory of Money and Credit, trans. H. E. Batson (Indianapolis: Liberty Fund, 1981), 251.

The Conclusion to Which My Investigations Lead Is That Expansion of Credit Cannot Form a Substitute for Capital

This point of view is sometimes called the "orthodox" because it is related to the doctrines of the Classical economists who are Great Britain's imperishable glory; and it is contrasted with the "modern" point of view which is expressed in doctrines that correspond to the ideas of the Mercantilists of the sixteenth and seventeenth centuries. I cannot believe that there is really anything to be ashamed of in orthodoxy. The important thing is not whether a doctrine is orthodox or the latest fashion, but whether it is true or false. And although the conclusion to which my investigations lead, that expansion of credit cannot form a substitute for capital, may well be a conclusion that some may find uncomfortable, yet I do not believe that any logical disproof of it can be brought forward.

--Ludwig von Mises, preface to the English edition of The Theory of Money and Credit, trans. H. E. Batson (Indianapolis: Liberty Fund, 1981), 31.

The Grocer Philosophy of Inflation Was Exploded by Adam Smith and Jean-Baptiste Say But Revived by Lord Keynes as the Full-Employment Policy

The inflationist or expansionist doctrine is presented in several varieties. But its essential content remains always the same.

The oldest and most naive version is that of the allegedly insufficient supply of money. Business is bad, says the grocer, because my customers or prospective customers do not have enough money to expand their purchases. So far he is right. But when he adds that what is needed to render his business more prosperous is to increase the quantity of money in circulation, he is mistaken. What he really has in mind is an increase of the amount of money in the pockets of his customers and prospective customers while the amount of money in the hands of other people remains unchanged. He asks for a specific kind of inflation; namely, an inflation in which the additional new money first flows into the cash holdings of a definite group of people, his customers, and thus permits him to reap inflation gains. Of course, everybody who advocates inflation does it because he infers that he will belong to those who are favored by the fact that the prices of the commodities and services they sell will rise at an earlier date and to a higher point than the prices of those commodities and services they buy. Nobody advocates an inflation in which he would be on the losing side.

This spurious grocer philosophy was once and for all exploded by Adam Smith and Jean-Baptiste Say. In our day it has been revived by Lord Keynes, and under the name of full-employment policy is one of the basic policies of all governments which are not entirely subject to the Soviets.

--Ludwig von Mises, The Theory of Money and Credit, trans. H. E. Batson (Indianapolis: Liberty Fund, 1981), 463-464.

What Is Needed First of All Is to Force the Rulers to Spend Only What They Have Collected as Taxes

Sound money still means today what it meant in the nineteenth century: the gold standard.

The eminence of the gold standard consists in the fact that it makes the determination of the monetary unit's purchasing power independent of the measures of governments. It wrests from the hands of the "economic tsars" their most redoubtable instrument. It makes it impossible for them to inflate. This is why the gold standard is furiously attacked by all those who expect that they will be benefited by bounties from the seemingly inexhaustible government purse.

What is needed first of all is to force the rulers to spend only what, by virtue of duly promulgated laws, they have collected as taxes. Whether governments should borrow from the public at all and, if so, to what extent are questions that are irrelevant to the treatment of monetary problems. The main thing is that the government should no longer be in a position to increase the quantity of money in circulation and the amount of checkbook money not fully--that is, 100 percent--covered by deposits paid in by the public. No backdoor must be left open where inflation can slip in.

--Ludwig von Mises, The Theory of Money and Credit, trans. H. E. Batson (Indianapolis: Liberty Fund, 1981), 480-481.

Ideologically, Sound Money Belongs in the Same Class with Political Constitutions and Bills of Rights

It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights. The demand for constitutional guarantees and for bills of rights was a reaction against arbitrary rule and the nonobservance of old customs by kings. The postulate of sound money was first brought up as a response to the princely practice of debasing the coinage. It was later carefully elaborated and perfected in the age which--through the experience of the American continental currency, the paper money of the French Revolution and the British restriction period--had learned what a government can do to a nation's currency system.

--Ludwig von Mises, The Theory of Money and Credit, trans. H. E. Batson (Indianapolis: Liberty Fund, 1981), 454.

The Most Important Economic Element in This War Ideology Was Inflationism

When the first edition of this book was published twelve years ago, the nations and their governments were just preparing for the tragic enterprise of the Great War. They were preparing, not merely by piling up arms and munitions in their arsenals, but much more by the proclamation and zealous propagation of the ideology of war. The most important economic element in this war ideology was inflationism.

--Ludwig von Mises, preface to the second German edition of The Theory of Money and Credit, trans. H.E. Batson (Indianapolis: Liberty Fund, 1981), 33.