Ludwig von Mises on Money and Inflation.pdf - The Ludwig von ...

CHAPTER
FOURTEEN
Two Monetary Problems
e function of the government is to prevent violence. e function which
the government adopted, accepted, and held with respect to money, was
to say what the parties had meant and whether or not the parties to the
agreement had done what they were bound to do according to the agreement
which they had voluntarily accepted. In these agreements the term
“money” was used in order to specify the medium of exchange used by
the parties when they met, when they made the contract. But when the
government faced this situation they adopted the privilege of coining the
metal used in these agreements and using the coins, at first without any
bad intentions. At the beginning this didn’t mean anything more than the
government’s declaration that the coin was a piece of metal of a definite
weight and that it could be used as such by the parties. But again and again
in various nations, governments misused the position which this situation
gave them. e situation was simply this. Already in very ancient times, in
the history of almost every group of nations and of every civilization there
developed among governments that did this, that coined certain pieces of
metal, the idea that they had the right to—it is very difficult for me to
say this word—“swindle.” If one talks about all these things, one must not
forget that they did it with a bad conscience. But when government got
involved with money it led to two problems.
e first problem, the one which is not recognized as a monetary problem
by the government, by official spokesmen and writers, is that of the
increase in prices, the so-called “inflation.” One of the most important features
of the “New Economics,” 1 once simply known as “bad economics,”
1 e doctrine derived primarily from the teachings of the British John Maynard Keynes
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