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

ate in order to stop the withdrawal of gold, i.e., its “gold reserves.”
Not all countries inflate, or if they do inflate, they do not inflate to
the same extent. Switzerland is considered a “bad” country because it
does not inflate sufficiently. erefore, there are continual problems with
the flow of money from countries which have more inflation to others
which have not inflated to the same extent. If the various governments and
central banks do not all act in the same way, if some banks or governments
go a little farther than the others, the situation develops that I have just
described; those who expand more are forced to return to the market rate
of interest in order to preserve their solvency through liquidity; they want
to prevent funds from being withdrawn from their country; they do not
want to see their reserves in gold or foreign money dwindling. And one
calls this the “international problem.”
In the nineteenth century one spoke of “the war of the banks.” is
term was not a good one. It would have been more correct to refer to
the useless attempts of central banks, from time to time, to maintain a
lower rate of interest within their own country than actual conditions permitted.
Nevertheless, this expression, “the war of the banks,” was most
popular during the first decade of the present [20th] century when the
Peace Conference at the Hague was in vogue. One day the Italian Minister
of Finance even suggested a “peace conference” of the central banks in
order to end “the war of the banks.” However, there was neither a “war of
the banks” nor a “peace conference” of the banks.
All countries in the past had only metallic money, no paper money,
and they used the metallic money according to weight—you know the
metallic weight of money still remains in the names of some monetary
units, for instance the “pound sterling.” Money was then valued according
to its content of metal, and governments were not in a position to increase
the quantity of money. But the problem of money connected with a purely
metallic currency is not the problem of our age. e problem we have to
meet today, what we have to face today, is that the governments pretend
that they have the right to increase the quantity of money if they want to
spend more. And the governments that do this, to the extent that they
do, become very angry if somebody says it has adopted an inflationary
policy. ey say inflationary conditions are what businessmen cause by
asking higher prices. But the question is not that the businessmen ask
for higher prices, you know; the question is why did they not ask higher
prices yesterday before the government increased the quantity of money
If they had asked higher prices yesterday, people would not have paid the
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