Ludwig Von Mises Theory of Money and Credit (Chapter 8: Monetary Policy of Etatism Continuing and Last 🧵 of the Chapter):
Balance of Payments Theory as Basis for Currency Policy:
Here Mises attacks the view that "Metallic Money money moves freely between countries.
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Balance of Payments Theory as Basis for Currency Policy:
Here Mises attacks the view that "Metallic Money money moves freely between countries.
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https://twitter.com/Zero_Analyticz/status/1887007888456970725
Under a purely metallic monetary system, the metals which perform the function of money will be distributed according to the intensity demand for each State's money.
This however is judged by the intensity of the demand for their products (all economic goods including...
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This however is judged by the intensity of the demand for their products (all economic goods including...
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....financial assets & commodities alike)
An undesired efflux of money can therefore can only be as a result of State intervention, so all the state needs to do to preserve the monetary system, is refrain from such interventions.
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An undesired efflux of money can therefore can only be as a result of State intervention, so all the state needs to do to preserve the monetary system, is refrain from such interventions.
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This is the one stance of the classical economists and their immediate successors that Mises agrees with.
When countries substitute credit or Fiat money for metallic money, the rate of exchange between each Fiat currencies according to Gresham's Law is determined by...
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When countries substitute credit or Fiat money for metallic money, the rate of exchange between each Fiat currencies according to Gresham's Law is determined by...
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...the Balance of Payments.
The Balance of trade theory neglects the fact that prices moves trade and not currency he says. As neither exportation nor importation can occur if there were no price differences.
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The Balance of trade theory neglects the fact that prices moves trade and not currency he says. As neither exportation nor importation can occur if there were no price differences.
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So the price level determine balance of payments and ultimately exchange rates.
However, for price level to be different, productivity or quantity must be as well for every single product on the international markets.
So productivity and resources endowments...
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However, for price level to be different, productivity or quantity must be as well for every single product on the international markets.
So productivity and resources endowments...
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...drive trade and by extension balance of payments, through price differentials for the cost of production and availability of the commodity if it's a natural resources.
This I think is a deeper view into price and BOP determinants than Mises presented. My only dissent...
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This I think is a deeper view into price and BOP determinants than Mises presented. My only dissent...
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....where this chapter is concerned.
A final point he makes which I am in total agreement in the broadest sense, is that, though money facilitates trade, imports are paid for by exports.
How?
If a country wishes to import more, they must export more of goods, raw,...
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A final point he makes which I am in total agreement in the broadest sense, is that, though money facilitates trade, imports are paid for by exports.
How?
If a country wishes to import more, they must export more of goods, raw,...
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...and unfinished or export shares bonds and other financial securities.
Thus, it follows from this that imports are paid for by exports (in the present or future) not by money. Money merely is an instrument by which this exchange takes place.
By @Muhammad_Okoye @Mo_Okoye
9/9.
Thus, it follows from this that imports are paid for by exports (in the present or future) not by money. Money merely is an instrument by which this exchange takes place.
By @Muhammad_Okoye @Mo_Okoye
9/9.
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