20
Jan
2012
Learn the Views of Mises on Money and Banking!
Admit it: You’ve had that copy of The Theory of Money & Credit on your shelf since October 2008. When TARP went through, you thought the end was near, and you needed to go back to the ancient texts to get guidance through the storm.
But then Mises started talking about “credit money” and you punted.
Well, this class is for you.
Bob, just out of curiosity, you once said that with regard to money aggregates that you were not as familiar with M2 as you are with M1 (I am paraphrasing, of course). M2 is pretty much the same as M1, except it adds in the “credit money” component. My question is whether ToMC helped you in more fully understanding M2 and how it works (what mechanisms cause it to rise/fall)?
It’s been a while since I read ToMC, so I don’t remember much of it, and I probably didn’t understand it as well then as I would now.
Joseph, I don’t think anything in M2 is “credit money” the way Mises uses that term in TOMC. I think Mises uses it more in the sense of something that right now isn’t redeemable for anything, but could be in the future, and yet right now it is a medium of exchange.
Ok, gotcha. I am using the more mainstream version of “credit money”.
ToMC was actually the very first Austrian book that I ever read (yes, probably not the best choice to start with), so I am definitely rusty on the details. Looks like it is time for me to crack ToMC open again. In fact, I’ve been slacking in the economics realm, I haven’t read any economic books in about a year– it is difficult for me to stick to one subject for too long.
I may sign up for the class, but I have so much going on in February it’s not even funny.
This is self-promotion I can get behind. Downloaded the study guide, many thanks!
I wasn’t 100% sure what Mises meant by credit money either, especially whether he meant to refer to an entire type of money system (as Bob says), or to a specific fraction of a money supply (as Joseph seems to have meant).
I thought that Ropke gave the best one-liner type of explanation for credit money, is that it comes into existence when people give up on actually making cash transfers and begin to simply ‘keep score.’ I think it is best to give it that type of explanation, and leave off the hard definitions, because so much of this is a matter of convention and very ‘squidgy.’ If your definition doesn’t have fuzzy edges, situations will most surely arise where it will fail you.