Money Mises University July 12 18 2020 Nature

Money Mises University July 12 -18, 2020

Nature of Money Types of Goods ● Present Goods • Consumer Goods • Media of Exchange ● Future Goods • Original Factors of Production: Labor and Land • Produced Factors of Production: Capital Goods

Nature of Money Types of Media of Exchange ● Money • Commodity Money • Credit Money • Fiat Money ● Money Substitutes • Money Certificates • Fiduciary Media ● Auxiliary Media of Exchange

Origin and Development of Money Conforms to the Logic of Action ● Money Originates from Two Facts • Desire to Attain Ends through Exchange • Spectrum of Salability of Goods ● Money Develops by Entrepreneurial Innovation • Selection of Superior Commodities • Certification of Commodities • Money Certificates

Money and Economic Calculation: Using Money Prices in Decisions about Participating in the Social Economy ● Consumers Use Money Prices in Decisions to Buy Consumer Goods • Calculate the Opportunity Cost of Their Purchases ● Producers Use Money Prices in Decisions to Sell Producer Goods • Calculate the Value of Their Compensation ● Entrepreneurs Use Money Prices in Decisions about Enterprises • Calculate Net Income = Revenues – Costs • Calculate Net Worth = Assets – Liabilities

Price of Money ● Purchasing Power of Money ● Determined by Total Stock of and Total Demand for Money • Total Stock: amount of a good persons possess TS increases by production and decreases by consumption • Total Demand: amount of a good persons prefer to possess TD to hold money to deal with uncertainty Exchange Demand + Reservation Demand • PPM at market-clearing level: TD = TS

Price of Money PPM TS PPM 1 • A TD M 1 Money

Regression Theorem Subjective Use Value of Money → Demand for Money Stock → PPM Objection: Austrian Circle Objective Use Value → SUV → Demand for Money Stock → PPM (OUV) Solution to Austrian Circle and Objection: Infinite Regress OUVyesterday → SUVtoday → Demandtoday → PPMtoday Solution to Infinite Regress OUV of Goldlast day → SUV of Goldfirst day → Demandfirst day → PPMfirst day → of barter of money

Changes in the PPM Four Cases ● TD increases relative to TS causing the PPM to rise ● TD decreases relative to TS causing the PPM to fall ● TS increases relative to TD causing the PPM to fall ● TS decreases relative to TD causing the PPM to rise

Any Amount of Money Performs the Entire Medium of Exchange Function in Society PPM TS 1 • A TS 2 • B M 1 M 2 TD Money

Unhampered Market Economy Money and Banking ● Money Stock • Money: Commodity Coinage • Money Substitutes: Money Certificates • Money Stock production is economized ● Banking • Produce money certificates: earn fees • Intermediate credit: earn interest rate spread • Credit supply is economized

Hampered Market Economy Money and Banking ● Money Stock • Money: fiat paper • Money Substitutes: fiduciary media • Monetary Inflation and Monetary Deflation ● Banking • Produce fiduciary media and create credit • Intermediate Credit • Credit Expansion and Credit Contraction