Ludwig von Mises and the Market Nature of Money
In his seminal work The Theory of Money and Credit, Ludwig von Mises defined money as a market phenomenon emerging spontaneously from the needs of exchange. His analysis, based on the subjective theory of value, forms the foundation of the Austrian School and challenges contemporary statist paradigms. Understanding Mises's thought allows us to see why money is not a neutral tool of the state, but a key element of economic rationality and individual freedom.
Origins and Functions: Money as a Spontaneous Market Process
According to Mises, money is not a creation of the state nor the result of an arbitrary decree. Its source is the market and the natural need for a generally accepted medium of exchange. This is the only primary function of money—roles such as a measure of value or a store of value are secondary to it. Mises rejects the concept of money as an objective measure, pointing out that it only enables the comparison of price relationships resulting from the subjective decisions of individuals.
The purchasing power of money is explained by the regression theorem: today's value depends on yesterday's, which in a causal chain leads back to the point when a given commodity had use-value. This praxeological perspective portrays money as a social institution based on trust and evolutionary coordination. Mises firmly rejects fiat money and statism, proving that no ruler's stamp can impose a value on the market that contradicts its own assessment.
Credit and Cycles: Why Fiduciary Expansion Triggers Recession
Central to Mises's theory is the distinction between commodity credit (based on real savings) and circulation credit (created ex nihilo). The expansion of the latter distorts market signals by artificially lowering interest rates, which should reflect the natural time preferences of society. This leads to malinvestments—flawed ventures whose unprofitability only becomes apparent during the crisis phase.
Mises proves that money is not neutral. Changes in its supply trigger the Cantillon effect: newly created funds first reach privileged groups, causing a hidden redistribution of wealth at the expense of the rest of society. It is the manipulation of the fiduciary credit supply, rather than the flaws of the free market, that is the primary cause of cyclical economic shocks and distortions in the structure of production.
Contemporary Challenges: From MMT to CBDC Projects
Mises's thought remains in fundamental conflict with Modern Monetary Theory (MMT), which treats the state as the omnipotent creator of currency value. For the Austrian economist, such an approach is a dangerous illusion leading to the sabotage of the social structure through inflation. Similar risks are posed by CBDC (Central Bank Digital Currency) projects, which could be used for the political profiling of consumption and a radical break from the idea of monetary neutrality.
Mises's theory precisely diagnoses contemporary crises, such as the 2008 crash or the effects of quantitative easing following the pandemic. It shows that attempts by central banks to arbitrarily manage economic conditions only accumulate imbalances. In the face of growing statism, a return to the idea of money as a spontaneous order becomes essential for maintaining stability and economic freedom.
Summary: Freedom of Choice in Money
Mises's analysis goes beyond a technical description of economics, touching upon the philosophical foundations of social order. In a world dominated by interventionism and digital surveillance, does the idea of market money have a chance to survive? History teaches us that the state monopoly on money always leads to abuse. The question remains whether, by surrendering total control over the instrument of exchange to the state, we are not relinquishing the most fundamental guarantor of our sovereignty.
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