. ?Austrian School,? p. 6; and miscellaneous definitions under ?Subjective . . . .? pp. 133-134.4.
. ?Historicism,? p. 60; ?Nominalism,? pp. 98-99.5.
. ?Empiricism,? p. 39; ?Institutionalism,? p. 68.6. Sixteen years ago when I presented the Circulation Credit Theory of the crisis in thefirst German edition of my book on
The Theory of Money and Credit
(1912), I encounteredignorance and stubborn rejection everywhere, especially in Germany. The reviewer for Schmoller?s Yearbook [
Jahrbuch f?r Gesetzgebung, Verwaltung und Volkswirtschaft
]declared: ?The conclusions of the entire work [are] simply not discussable.? The reviewer for Conrad?s Yearbook [
Jahrbuch f?r National?konomie und Statistik
] stated: ?Hypothetically,the author?s arguments should not be described as completely wrong; they are at leastcoherent.? But his final judgment was ?to reject it anyhow.? Anyone who follows currentdevelopments in economic literature closely, however, knows that things have changed basically since then. The doctrine which was ridiculed once is widely accepted today. LvM.7.
Zeitschrift f?r Volkswirtschaft, Sozialpolitik und Verwaltung.
Vol. VII, p. 132. LvM. [p.63] [p. 64] [p. 65]
Stabilization Of The Purchasing Power Of The Monetary Unit
1. ?Stable Value? Money
Gold and silver had already served mankind for thousands of years as generally acceptedmedia of exchange?that is, as money?before there was any clear idea of the formation of theexchange relationship between these metals and consumers? goods, i.e., before there was anunderstanding as to how money prices for goods and services are formed. At best, someattention was given to fluctuations in the mutual exchange relationships of the two preciousmetals. But so little understanding was achieved that men clung, without hesitation, to thenaive belief that the precious metals were ??stable in value? and hence a useful measure of thevalue of goods and prices. Only much later did the recognition come that supply and demanddetermine the exchange relationship between money, on the one hand, and consumers? goodsand services, on the other. With this realization, the first versions of the Quantity Theory, stillsomewhat imperfect and. vulnerable, were formulated. It was known that violent changes inthe volume of production of the monetary metals led to all-round shifts in money prices.When ?paper money? was used along side ?hard money,? this connection was still easier tosee. The consequences of a tremendous paper inflation could not be mistaken.