The Phaserl


Six Myths About Money and Inflation

from Mises:

The following are six of the most prevalent economic myths that appear time and again in the mainstream media. I will give a brief description of each and a brief description of the economic reality, as seen from an Austrian perspective.

Myth 1: Increased money leads to economic prosperity.

This Keynesian myth postulates that increasing aggregate demand through increasing the money supply will lead to more spending, higher employment, increased production, and a higher overall standard of living.

The reality is that an increase in money (when injected into credit markets via bank lending of newly-created reserves) leads to malinvestment. The time structure of production is thrown into disequilibrium by encouraging investment in projects more remotely removed in time from final consumption.

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1 comment to Six Myths About Money and Inflation

  • Ed_B

    “Myth 1: Increased money leads to economic prosperity.”

    Money is the scoring mechanism in our economy. Creating more score sheets does NOT alter the outcome of the game. This was discovered by Henry Morganthau Jr., who was FDRs Sec Treas. he recognized 80 years ago that government spending was not increasing employment or business activity. Why is it that 80 years later, people cannot seem to figure this out? Do they HAVE to collapse the current economic system before they finally comprehend that Keynes was an academic who was completely divorced from the real world? It sure seems like it.

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