Comments (23)

• Arthur Wendel

  May I modestly suggest the word "currency" as a more accessible translation of the term, "Umlaufsmittel"?

  Published: March 15, 2006 11:27 AM

• jeffrey

  Ah, therein rests a massive controversy!

  Published: March 15, 2006 12:11 PM

• J. H. Huebert

  If you have a word as cool-sounding as "Umslaufmittel," why translate it at all?

  Published: March 15, 2006 12:41 PM

• drs

  "Those Germans have a word for everything"
  -- Homer Simpson (many years ago when it was still a funny show)

  Published: March 15, 2006 1:36 PM

• Dennis Sperduto

  But if (paper) currency is 100% backed by commodity money, my understanding is that there is no inflation, no business cycle effects, and no ethical/legal principles that have been violated as a result of the issuance of the currency. I believe important economic and legal/ethical reasons exist to differentiate between 100% backed receipts, and paper tickets or electronic entries that are not 100% backed by the money commodity. The terms "umlaufsmittel" and “fiduciary media� point out a crucial distinction.

  Published: March 15, 2006 1:38 PM

• Paul Edwards

  Dennis,

  Your comments seem right to me. To which proposition are you responding?

  Published: March 15, 2006 1:59 PM

• Dennis Sperduto

  Hi Paul,

  My reading of the first comment is that it appears to suggest that the terms "currency" and "umlaufsmittel" be used interchangeably. As I mentioned in my above comment, based on my understanding of the Mises/Rothbard (and Huerta de Soto) money and banking framework, I do not believe this would be correct, and would in fact obscure critical differnces.

  Published: March 15, 2006 2:14 PM

• Paul Edwards

  Oh i gotcha! Yeah i agree.

  Published: March 15, 2006 2:24 PM

• Dennis Sperduto

  Hi again Paul,

  My understanding is that Mises used the terms umlaufsmittel and fiduciary media to refer to credit that was created by banks and that was not fully the result of prior real savings. This bank-created credit could take the form of unbacked currency or demand deposits. But I believe the key distinction is that the credit was bank-created and not the result of the bank transferring the savings of one individual to another in the form of a loan.

  Published: March 15, 2006 2:26 PM

• Paul Marks

  As has often been pointed out, one of the key mistakes is to allow a special name for a unit of money - rather than simply saying what weight of a given type of material one is talking about (for example gold of a certain purity, or silver, or whatever).

  Having a piece of paper in one's pocket may cause less damage to the material than having a metal coin but there are few other advantages. The dangers of the idea are well known to people here.

  The whole idea of a commodity "backing" money is (of course) mistaken - the commodity IS the money. The bits of paper are just certificates of ownership of the commodity.

  The danger of treating these certificates as if they were money themselves is always present and can lead to the very fiat money, frational reserve mess we find ourselves in.

  Assuming that reconstruction occurs after the present financial system finally falls apart (a rather big assumption given the opinions of most of the public) the old mistakes must be avoided.

  If either bits of paper or computer data must be used then special names must be avoided as the danger that they are.

  There must be no more "Dollars" (or other such names) just a certain weight and purity of whatever commodity parties choose to have a contract in.

  Also the bits of paper or computer entries must be certificates of ownership for commodity that ACTUALLY EXITS.

  If the gold (or whatever other commodity is written on the certificate) is not there in the vault then fraud has taken place and should be punished.

  A financial system can take a vast amount of distortion before it breaks down (our own history proves this), but surely there is no need to go through the same story again.

  "We will call a certain weight of the commodity by a special name, we will have notes to represent certain amounts of the special name, we will not have enough of the commodity to "back" the notes, we will have fractional reserve banks that do not even have the notes to back their credit........."

  And on and on till we get to the present mess.

  A system where borrowing is not backed by real savings (simply credit expansion) and where the money is based on government whims.

  "We know all this - why tell us whatever we already know?"

  Because mistakes do not come all at once. Assuming (the big assumption again) that people such as yourselves manage to rebuild a financial system after the present one finally goes, it would be nice if you nipped the story in the bud.

  So please - no special name for a certain amount of a commodity money, and no talking of "backing".

  Published: March 15, 2006 2:46 PM

• Dennis Sperduto

  "The whole idea of a commodity "backing" money is (of course) mistaken - the commodity IS the money. The bits of paper are just certificates of ownership of the commodity."

  Paul Marks, your above comment regarding the use of the term "backing" is well taken.

  Published: March 15, 2006 3:10 PM

• Casey Khan

  Prof. Hulsmann has sold me, I just bought the book. Looks great, particularly the historical parts.

  Published: March 15, 2006 4:53 PM

• Paul Edwards

  Dennis,

  Cool. I meant i agree with you, in case i came across ambiguously.

  Published: March 15, 2006 6:22 PM

• anarkhos

  Is anyone else here pondering what's going to happen as the dollar becomes useless as money? I, for one, don't wish to live like a caveman. However, if money is essentially abolished, we can no longer effectively divide our labour. Modern society will collapse.

  I look around for money-substitutes and nothing looks good for that use. Most of the commodities we use aren't even made (or mined) here in the USA. Are we screwed or what?

  Published: March 15, 2006 9:50 PM

• void

  So is Prof. Hulsmann's book another Human Action or can it be (at least mostly) understood by a layman?
  

  Published: March 16, 2006 12:39 AM

• Jordi Franch

  I've read both "Theory of money and credit" by professor Mises (in Spanish version: "La teoría del dinero y del crédito") and this book by Jesús Huerta de Soto in the original Spanish "Dinero, crédito bancario y ciclos económicos" (professor Huerta de Soto teaches in Universidad Rey Juan Carlos and formerly in Universidad Complutense, both in Madrid - Spain).
  May I only emphasize the importance of translations (I don't know who is the translator of the last book from Spanish to English):
  . Works by Mises and Hayek written in the original German are unknown, even nowadays, due to the language. Had professors Mises and Hayek not emigrated to the United States and the United Kingdom respectively, the diffusion of Austrian Economics would certainly have been lessened.
  . The translator must have a thorough understanding of both languages (German and English, Spanish and English ...) to avoid errors or problems such as with the term Umlaufsmittel.
  . The importance of not only the deductive theory from a prior axioms, but of connecting them with the law.

  Greetings from Catalonia (Spain), JFP.

  Published: March 16, 2006 3:48 AM

• Brian Drum

  void,

  de Soto is the author, not Hulsmann. Also, I have read the first two chapters and so far it is pretty much straightforward.

  Published: March 16, 2006 8:43 AM

• gene berman

  Jordi:

  Whatever criticism of translations you may have, had these gentlemen not been able to emigrate and write in English, there might not have been very much of either to be read--in any language.

  By and large, none of Mises' works in German were very influential, despite his wide European recognition in economic circles.. Whatever real intellectual influence they wield today seems to have followed publication of HUMAN ACTION. In no wise do I mean to demean any language whatever--only to point out that, for whatever reasons there may be, good ideas are best (and have the greatest chance of achieving their desired results) when published in English.

  Published: March 16, 2006 10:38 AM

• Paul Marks

  Both gold and silver (and many other materials) are still mined in the United States.

  And people do not have to use a commodity that is mined locally as money - most nations that had gold or silver money did not have such mines.

  
  Rothbard was correct (as much as I may not agree with him on other matters).

  Even though he was a government man, old Joseph Harris (Master of the Mint) had things about right on money and banking in the mid 18th century.

  Published: March 16, 2006 2:50 PM

• Jordi Franch

  Gene, I do agree with you. "Good ideas are best (and have the greatest chance of achieving their desired results) when published in English". Certainly. The importance of a language (a spontaneous order) as a diffusion instrument relies on the strengthness and vitality of the civil society (another spontaneous order) that expresses using it.

  Published: March 17, 2006 7:34 AM

• Richard

  Will this book be available to buy via Amazon.com? Without wishing to sound cheeky, their international shipping rates tend to be lower.

  Published: March 20, 2006 6:28 PM

• Ed

  Just finished reading this incredible book. The suggestion for ending the fractional reserve banking system has incredible beauty and simplicity, and the added "bonus" that at the same time WE COULB KILL NATIONAL DEBT instantly.

  However, there is a little question: in order to remonetize gold, central bank reserves are so low, at least in Spain, that either this step is taken by all relevant countries at the same time, or , invariably, a gross mistmatch between the purchasing power of gold in the "reforming" country and the international price of gold will develop. This will lead to a cessation of imports & the virtual exports of all the assets of the reforming country, in exchange for gold.
  

  Published: November 25, 2006 11:34 AM

• billwald

  I propose "standard work hour" (swh) as a name for a unit of money. It is the amount of work accomplished by a healthy human using a shovel. Every community in every era knows the economic value of a swh. The value of labor and assets would be determined in fractions and multiples of swh.

  Published: November 25, 2006 12:28 PM