Understanding Money Mechanics by
Robert P. Murphy
My rating:
4 of 5 stars
A great book on money (and consequently on inflation). A wonderful review on the basic concepts or an easy introduction for a lay person on the subject.
Introduces or revisits the Austrian economic theory of Credit Circulation Theory of Trade Cycle, Equation of Exchange, Keynesian Approach, the Market Monetarists and Modern Monetary Theory (MMT). On top it redirects you and provides relevant bibliography in case you want to get a more sophisticated knowledge in any of the previously mentioned subjects.
Highly recommend it, especially on the times we are currently living.
My highlighted Quotes:
"...A formal definition for money is that it’s a universally accepted medium of exchange. [...] medium of exchange to possess the following qualities: ease of transport, durability, divisibility, homogeneity, and convenient size and weight for the intended transactions..."
"...Among the foreign coins circulating among the American colonists, the most popular was the Spanish silver dollar. This made the term “dollar” common in the colonies, explaining why the Continental currency was denominated in “dollars” and why the US federal government—newly established under the US Constitution—would choose “dollar” as the country’s official unit of currency. ..."
"...Inflation, as this term was always used everywhere and especially in this country [the United States], means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term “inflation” to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation. It follows that nobody cares about inflation in the traditional sense of the term. As you cannot talk about something that has no name, you cannot fight it. Those who pretend to fight inflation are in fact only fighting what is the inevitable consequence of inflation, rising prices. ..."
"..It is standard for economists to handle the relationship between money and prices using the equation of exchange, credited to Irving Fisher, which is nowadays11 often written as: MV = PQ where M is the quantity of money in the economy, V is the “velocity of circulation,” meaning the average number of times a unit of money “changes hands” during the time period in question,12 P is the “average price level,” and Q is the total quantity of real output produced during the period. ..."
"...Milton Friedman is often quoted as saying, “Inflation is always and every-where a monetary phenomenon.”..."
"...At this time, let us emphasize the important point that government cannot be in any way a fountain of resources; all that it spends, all that it distributes in largesse, it must first acquire in revenue, i.e., it must first extract from the “private sector.”..."
"...After explaining that government spending programs merely return resources to the private sector that had previously been taken from it, the economist will inform the public that there are three methods by which this taking occurs: taxation, borrowing, and inflation. The economist will often add that government borrowing can be considered merely deferred taxation, while inflation is merely hidden taxation. ..."
"...the printing press allows the government to get away with spending that the public would never agree to explicitly pay for, through straightforward tax hikes. ..."
Murphy, Robert. Understanding Money Mechanics. Ludwig von Mises Institute. Kindle Edition.
View all my reviews
Homenagem à Catalunha by George Orwell
