Professor Fekete: The Rothbardian and Misesian prognostications are rooted in the Quantity Theory of Money (QTM), according to which, if it were correct, we would have inflation instead of deflation following the miraculous proliferation of money, credit and debt.
BM: Two thoughts. First, there is inflation – using the professor’s own definition (and I will come to this shortly). Second, the professor seems to be describing only one side of the QTM equation and then attributing this definition to the Austrians associated with Mises and Rothbard.
Hans Hoppe defines the quantity theory of money: “whenever the quantity of money is increased while the demand for money to be held in cash reserve on hand is unchanged, the purchasing power of money will fall.”
Hoppe has read and studied far more Mises and Rothbard than I have, so I will take his word for this. In any case, this more complete definition by Hoppe seems reasonable.
Professor Fekete: I recognize only one kind of deflation, namely the deflation of assets.
BM: It is interesting; the professor defines “deflation” in the price of assets. Would it not follow that he would define “inflation” the same way, in the price of assets? Yet he does not recognize today’s asset price inflation as inflation – see his quote at the top of my comment.
Using Fekete’s own definitions, Mises and Rothbard are correct, yet the professor chides them for this.
But why is there an expectation of a deflation of assets? It can only be due to an artificially induced and maintained inflation in assets. And why would this be? Might it have something to do with the quantity theory of money and where / how that quantity was deployed?
Professor Fekete: A gold standard cum real bills is the right medicine to the moribund world economy.
BM: Unless it is advocacy for the free market, I get nervous when someone proclaims “the right medicine” for economic ills (aren’t we operating under the “professorial standard” today?) although I find no reason to disagree with “a gold standard cum real bills” as a possibility in a market of freely developed and accepted money and credit instruments.