Part 2. The Hong Kong Economic Experiment or the freest economy on earth

Part 1. The Hong Kong Economic Experiment or the freest economy on earth

Part 5.2: The inflationary process and the economic effects of inflation

Inflation has further pernicious consequences: It distorts business calculation and accountability, as the profit and loss statement of an enterprise does not reflect reality any more. 

Part 5.1: The inflationary process and the economic effects of inflation

Price changes of goods and services may arise due to variations in their supply and demand or due to changes in the purchasing power of money. The former case was to be called by Mises ¹ “good-induced-changes” and the latter case “cash-induced-changes”.

Part 4: The optimum quantity of money

Several economic consequences arise from Say’s Law (for example, it is production and not consumption what has to be stimulated in order to boost economic growth) , but we will go straight to the point: Money creation boosts demand , albeit this demand is not a real one. 

Part 3: The regression theorem, trade and production and the Say’s Law

Money must have a pre-existing price on which to ground its demand, but if supply and demand determine the price, how can it be that this demand depends on a pre-existing price? Mises solved this confusing circular trap in 1912 with his regression theorem.  

Part 1: A brief summary about the origins of money

Why has money been present in mankind’s history for so many millennia? Different cultures in different places and periods of time have used very different commodities as money, such as cocoa, salt, gold, shells, circular stone disks (or cigarettes). In fact, the concept of “money”, or “medium of exchange”, has always arisen spontaneously when the sprouts of civilization have taken root. Why? Let’s trace money back to the absolute beginning.

Part 2: The special nature of money, media of exchange, demand and supply and purchasing power

We have seen that money has historically been a commodity which, among other things, differed from other commodities in being demanded mainly as a medium of exchange, although it always had other uses. ¹ Economic goods are categorized in two different groups: Consumer goods and producer goods; the former satisfy human needs directly and the latter indirectly.