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Money, Monopoly, and Market Intervention, Lecture 4 with Robert Murphy - Mises Academy
1. Money, Monopoly &
Market Intervention
Robert P. Murphy
Mises Academy
October 26, 2011
Lecture 4: 2nd
Third of Chapter 11 of
Man, Economy, and State
2. 2nd
Third of
Chapter 11 of MES
1. Speculative Demand for
Money
2. Clearing / Credit
3. “Keynesian Cross”
4. “Money Illusion”
5. Hoarding & Interest Rates
VI. Keynesians on Money &
Interest
VII. Purchasing Power Component
in Interest?
VIII. Banks
IX. “Cost of Living”
X. Purchasing Power Parity
7. V. Hoarding: No Necessary
Effect on Interest Rates
If people increase their desired cash
balances, they can accomplish this
through a reduction in consumption or
investment spending.
8. VI. Keynesians on
Money & Interest
Keynes argued that people have
“liquidity preference,” meaning they’d
prefer to hold cash rather than risky
bonds/stocks. Yet higher the interest
rate, higher the “penalty” on holding
wealth in form of cash.
So, other things equal, Keynesians say
lower interest rates higher demand to
hold money.
9. VII. Purchasing Power Component of
Contractual Interest Rate?
Standard view from Irving Fisher says
market interest rate contains a
component to allow for changes in PPM.
But Rothbard argues that if change is
expected, then it won’t be handled in
loan contracts—it will show up already
in today’s PPM!
13. IX. “Cost of Living” By Region
“Law of One Price” applies to
money as to other commodities,
meaning a uniform PPM across
regions.
What about Manhattan vs.
Boise??
14. X. Purchasing Power Parity
In equilibrium, different moneys
will trade against each other so as
to equalize their purchasing
powers (at least among tradable
goods?).
E.g. if barrel of oil trades for 100
euros or $120, then one euro
trades for $1.20.