“When a country has substituted credit money or fiat money for metallic money, because the legal equating of the over-issued paper and the metallic money sets in motion the mechanism described by Gresham's Law, it is often asserted that the balance of payments determines the rate of exchange. But this also is a quite inadequate explanation. The rate of exchange is determined by the purchasing power possessed by a unit of each kind of money.”

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About Ludwig von Mises

Austrian economist and social theorist of the early-to-mid 20th century, Ludwig von Mises is best known for his rigorous defense of classical liberalism and free-market economics. His work in praxeology—an a priori method of social science—shaped modern libertarian thought, while his critiques of socialism and central planning remain foundational in economic theory.

More from Ludwig von Mises (152 quotes) →
"When a country has substituted credit money or fiat money for metalli…" — Ludwig von Mises | Daily Quotes