Debate with Guido Hülsmann on the demand for money and hyperinflation
Debate with Guido Hülsmann on Mises.org
In a recent debate on Mises.org, ny friend Professor Guido Hülsmann and I discussed whether hyperinflation can occur purely through a collapse in money demand, even when the money stock remains constant. Hülsmann argued that hyperinflation requires both a loss of confidence and a large monetary expansion. I argued that a drastic fall in money demand is sufficient on its own to drive the value of money toward zero, just as the price of any good can collapse when demand disappears.
The discussion highlighted important methodological issues. My position focused on causal analysis: prices depend on both supply and demand, and demonetization is fundamentally a demand-driven process. Hülsmann’s approach leaned more on definitional distinctions, which risk obscuring the underlying economic mechanism.
We also examined the relevance of central-bank assets in a monetary transition. Hülsmann acknowledged that pesos would ultimately be redeemed against these assets, which implies that asset quality matters—contrary to claims that they are irrelevant. This point becomes especially important in countries like Argentina, where the credibility of monetary institutions is already fragile.
Overall, the debate clarified that institutional expectations and money demand play a decisive role in extreme monetary crises. I am grateful to Prof. Hülsmann for the exchange. The debate has deepened our understanding of hyperinflation, demonetization, and the structure of Austrian monetary theory.
Bagus: Credit Money, Pesos, Dollars and Argentina
Hülsmann: Closing a Central Bank: Comment on Bagus
Bagus: Closing Argentina’s Central Bank: A Response to Professor Hülsmann
Hülsmann: Closing Argentina’s Central Bank: Rejoinder
Bagus: The Logic of Hyperinflation: A Rejoinder to Hülsmann
Hülsmann: The Nature of Hyperinflations: Response to Bagus
Bagus: The Logic of Monetary Collapse: A Rejoinder to Hülsmann
Hülsmann: Closing Argentina’s Central Bank: Concluding Comments
Bagus: Money Demand and Demonetization: Concluding Comments
