Chapter 17 of Human Action

Date and time: October 14, 2026, 21:30

Location: Online

Participants: mori, Bench Press

Book title: Human Action

Author: Ludwig von Mises

Year of publication: 1949

Relevant section: 17

1. Overall impression of the chapter: Inflation vs. Deflation

What stood out most in this chapter was Section 18, “The Inflationist View of History.”

Like Hayek, Mises sees inflation as far more dangerous than deflation.

Inflationists such as Keynes advocated inflationary policies on the grounds that deflation is harmful.

Mises regarded both as harmful and did not support deflation either.

However, because inflation benefits politicians, inflationary policies continue to be tried in reality.

2. The real intention behind defending the gold standard

Mises did not present the gold standard itself as an ideal.

The reason he argued for preserving the long-established gold standard was to prevent government intervention.

What people cite as a defect of the gold standard—that the government cannot control it—Mises regarded precisely as its advantage.

3. Criticism of Bretton Woods and the current dollar system

Mises criticized the newly launched Bretton Woods system, and that system did in fact collapse.

It reads almost like a prophecy.

The current situation, in which U.S. hegemony is wavering, is also connected to this.

Mises said that if a world fiat currency were created, conflict would be inevitable over how newly created money would be distributed among countries.

If the dollar is seen as the de facto world fiat currency, then Trump’s objection—“Why should the United States have to run deficits?”—is ultimately also a matter of distribution among countries.

4. Criticism of the IMF system and the 1997 foreign exchange crisis

Mises’s criticism of the IMF system was striking.

During the foreign exchange crisis, Korea tried to borrow foreign currency from a number of countries.

However, because of the principle that foreign exchange response channels should be centralized through the IMF and the World Bank, even Japan and others could not provide support individually.

There was an aspect in which Korea suffered because of the mindset that a single international organization should control the world’s foreign exchange problems, and this aligns with Mises’s criticism.

The very fact that foreign exchange reserves must be stockpiled is itself a product of floating exchange rates.

Under the gold standard, exchange ratios between currencies were effectively fixed, so there was no need to hold reserves beyond a certain amount; currencies could simply be exchanged at that ratio.

Under a floating exchange rate system, the ratio is not fixed, so it is safer to hold more than a certain amount.

The very occurrence of such crises is wasteful.

This is not to say the gold standard was good, but rather to compare structures.

There was also the counterquestion of whether, absent government intervention, firms would simply have collapsed one by one.

Jongin Kim sees financial liberalization as the cause of the foreign exchange crisis.

His explanation is that after liberalization, overseas borrowing became excessive, and when credit ratings fell, foreign creditors moved all at once to withdraw funds, depleting foreign exchange reserves.

There was also a view that partially accepted this explanation. Since both the gold standard and Bretton Woods had already collapsed, there was also an aspect in which countries lent and borrowed excessively without properly considering risk.

There was a rebuttal as well.

According to that analysis, Korea could never escape state-directed finance.

5. The political causes of the foreign exchange crisis

This interpretation is based on testimony from people who witnessed the situation at the time.

Background: The financial reform that the Youngsam Kim administration ultimately failed to complete.

From around March 1997, warning signs such as credit rating downgrades began to appear.

Appointment of Kyungsik Kang: President Youngsam Kim appointed Kyungsik Kang, a bureaucrat from the Fifth Republic whom he did not particularly like, as deputy prime minister for economic affairs.

Kyungsik Kang’s plan was to first pass the financial reform bill that the IMF would eventually demand anyway, and then use that as the basis for negotiations with the IMF in order to secure funds while minimizing interference.

Failure of the bill: From March to December, the bill failed to pass.

The Bank of Korea labor union opposed it through strike action, and not only the opposition party but even ruling party candidate Hoichang Lee opposed it.

Prior agreement with the IMF: At the very end, contact was made with the IMF managing director, and it was agreed that Korea would carry out the reforms autonomously and receive funding without the IMF imposing separate conditions.

Dismissal and collapse of trust: President Youngsam Kim suddenly dismissed Kyungsik Kang.

The succeeding deputy prime minister for economic affairs, unaware of this agreement, announced that “IMF funds are not necessary.”

The IMF, the United States, and others lost trust, and Korea failed in its attempts to borrow dollars elsewhere.

Capital outflows accelerated further.

Memoranda and disclosure of the agreement: As a condition for financial support, the IMF obtained memoranda of compliance from each presidential candidate.

But the candidates who signed them then called for renegotiation, and the IMF demanded disclosure of the contents of the agreement, which had originally been confidential.

After the disclosure, trust in the economic sphere collapsed completely.

Conclusion: This situation was created by the politicians who blocked the bill starting in March.

The IMF’s mistake was its insistence on centralizing foreign exchange response. Since then, the IMF has not made such strong demands, and matters such as currency swaps have been left for countries to resolve autonomously.

Evaluation of Jongin Kim: Jongin Kim argues that instead of clinging to the financial reform bill, Korea should have borrowed foreign exchange and held out.

However, there is a problem with that argument because at the time it was impossible to borrow even if Korea tried.

Watching his YouTube discussion gives the impression that politicians still have not come to their senses.

6. Text quotations: Business cycles, free banking, and central bank independence

p.865: “Nothing has harmed the cause of liberalism as much as the almost regular recurrence of booms and the subsequent slumps.”

There is a common belief that if a liberal economy is left alone, the Great Depression will repeat itself.

But the real cause is inflationary policy, and cause and effect are being understood in reverse.

p.863: Even under a pure gold standard, and even if a 100 percent reserve requirement were implemented, the defects inherent in government interference with banking cannot be completely eliminated.

So long as banks remain privileged institutions under special legislation, they remain instruments of government finance.

This passage connects to Jaeik Kim’s effort to constitutionally specify the independence of the Bank of Korea.

Even if such independence were written into the Constitution, as long as the central bank remains a privileged institution, it cannot be prevented from becoming an instrument of the government.

Thus Mises’s conclusion is that only free banking is the ultimate solution.

That means there is no need for the state to maintain a legal monopoly over currency.

What Mises feared has actually occurred, and now the whole world is suffering the aftermath.

It is only because the process is slow that people do not notice it.

It feels like reading a book of prophecy.

7. Hayek translations and the problem of misreading Mises

Status of Hayek translations

Of the 13 volumes of Hayek’s collected works, only one or two have been translated in Korea.

They also include material on business cycle theory, socialism, and war.

Cryptocurrency researchers cite Hayek frequently.

If translation begins with the essays containing Hayek’s ideas on money and banking, many young people would read them.

Because there are copyright issues, it was decided to use them for study purposes first and decide later whether to make them public.

The problem of misreading Mises

In this chapter, the most important content concerned the gold standard.

The conventional view that Mises argued only for the gold standard is a misreading.

It is not just a simple misreading; it is the exact opposite of what he meant, written by people who did not even read him properly.

Scholars say this, and even professors who participated in translating this book say it.

There are scholars who understand Mises properly, but they have not been able to make their voices heard.

The reason the voices of misreading professors are louder seems to be that universities have been transformed into public education institutions.

The relationship between Mises and Hayek

The more one reads, the more one finds that Mises says many of the same things as Hayek.

The point at which the two diverged was Hayek’s The Constitution of Liberty.

Its proposals in the area of welfare were not well received.

However, even if their solutions differ, their perspective on the problems is the same.

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Original title: <인간행동> 17장

Author: Ja-yu-ju-ui Ip-mun Dok-seo-to-ron-mo-im

Date: 2026-10-16

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=reading01&pn=1&idx=29638