It is the 100th anniversary of Irving Fisher’s 1911 book The Purchasing Power of Money. But, more important than that, it is a good time, during the current financial turmoil, to reconsider some of his theories again, in light of current events. And I think that some of his theories about variations in the purchasing power of money are very important today, have been underappreciated, and are worthy of considering anew.
In that 1911 book he described a theory of financial crises that tied them to over-borrowing during the expansion phase that preceded the crisis, and to the changes in the purchasing power of money that this expansion causes, then to the collapse in credit and the drop in the price level.
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Amazingly insightful.
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