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Articles, Authors

Third Daily Bell Interview
The Daily Bell is pleased to present this exclusive interview with Antal Fekete.
Author: Prof. Antal E. Fekete

Daily Bell: Please review again your criticisms of the Quantity Theory of Money. It certainly makes sense on a simplistic level. When you print too much money, you devalue the rest. Why isn't this an accurate statement?

Antal Fekete:You can print all the money you want, but once you put it into circulation, you no longer have control over it. Money flows where it will; the only thing certain is that it will not flow uphill. Instead, it will flow to the place where the fun is. Right now the guys at the Fed hope against hope that their freshly printed Federal Reserve notes will flow to the commodity market or the housing market. But thats not where the fun is. The fun is in the speculative financial markets. Thats where the money flows, frustrating the Quantity Theory of Money and those who believe in it.

Daily Bell: You stated your theory implies a rehabilitation of Adam Smith's Real Bills Doctrine. But how is the Real Bills Doctrine linked to the denial of the Quantity Theory of Money?

Antal Fekete: The Gold Bills Doctrine is a living reminder that the Quantity Theory is false. It is thorn in the flesh. Certainly, drawing gold bills will add to the money supply, but it does it in such a way that will not make prices to rise.

Daily Bell: Why did Rothbard dislike Adam Smith? He criticized Smith based on the title of his book, Wealth of Nations, pointing out that nations didn't own wealth, people did. Is this a valid criticism? If it is, does it imply a basic misconception on Adam Smith's part?

Antal Fekete: No, it doesnt. The title of a book must be concise (not that the full title of Adam Smiths book is the paragon of conciseness!) Rothbard is right in saying that macroeconomic aggregates such as a nation do not act like individuals, nor do they create or dispense wealth. Thats the trouble with macroeconomics. It is a silly anthropomorphism. It assumes that macroeconomic aggregates have free will. You must treat the wealth of nations as figurate speech.

Daily Bell: You stated previously that the fratricidal war between the Time Preference School and the Productivity School of Interest must end. Can you explain the differences between these two theories?

Antal Fekete: The Time Preference School teaches that interest exists solely because of our innate preference for present goods as opposed to the same quantity and quality of future goods. The Productivity School teaches that interest exists only to the extent of greater productivity due to the application of better tools and methods in production. Interest theorists, in their conceitedness, have never considered that both theories may be right simultaneously. This omission resulted in a stagnation of the theory of interest that has remained the most backward chapter in economics to this day.

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