Pat Gunning wrote: 
 
> 
> Also to elaborate on Larry's point about the particular means of  
> increasing the quantity of money (namely, through the loan market),  
> the key to understanding the Austrian argument is to recognize the  
> demand for present goods in relation to the demand for future goods.  
> Mainstream macroeconomics models used a concept of money saving that  
> almost entirely disembodied this demand. By doing this, it diverted  
> attention away from Mises's main idea -- that unexpected money  
> injected into the economy through loan markets distorts the signals  
> that consumer-savers give to entrepreneurs about their near future  
> goods demand. This diversion was part of the Keynesian legacy. 
 
Pat's point here is also right on target.  In my 2000 book  
*Microfoundations and Macroeconomics:  An Austrian Perspective*  
(Routledge), I have a discussion of the "neutrality of money" where I  
make the following point (p. 97): 
 
"If the capital structure is understood as being comprised of the  
various intertemporal prices existing in the market, then money is  
neutral if the current monetary policy or regime is not a cause of any  
systematic distortion in those prices, leading to the potential  
unsustainability of that structure.  Changes deriving from the money  
supply process are not providing too much or too little investment in  
comparison to voluntary savings, creating the possibility of a  
sustainable capital structure.  In monetary disequilibrium, the mismatch  
of savings and investment implies a lack of synchrony between the  
signals facing entrepreneurs adn the preferences of consumers, leading  
to the creation of a capital structure that is unsustainable and must  
eventually be reversed.  It is in this sense that money is neutral in  
monetary equilibrium.  This usage seems consistent with the meaning  
behind the Wicksell-Hayek conception [of neutral money]. 
 
A money that is neutral in the Wicksell-Hayek sense need not be neutral  
in the modern equiproportionality sense." 
 
The use of "neutral money" in the Swedish and Austrian tradition is  
tightly linked to their conceptions of capital and the idea of monetary  
equilibrium.  It was not, in that tradition, the idea of either the  
price level or all individual prices moving step-for-step with changes  
in the money supply.  Wicksell, Mises, and Hayek of course all  
recognized the fundamental truth of the equation of exchange, but  
understood that its application to real-world economies required a  
disaggregation of its terms and significant attention to the  
microeconomic processes, especially the intertemporal ones, that it  
rested upon. 
 
Steve Horwitz