Having learned much from the interesting, excellent HES exchange on the neutrality of money, may I add some further minor points? (1) Mises was certainly not the first to attract attention to where in the economy the new money comes in "first", and to the consequences on relative prices (including the rate of interest) and (possibly) on capital accumulation. Hayek,1935, chap.1 and Hayek, 1932, are very useful references on the history of this idea, in its different versions (including Cantillon's and Wicksell's versions, the one proposed by Malthus, etc). (2) Mises and other Austrians (as Larry Moss, Pat Gunning and Steve Horwitz have aptly remarked) opposed discretionary monetary policy. In Mises's view, when, in addition to "money proper", there is also fiduciary money (which includes bank-money, a component of loanable funds) the negative "social consequences" of monetary expansions (redistribution in favour of the issuing authority, of debtors, and of the receivers of variable-incomes) are greatly exacerbated, as capital accumulation is directly interfered with. As has been remarked , the disequilibrium process amounts to the banks artificially distorting relative price "signals" and violating consumers' sovereignty. Since there is no real saving to "back" the longer production processes induced by their policy, the "disruption of capital" necessarily follows. (3) It is interesting, I think, that in his book Mises also told a different story, according to which a monetary expansion may lead to a permanent increase in the capital stock, via its distributional effects, and its consequent augmenting effects on total saving. But he decided not to develop this alternative story, which would have led him towards a different approach to money and capital formation. See (if interested) my article 'Money, cycles and capital formation: von Mises the "Austrian" vs. Robertson the "Dynamist" ', forthcoming in the Cambridge Journal of Economics, 2005; currently at the Advance Access section of the CJE website: http:/www.cje.oupjournals.org Lilia Costabile Hayek, Prices and Production, 1935. Hayek, "A note on the development of the doctrine of forced saving", Quarterly Journal of Economics, 1932 Mises, The theory of money and credit, The Foundation for Economic Education, Irvington on Hudson, New York, 1971 (many of Mises's arguments date back to previous editions of this book, published in the first decades of the XXth century).