We write the year 1919. The lost war and the hardships that followed only intensified the process of political and economic disintegrations of the once mighty Austria-Hungarian Empire. Hopeless economic conditions contributed to greater, not less, tensions between nationalities, culminating in a total politico-territorial break-up, with entire nations seceding and building their own new states and cultural identities. The leftover of the Habsburg state shrank into political insignificancy, into a state comprised of a population of little over 6 million, predominantly of German ethnicity. People were paralyzed and disoriented. Lacking the knowledge of the real roots of their plight, blinded by socialist propaganda about evils and failures of liberalism and promises of a shiny future in collectivistic paradise, people turned their lives and country over to communists.
Communists’ methods to restore agricultural and industrial production and ease the economic plight of people were to socialize industries and inflate the currency â€“ exactly the means totally inimical to economic recovery. Being Austria’s preeminent monetary economist, Mises’s contribution was to take any step possible to avert greater disasters that those policies were constantly creating.
In chapter’s 9 section Toward Sound Money, we learn, among other things, about Mises’s plan to save the country from the chaos which was to ensue once inflation had run its course. Mises understood full well what will be the consequences once the official currency, krone, devaluated into virtual worthlessness ceases to be accepted as medium of exchange. Knowing that the new government was impervious to rational arguments as well as simply unwilling and unable to stop inflation, Mises distributed a secret memorandum among leading bankers and industrialists proposing to save the economic system by replacing Swiss francs for krons once the prospect of monetary collapse stands immediately before.
As busy as he was taking care of daily political problems, his passion for ideas could not in the least be hurt by his many extra-academic appointments. In addition to teaching economics at the University of Vienna and â€“ briefly â€“ at the Exportakademie, he organized seminars and participated in numerous intellectual circles that discussed ideas of a broad ideological origin. Mises’s reputation as passionately intransigent fighter for classical liberalism, he gained the name of der Liberale, powerfully attracted many gifted young scholars, of whom Friedrich A. von Hayek, Gottfried Haberler and Fritz Machlup would eventually become economists of note.