Commenter "Patch" provides this passage from Human Action:
"It is beyond doubt that credit expansion is one of the primary issues of interventionism. Nevertheless the right place for the analysis of the problems involved is not in the theory of interventionism but in that of the pure market economy. For the problem we have to deal with is essentially the relation between the supply of money and the rate of interest, a problem of which the consequences of credit expansion are only a particular instance.
Everything that has been asserted with regard to the effects of any increase in the supply of money proper as far as this additional supply reaches the loan market at an early stage of its inflow into the market system. If the additional quantity of money increases the quantity of money offered for loans at a time when commodity prices and wage rates have not yet been completely adjusted to the change in the money relation, the effects are no different from those of a credit expansion. In analyzing the problem of credit expansion, catallactics completes the teachings of the theory of money and of interest.”
You can read it in context here.
I think this supports my premise to DeLong initially. Gold is given something of a free pass because it doesn't fluctuate all that much, and certainly not at political whim. If paper money increased at the same pace as the gold supply, you would not see Mises upset about paper money. The whole point (the whole reason why we like it) is that it is more flexible than the gold supply. The sweat of the gold miner's brow has little to do with the matter at hand (and I don't think DeLong ever seriously thought it did).
At Bob Murphy's blog, Danny Sanchez (of the Mises Institute) notes that this is how Rothbard read Mises too. In America's Great Depression, Rothbard writes:
"In his Human Action, Mises first investigated the laws of a free-market economy and then analyzed various forms of coercive intervention in the free market. He admits that he had considered relegating trade-cycle theory to the section on intervention, but then retained the discussion in the free market part of the volume. He did so because he believed that a boom–bust cycle could also be generated by an increase in gold money, provided that the gold entered the loan market before all its price-raising effects had been completed. The potential range of such cyclical effects in practice, of course, is severely limited: the gold supply is limited by the fortunes of gold mining, and only a fraction of new gold enters the loan market before influencing prices and wage rates.”
Another relevant point to emphasize here is that this whole discussion really highlights the reason why Austrians insist on talking about inflation in a way that nobody else talks about inflation. If this is how you think about the business cycle, it clearly matters whether we're talking about price increases or a money supply increase in general. If money "enters the loan market" you're clearly going to have some bidding up of prices as a result of increased borrowing, but the primary impact of the money supply inflation is going to be on the capital structure, not on prices and wage rates. And it's precisely that impact on the capital structure that presents the problem for Austrians.
A much longer discussion is available here.
I don't agree with all of Patch's criticism of DeLong. In my comment section, Patch accuses DeLong of selective quotation. Patch writes:
"Lets take a couple of more sentences from the page that you [DeLong] decided to cherry pick your quotes, okay?
"If gold production had been considerably greater than it actually was in recent years, then the drop in prices would have been moderated or perhaps even prevented from appearing. It would be wrong, however, to assume that the phenomenon of the crisis would not then have occurred."
Brad seems to have left out the sentence that comes right after his "proof", and right before the union quote. How convenient!"
Now this bothers me, because Patch himself is now cherry picking and cutting off his passage at convenient times. If you read the entire passage it's clear that DeLong still has caught Mises making a problematic claim. If you keep reading past where Patch stops, we have:
"It is true that there is a close connection between the quantity of gold produced and the formation of prices. Fortunately, this is no longer in dispute. If gold production had been considerably greater than it actually was in recent years, then the drop in prices would have been moderated or perhaps even prevented from appearing. It would be wrong, however, to assume that the phenomenon of the crisis would not then have occurred. The attempts of labor unions to drive wages up higher than they would have been on the unhampered market and the efforts of governments to alleviate the difficulties of various groups of producers have nothing to do with whether actual money prices are higher or lower."
Mises essentially says "don't think you're out of the woods yet - even if we're on gold the unions are still going to f*#% it up". He gives no indication that he thinks that "it would be wrong... to assume the phenomenon of the crisis would not then have occurred" because gold could cause the crisis. He says it's wrong because there are other causes outside of monetary causes. That's quite an omission on your part, Patch! He continues to discuss labor unions for another paragraph, and then he discusses another danger of being sanguine about how an increase in the gold supply would have moderated the crisis. He says that it "leads to the view that the crisis could be overcome by increasing the fiduciary media in circulation."
So my view is that DeLong has not cherry picked here and he has stumbled upon a genuine gold fetish on the part of Mises in this particular book. I am not convinced by Patch that DeLong has cherry picked because it seems clear to me that the one sentence DeLong picked out is truer to the entire passage than the two sentences that Patch picked out.
That having been said, my view is also that the passages from Human Action provided by Patch do show Mises telling a different story - and being more cautious about gold. That's fine by me - people can change their views over time. But clearly Brad has identified a problematic viewpoint from 1931, at the very least.
In the same collection of essays that DeLong quotes from, an essay of Mises on The Stabilization of the Monetary Unit appears that was published in 1923. This is intriguing to me because Keynes's Tract on Monetary Reform was also published in 1923 and it was on essentially the same topic. Does anyone know if anyone has written a head-to-head comparison of the two, or looked into their comparative influences. Keynes was deeply involved in the German situation at this time too, which I'm sure influenced Mises's thought as well, which is why this comparison seems particularly interesting... I may have to finally add Mises to the reading list. He hasn't quite intrigued me enough up until now.