The paper precisely hits one point of disagreement in the monetary disequilibrium vs injection effects debate, which divides the orthodox Austrian camp (Mises, Hayek, Rothbard,...) and a new brand of Austrian-monetarist synthesis whose most important proponent is Horwitz (Microfoundations for microeconomics), and is at the root of the works of Warburton, Yeager, Selgin, White, and Sechrest.
The two theories appear to differ on many aspects, some of them of purely ideological and noneconomical nature, and some of theoretical interest: is free banking feasible?, is money a present or future good? are injection effects or price rigidities responsible for monetary non-neutrality? is the law of reflux a feasible way to enable a proper use of voluntary saving?
Today I want to talk about the issue of presentness, because I consider both camps to be wrong (which means that the only right explanation is to be found in this blog, and this adds to the unlikeliness of its reliability):
- Cochran says that there is no cost in money holding, in terms of foregone consumption, because money can be used without any delay: money is a present good.
- Horwitz says that money holding is saving, because it is not consumption.
- I say that money holding is neither of the two.
This is not an analysis of the business cycle, becasue, to say the least:
a distinction between real and nominal movements should be done: if prices were perfectly flexible, market coordination were instantaneous, and monetary movements had no distributive effects... money would only be a nominal issue, of no interest for economics (this is unlikely, of course), not all banking crises result in inflation, so that an analysis of deflationary crises is necessary (there is no mystery here: credit and monetary aggregates are countercyclical, so not all crises result in devaluation, a stop in the credit creation process suffices to create a crisis when the underlying market structure is unsustainable, and its reversal adds to it).
The error in the monetary equilibrium analysis is to confuse a tautology (money holding is saving now, as there is no consumption) with the real economic issue (in order to avoid problems, money holding will have to be saving from now to the end of the underlying investment).
At this point, a question must be raised about how banks can distinguish between real saving (in the economically relevant sense, i.e., over an horizong linked to the time structure of production, which in monetary equilibrium analysis is never considered) and merely instantaneously foregone consumption. I know of no reliable answer to this question, maybe because, in the literature I know, both "presentists" and "futurists" don't see the problem in these terms.