Our text remains:
Ludwig von Mises: Attempts to carry out economic reforms from the monetary side can never amount to anything but an artificial stimulation of economic activity by an expansion of the circulation, and this, as must constantly be emphasized, must necessarily lead to crisis and depression. Recurring economic crises are nothing but the consequence of attempts, despite all the teachings of experience and all the warnings of the economists, to stimulate economic activity by means of additional credit...
From my point of view, liquidity creation, duration transformation, and simple diversification are all attempts to make the law of large numbers work for us. They are largely successful attempts not to buy liquidity, immediacy, and Insurance from those who want to sell them, but rather to create them out of whole cloth--via clever applications of the principles of probability. As such, they are the preeminent examples of our largely successful ability to make the economy live beyond its means on its wits. Liquidity, immediacy, and insurance are good and valuable things: the marvel of financial engineering is that it creates them out of thin air.
But to von Mises, Ron Paul, and all their epigones, these forms of financial engineering are all terrifying.
I think that the deep point of view underlying von Mises's--and von Hayek, and Marx, and Ron Paul--complaint against fiat money in general and monetary management of the business cycle in particular is this: that value comes from human sweat and toil, not from being clever. Thus it is fine for money to have value if it is 100% backed by gold dug from the earth by sweat and machines and muscles (even if there is no state of the possible future world in which people actually want to exchange their pieces of paper for the gold that supposedly backs it). But it is not fine for money to have value simply because it is useful for buying things. There is, von Mises--and Marx, and von Hayek, and Ron Paul--think, something profoundly wrong on an economic and on a moral level with procedures that create value that is not backed by, in Marx's case, human labor, and in von Mises's and von Hayek's case human entrepreneurial ingenuity. And in its scarier moments some of the trains of thought emanating from this deep point of view slide over to: "good German engineers (and workers); bad Jewish financiers" (and "good Russian Stakhanovites, bad Jewish Trotskyite intellectuals").
Note that this does not just apply to fiat money produced by a government.
This applies to all financial market asset valuations in excess of capital cost of production (or perhaps the value of the inventions of the gigantic Krell-like brain of John Galt). They are, to von Mises, all cheats. Thus Von Mises loathes fractional reserve bankers and IPO-mongers as much as he loathes modern central bank chairs.
The "value equals cost of production constant returns to scale" viewpoint is an astonishingly powerful set of blinders to wear.
Anybody have a better theory?