Irving Fisher

Fisher is one of the earliest American neoclassical economists, although his later works on debt inflation are often regarded as belonging to the post-Keynesian school. Despite the fact that he was probably the first economist who graduated from the university and reached the celebrity status, Fishers public statements caused an irreparable harm to his reputation. Thus, for example, not long before the collapse on Wall Street in 1929, Fisher argued that the stock market reached its highest plateau, which could not be harmed. His subsequent debt-inflation theories were ignored for a long time in favor of the works of John Maynard Keynes. In the late 50s of the last century, after Fishers death, his work again became of wide interest, which greatly recovered his professional reputation. Another surge of interest in the theory of debt inflation was observed just a few years ago in relation with a new global crisis.

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Fishers work about the quantity theory of money led to the establishment of the school of economic thought known as monetarism. A famous economist and the Nobel laureate Milton Friedman called Fisher the greatest economist who was ever born in the United States. The Fisher equation, the Fishers hypothesis, the international Fisher effect, as well as the Fisher separation theorem are named after his name.

Irving Fisher was born on February 27, 1867, in the town Saugerties, New York. His father was a teacher and a congregational priest who raised his son in the belief that a person should bring benefit to society. Irving Fisher was a child showing a great aptitude for mathematics and a penchant for innovation. A week later, after Irvine was admitted to Yale College, his father died of tuberculosis at the age of 53. However, the young man became engaged in tutoring and was able to support not only himself, but also his mother and younger brother. He graduated from Yale where he became a member of the prestigious fraternity called Skull and Bones with a bachelors degree in 1888, a year after the college became known as Yale University (Fisher n.pag.).

Mathematics was the most interesting subject in Yale for Fisher, while economy was more consistent with his aspiration to serve the public. His doctoral thesis on mathematical economics was written at the junction of the two sciences. A 24-year-old Fisher received his first doctoral degree in Yale, in 1891. It was interesting that a physicist Willard Gibbs and economist William Graham Sumner were his mentors at that time.

At the beginning of his research, Fisher did not know that there had already existed European works on mathematical economics, but he did justice to them in the thesis. After Yale, Fisher also studied in Berlin and Paris. Since 1890, Irving Fisher began teaching at Yale University, after which he became Professor of Political Economy in 1898 and Distinguished Professor in 1935 (Lovett n.pag.).

From 1896 to 1910, Fisher was the editor of Yale Review and actively participated in the activities of many scientific societies, institutions and charitable organizations. At the stage of historical development of econometrics, he was one of its main supporters. As for his interests, Fisher paid special attention to the promotion of sobriety, eugenics, public health, and the cause of peace throughout the globe. He was awarded the New York Medical Society Prize for the invention of the tent for treating people suffering from tuberculosis. Tuberculosis had once killed his father and almost killed him. This is why Fisher had to spend three years in sanatoriums, after which he returned to work with even greater energy. In the 20s, Irving Fisher strongly supported the idea of the Prohibition. In addition to this, Fisher was a prolific writer and journalist, working on a considerable amount of technical books and articles concerned with the problem of the First World War, the Prosperity of the 20-ies of the last century, as well as the ensuring Depression of the 30s. Irving Fisher died in New York at the age of 80 on April 29, 1947 (Dieterle n.pag.).

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Considering Fishers exchange quotation, the global demand for crude oil can be explained in the next way. The economic theory states that the M2 money supply is growing due to the fact that the central bank issues new amount of money. In one of the cases, it happens when exports in dollar terms are greater than the volume of imports. This is why, in order to prevent the strengthening of the national currency, the central bank buys excess revenue of the exporters at foreign exchange market. To do this, it needs new money which can be issued. The strengthening of the national currency is an inevitable consequence of a positive balance of trade, but only if the central bank does not intervene in the process of free pricing in the currency market.

Fishers exchange quotation described in his work The Purchasing Power of Money in 1911 presents a formula MV = PQ, where M is money supply, V is the velocity of money, P price, and Q the production of goods and services (Grant and Vidler 186). The quotation states that in order to maintain (ensure purchase and sale) created in a certain time of a product (P * Q), it is necessary a certain amount of money (M) which is cycled with a certain velocity (V). Time for which there is complete sale of products and services can be taken as t. Thus, if we take t equal to one year, the right-hand side of the equation (P * Q) with some degree of approximation will be no other than the annual gross domestic product GDP. GDP is defined as the amount of produced goods and services within the territory, regardless of the manufacturer of goods and services (whether it is the resident or non-resident of the country). GDP may have commodity and value terms. The Q value at t equaled to one year is a product in terms of GDP, while the product P * Q is described in value terms. This is why if the price of oil increases, the price of gasoline rises; if the price of oil falls, the price of gasoline remains in place. The reason is not in the increase or fall of the world oil prices and not in collusion of oil companies and petrol station owners. In fact, this factor does not directly affect petrol prices and is used by the sellers of fuel as an excuse for inflation. The reason lies in a growing number of vehicles on private property, as well as in the increase of the monetary aggregate M2 and the level of monetization of the economy. All this together causes a continuous growth in demand for gasoline, which is reinforced by money. This is why the manufacturers and sellers increase gasoline prices without a fear that the demand for their goods will fall because of the high prices.

The above question can be addressed to the situation happened on the financial market, which represents the amount of money, cash and non-cash in circulation. In addition to this, it also can be related to the secondary stock market because it is a subsystem of the financial market. Therefore, the amount of money circulating there should have some influence on the share price, as well as on the dynamics of stock indices. The same principles are worked over there. This is why they are supported by the same demand on the service.

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