Reply To: Capital Investment


Yes, Schumpeter was wrong. Mises argued that any credit creation from the issue of fiduciary media generates mal-investments which must be liquidated later. People’s time preference determine both the pure rate of interest and the extent of saving-investing people prefer. People’s preferred saving-investing releases resources from lower-order to higher-order production. Credit creation from fiduciary media issue does not create more resources it merely diverts more of them from lower-order to higher-order production than people desire according to their time preferences.

Take a look at chapter 20 in Ludwig von Mises’s Human Action:

Here is Murray Rothbard on Schumpeter: