[jmherbener]

What Mises says in Human Action is that in our current state of knowledge we must accept methodological dualism. The deterministic cause-and-effect in the material world and the scientific method of discovering the quantitative magnitudes of cause and effect relationships in the material world have not been successfully applied to the realm of human action. There is no theory describing the quantitatively precise relationship between material factors in the world and ideas in the mind that has been established, or not falsified at least, by the scientific method. We must, therefore, conceive of the cause and effect relationships between ideas in the mind and things in the world in a different way and discover cause and effect relationships between the mind and the material world with a method other than the scientific method. Mises calls this method, praxeology.

https://mises.org/library/human-action-0

[kbxcoop]

Is there a relationship between treasury rates and interest rates on other things (mortgages)? For the past week, I have noticed that, since bond yields have gone up, so has interest rates of other things such has mortgages. Is it arbitrage?

[jmherbener]

Indeed, there is a relationship and arbitrage is a connection. It is arbitrage that directs the flow of credit expansion from its primary areas which is generated by bank credit creation into related areas.

https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield

https://www.treasury.gov/resource-center/economic-policy/corp-bond-yield/Pages/Corp-Yield-Bond-Curve-Papers.aspx

[kbxcoop]

Over the past couple weeks, one of the reasons people say treasuries are selling off is because of inflation due to more government spending. How can there be more inflation if of the government is selling bonds in the market? Do banks lend to the government by credit expansion?

Also, I had an interesting discussion regarding human action. I said “all humans use means to achieve ends” and he stated “people in vegetative states, such as those hooked up to machines and cant do anything, cannot act, so are they not human?”. I was curious about this, because, although economics is the study of purposeful behavior, and therefore a vegetative state would not be in the study, Rothbard (Man economy and state pg 2) states (not in exact words) that it is the nature of man to act purposefully, and incomprehensible for humans to not do so, therefore they cant be human.

[jmherbener]

(1) It’s not the Treasury selling more bonds, it’s investors who bought them in the past and have been holding on to them until now.

https://www.bloomberg.com/news/articles/2016-06-15/china-dumping-more-than-treasuries-as-u-s-stocks-join-fire-sale

Holders are selling in anticipation of higher rates of price inflation from more fiscal expenditures in the future. Higher rates of price inflation will mean higher interest rates on new bonds issued by the Treasury and thus, lower prices for the older bonds they have been holding.

http://www.reuters.com/article/usa-bonds-idUSL1N1DF0JM

(2) Ludwig von Mises wrote that “Thinking and acting are inseparable.” Take a look at Human Action, p. 177. No observer of a person can know the thoughts of a man, whether or not there are outward signs of action.

https://mises.org/library/human-action-0

Furthermore, a person who shows no outward sign of action is not by that fact alone demonstrably incapable of action. He can still act, potentially. For example, we would not declare a man unconscious from intoxication a non-human until he wakes up or even a man in a coma.

http://www.dailymail.co.uk/health/article-187920/Coma-man-wakes-19-years.html

A similar point could be made about newborn babies.

[kbxcoop]

“It’s not the Treasury selling more bonds, it’s investors who bought them in the past and have been holding on to them until now.”

Sorry, the question was poorly worded. I meant to say potential inflation/spending.

My understanding is that the only way for the government to spend more than revenues is to sell treasuries. But, where would the price inflation come from that bondholders are expecting? My thought was that the potential increases in government spending is what people are thinking will cause price inflation.

“Furthermore, a person who shows no outward sign of action is not by that fact alone demonstrably incapable of action. He can still act, potentially.”

Can you go a little further in this? How exactly can an unconscious potentially act? Is it that, even if to us they are not demonstrating action, that unconscious people are still acting but fail to achieve their ends?

[jmherbener]

(1) A government has three sources of monetary revenue: taxes, debt, and monetary inflation. Without monetary inflation, or a decline in the demand for money, there can be no price inflation, i.e., no decline the in the purchasing power of money.

Bond holders are anticipating monetary inflation or a decline in money demand or both. They know full well that the Fed will accommodate larger debt-financed government expenditures with monetary inflation.

https://fred.stlouisfed.org/series/M2MNS

(2) If a person is not demonstrating action to the satisfaction of an observer, it does not follow that the person is no longer human. He may be, in fact, successfully acting. Passivity can be a means to an end. He may be, as you suggest, unsuccessfully acting. He may be temporarily unable to perform demonstrable action (he is rendered unconscious by a blow to the head) but not permanently incapable of demonstrable action. He is able to demonstrably act, potentially, and will demonstrably act once the temporary condition is removed.

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