[jmherbener]

Concerning the first paragraph of the response above, of course the purchasing power of money, like the price of any good, can change from either a change in demand or a change in supply. So, perhaps it’s best to used the phrase “monetary inflation” to refer to supply-driven decreases in money’s purchasing power and “price inflation” to refer to fall in money’s purchasing power.

The second paragraph of the response above fails to mention the fact that for people to increase their demand for all goods, they must either have more money or reduce their demand to hold money.

The third paragraph makes a similar oversight. Costs of production are determined by prices of inputs. Without more money or reduced demand to hold money, entrepreneurs cannot increase their demands for inputs nor consumers their demand for outputs on all inputs and outputs throughout the economy. Moreover, costs of production are determined by input prices which are themselves determined by output prices, not the other way around. Neoclassical economists call this the marginal productivity theory of input prices.

The fourth paragraph ignores the purchasing power parity theory of exchange rates. The purchasing power of a given money tends to be the same everywhere it trades, both domestically directly for domestic goods and internationally through exchange for foreign currency which is then used to buy foreign goods. Monetary inflation of a domestic currency, ceteris paribus, generates both domestic price inflation and relative devaluation of the domestic currency against foreign currencies.

[jmherbener]

Here is Roger Garrison’s response to Friedman:

https://mises.org/library/business-cycles

Also, take a look at Joe Salerno’s article which addresses misrepresentations of ABCT:

https://mises.org/library/reformulation-austrian-business-cycle-theory-light-financial-crisis-0

[jmherbener]

Rolling over debt means that an equivalent amount of new debt is taken out when old debt is paid off. So if a person rolls over $5,000 in debt, his total debt remains at its previous level.

[jmherbener]

A prominent Austrian economist currently writing on and teaching about financial markets is Guido Huelsmann.

guido.hulsmann@univ-angers.fr

The course has lessons on Money and Banking, the Time Market, Bond Markets, Stock Markets, Booms and Busts, and Business Cycles. These would be the lessons bearing directly on your interest.

Here are a few short pieces related to your topic:

https://mises.org/library/mortgage-market-mess

http://fee.org/files/docLib/122008freeman-murphy.pdf

https://mises.org/library/greenspans-bogus-defense

https://mises.org/library/are-fannie-and-freddie-too-big-fail

You might search Bob Murphy’s website:

http://consultingbyrpm.com/about

[jmherbener]

As with any good, its price rises when demand for it increases relative to supply of it. College education is heavily subsidized by governments. State governments grant direct subsidies to college and universities. Here are statistics on California subsidies to higher education, which were $14.5 billion last year:

http://www.ebudget.ca.gov/2014-15/pdf/BudgetSummary/HigherEducation.pdf

Another subsidy is through federal government Pell grants to students, which were $44 billion in 2012:

http://americanactionforum.org/sites/default/files/PrimerOnPellGrants.pdf

Then there are student loan guarantees by governments:

http://www.collegescholarships.org/loans/guaranteed.htm

Governments restrict the production and supply of higher education by chartering institutions of higher education as not-for-profit organizations.

Check out the work of Richard Vedder at the Center for College Affordability:

http://centerforcollegeaffordability.org/

[jmherbener]

For macroeconomics, take a look at the books by Snowden and Vane The Development of Modern Macroeconomics and A Macroeconomics Reader. Also, take a look at Roger Garrison’s book, Time and Money.

For microeconomics, take a look at one of the older microeconomics textbooks like C.E. Ferguson’s book, Microeconomic Theory.

[jmherbener]

It can be done through lowering the reserve ratio of money against money substitutes. Various methods can be attempted, but the key is generate confidence among bank clientele that redemption can be maintained with lower reserve ratios.

Mises discusses this point in The Theory of Money and Credit in chapters 2-4 of Part 3.

https://mises.org/sites/default/files/The%20Theory%20of%20Money%20and%20Credit_3.pdf

Interbank lending is one method. Another is improving the liquidity of securities markets. Often this will be done by the lobbying the state to provide guarantees. The state can also provide suspension of redemption temporarily. Under the National Banking System, central reserve city bank notes were given legal privileges by the state making them more suitable as a reserve held by city banks and country banks against their notes. This provided some flexibility in the reserve as a source of bank note inflation.

Rothbard discusses some of these techniques in his History of Money and Banking in the U.S.

https://mises.org/sites/default/files/History%20of%20Money%20and%20Banking%20in%20the%20United%20States%20The%20Colonial%20Era%20to%20World%20War%20II_2.pdf

[jmherbener]

Here is Steve Hanke’s paper on 20th century hyperinflations.

http://www.cato.org/sites/cato.org/files/pubs/pdf/workingpaper-8.pdf

Here are a few pieces analyzing the end of the German hyperinflation:

https://mises.org/library/90-years-ago-end-german-hyperinflation

https://mises.org/library/hyperinflation-germany-1914-1923

Take a look at Bresciani-Turroni’s book on the German Hyperinflation, chapter 9 on Monetary Reform. He shows that a new Rentenmark was introduced as a redemption claim for gold marks.

https://mises.org/sites/default/files/The%20Economics%20of%20Inflation%20A%20Study%20of%20Currency%20Depreciation%20in%20Post-War%20Germany_2.pdf

In Zimbabwe, foreign currencies have been used as the Zimbabwe dollar’s value vanished.

http://www.cato.org/zimbabwe

https://mises.org/library/multiple-currencies-and-gresham%E2%80%99s-law-zimbabwe

[jmherbener]

The article at the link is criticizing neoclassical, mathematical demonstrations of the efficiency of the market economy. Austrian make the same criticisms. And then go on to show that the defense of the efficiency of the market economy does not depend at all on neoclassical models.

The only equal ground for negotiating contracts required by the market economy is the integrity of everyone’s private property rights. On the reason for animosity toward the market, take a look at Mises’s book, The Anti-Capitalist Mentality.

https://mises.org/sites/default/files/The%20Anti-Capitalistic%20Mentality_3.pdf

And Hayek’s article, “The Non-Sequitur of the Dependence Effect.”

http://www.mises.ch/library/Hayek_SEJ_Non_Sequitur_of_Dependence_Effect.pdf

It turns out that Sweden is not an exception to the laws of economics.

https://mises.org/search/site/sweden/library/mises-daily-147

[jmherbener]

Technological innovation requires capital investment which entrepreneurs determine by economic calculation. Entrepreneurs consider all the different lines of investment in all the stages of production and invest in that set of lines which they anticipate will prove to be the most profitable. But the profitability of each line of investment can be traced to its contribution to satisfying consumer demands.

So, the scenario would be: (1) Because of rising consumer demand for gasoline (and government restrictions on production and supply) the price of gasoline rises. The high price of gasoline makes investment in new technologies for producing oil more profitable. Entrepreneurs investing in fracking technology and then the drilling equipment and land rights, etc. They expand oil production capacity to the point at which they anticipate that the lower than otherwise price of oil and the higher than otherwise prices of drilling equipment and land rights, etc. will make further investment in oil production capacity unprofitable. The reason oil prices fall with increased supply is that entrepreneurs know that gasoline prices will fall with increased production and supply of gasoline from the increase production and supply of oil.

The costs of oil production by fracking are higher not lower than with other methods already in use.

http://www.businessinsider.com/saudi-arabia-can-hold-out-2015-1

What justifies investment in higher cost techniques of oil production is the higher price of gasoline. The innovations in fracking techniques made extraction of shale oil cheaper than with the techniques previously used, but even with the new techniques fracking costs are higher than methods already in use. That’s why they haven’t been adopted until now when the higher price of oil justifies their use.

http://www.marketplace.org/topics/sustainability/oil-man-who-figured-out-fracking

Even if for some reason the price of an input fell in the market, lowering costs of production of output, the new, lower price of the input depends on entrepreneurial demand which depends, in turn, on consumer demand for the output. For example, let’s say that demand for cigars vanishes causing tobacco prices to fall. The new, lower price of tobacco is still determined by entrepreneurial demand for tobacco, which is determined by, the now lower, consumer demand for cigars, cigarettes, and other consumer goods using tobacco as an input.

[jmherbener]

The turning points of the business cycle are notoriously difficult to anticipate. One might consult Mark Thornton’s skyscraper index:

https://mises.org/library/skyscrapers-and-business-cycles

http://shanghaiist.com/2013/08/11/skyscraper_index_andrew_lawrence_predicts_economic_downturn_in_china_following_super-tall_skyscraper_craze.php

http://mises.org/blog/mark-thornton-skyscrapers-le-monde

[jmherbener]

A person who thinks government-run schools are a model for colleges to emulate might be hard for you to convince along merely economic lines of argument.

You might, however, try a reductio ad absurdum. If it’s a good idea for the government to set the price of a college education at zero for students and then raise the funds to pay for the resources used to provide such education by taxing other people, then why not do the same thing for automobile production or tablet computers. If fact, if it’s such a great idea, then why not have the government provide everything for free by taxing everyone.

Links to several articles on public education can be found here:

http://wiki.mises.org/wiki/Public_education

[jmherbener]

Here are some Austrians on China:

http://www.financialsense.com/contributors/darryl-schoon/2012/01/04/china-2012-and-von-mises-crack-up-boom

http://mises.ca/posts/articles/chinas-looming-bust/

http://mises.org/library/china-bust-tic-toc

http://moneyweek.com/chinese-equities-even-riskier-than-you-think/

[jmherbener]

What needs to be kept in mind in tracing cause and effects throughout the economy is that the economy is a single system of production under the division of labor integrated by the structure of prices. The goal of the system of production is to economize the use of people’s resources in the satisfaction of their consumptive ends. When people’s consumptive demands change it sets in motion a reconfiguration of the entire structure of prices and production throughout the economy. Without government intervention, the process of the market generates the most efficient use of resources and build up of capital capacity possible.

Two factors have been at work in fuels.

First, the natural process of economic development has been at work. Worldwide consumer demand for gasoline has been increasing driving up gas prices. This cause alone would increases the profitability of gasoline production leading entrepreneurs to increase their demands for oil and other inputs which, in turn, would drive up oil prices and the prices of other inputs, which in turn would increase the profitability of producing more oil. If profitable enough, other entrepreneurs would invest in technological innovation to increase oil production and use of the new technologies would increase production and the greater supply of oil lowers its price which moderates the rise in price of gasoline, given the initial rise in demand for gasoline.

Second, government intervention has been at work. Governments have increased taxes on gasoline depriving entrepreneurs of the funds to expand production. They have also erected legal restrictions of further conventional oil production. Governments have also destroyed the capacity for conventional oil production in their wars over the last twenty years. The resulting artificially high price of oil has made investment in alternative technologies to circumvent convention production even more profitable. Entrepreneurs have responded with the fracking boom, vastly increasing oil production and lowering its price.

The reason gasoline prices have fallen is not because they are determined by oil prices, but because speculators anticipate profit from moving gasoline supplies from the future to the present in the wake of the greater future production of gasoline they anticipate. The increase supply moves along a given demand curve to clear the market at a lower price for gasoline. The (now lower) price of oil and other (now lower) input prices are still determined by that (now lower) price of gasoline.

[jmherbener]

You might try metaphors,

Mises referred to monetary inflation as the miracle of turning stones into bread.

https://mises.org/library/stones-bread-keynesian-miracle

Mises also used the metaphor of the master builder to explain why the build up of the economy’s capital structure set in motion by monetary inflation and credit expansion during the boom must end in liquidation of the malinvestments made in the boom and reallocation of resources back to a realizable capital structure during the bust.

https://mises.org/library/malinvestment-not-overinvestment-causes-booms

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