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jmherbener
ParticipantOver-investment theories claim that during the boom total spending in the economy shifts away from consumption and toward investment. The ABCT argues that monetary inflation and credit expansion suppress interest rates which leads to more consumption and a shift of investment into longer production processes, which eventually prove to be unprofitable.
Take a look at the article by Joe Salerno:
ParticipantEntrepreneurs solve the hold out problem with special terms of contracts. For example, an entrepreneur wanting to buy adjacent land parcels owned by several different land owners could offer each one a contract to buy his land contingent on the entrepreneur’s purchase of all the other parcels from other land owners or he could offer each landowner an option contract to buy his parcel at a future date (when the entrepreneur has made option contracts with the other landowners) at a price agreed upon today and then exercise the options only when all the landowners agree to sell.
Here is a scholarly article on the background behind the contract solution to such alleged externalities (the hold up problem is discussed on p. 467f):
ParticipantThe study below gives several citations to the literature on wealth distribution over time:
http://www.econ.nyu.edu/user/benhabib/pareto-volterra-oct24.pdf
ParticipantAustrian economists have proposed two types of plans to restore commodity money. One is to make the dollar redeemable into gold and then leave gold production up to the market.
Rothbard lays out one version of this type at the end of The Case Against the Fed:
https://mises.org/books/fed.pdf
Mises has a version of this type in part four of The Theory of Money and Credit:
https://mises.org/books/tmc.pdf
The second type is to remove all legal barriers to private money and all legal privileges for government money and let the market take over.
Advocates of this view include Hans Sennholz, Guido Huelsmann, Joe Salerno, and Peter Klein. For example, Huelsmann mentions this at the end of The Ethics of Money Production:
https://mises.org/books/moneyproduction.pdf
These different proposals have different effects on debtors. For example, One of Rothbard’s plans calls for redeeming all currency into the Fed’s gold stock dollar for dollar and making banks keep a 100 percent reserve of money against their customers’s checking accounts. This plan would destroy the created credit that was based on the issue of fiduciary media. In other words, banks would have to call in loans or not renew loans in order to build up their reserves to 100 percent. Rothbard has a second plan, which like Mises’s, prevents any further fiduciary media issue and credit creation. These plans, along with the second type of reform measures would leave existing dollar debts intact to be paid off, but not renewed and as that happened the credit supply would gradually shrink.
ParticipantFiat money is not itself a debt instrument. Debt comes into existence when one party, the lender, loans money to another party, the borrower. The debt instrument is the borrower’s I.O.U. to pay back the principle borrowed plus interest. U.S. Treasury securities are debt instruments. Corporate bonds are debt instruments. Certificates of deposit are debt instruments.
Fiat money is money itself. It is not itself a loan to a borrower that the government must pay back principle plus interest in the future. Just like a counterfeit bills are not an I.O.U. of the counterfeiter to pay back principle plus interest in the future to someone.
Governments of some countries can, and have in the past, simply printed fiat money and spent it to buy goods and services. Technically, this process need not involve debt at all.
In practice the Federal Reserve’s policy of issuing of fiat money expands the supply of credit and thereby makes the sale of federal debt by the Treasury more feasible. Without monetary inflation and credit expansion interest rates would be much higher and government borrowing less feasible.
Instead of a balanced budget amendment, a more binding constraint on the issue of debt by the federal government would be to supplant the Federal Reserve with a commodity money like gold coins or silver coins.
In the first chart at the link below is the history of Gross Public Debt. You can see how it exploded after the U.S. repudiated dollar redemption into gold in 1971.
http://www.usgovernmentdebt.us/debt_deficit_history
You can read about the issues involved in Murray Rothbard’s book, What Has Government Done to Our Money?
ParticipantHere is an OECD study:
ParticipantNon-market societies (like ancient ones) had a small group of rich but the the bulk of people were poor. The rich in non-market economies had little outlet for their wealth except consumption. In market economies, however, the rich can invest in capitalist production, which generates even more wealth. The bulk of the wealth from the greater productivity of capital capacity , however, goes to workers. The capitalist earn only the rate of return on their investment, but the workers earn the value of what their labor produces, which is greatly enhanced by capital goods. Since the rich in any society are a small minority, entrepreneurs in a market economy will cater mainly to the bulk of workers, who are middle-class.
Take a look at chapter 15 in Ludwig von Mises’s book, Human Action:
ParticipantSetting aside the money relation, whether or not goods become more or less scarce (and therefore, command higher prices or lower prices) would be determined by whether or not the additional persons in a growing population produced less than or more than they consumed.
If they are duplicating the existing production processes, then, they will be producing more than they are consuming. But, in that case, goods are becoming less scarce and their prices would be falling.
If they are producing less than they are consuming, but their deficit is being made up by reduced consumption of the existing population, then the scarcity of goods is not changing and prices would stay the same. Only in this case could the population actually increase while the additional people are producing less than they are consuming.
If they are producing less than they are consuming and the existing population does not distribute goods to them, then they will die and population will not increase and scarcity and prices will not change.
It seems to me that historical cases of rising population, at least in the market economies of the western world, correspond to the first case.
ParticipantIn both the case of human action and the case of complex physical phenomenon, there is the problem that the “facts” available to empirically test hypotheses are themselves complex, i.e., generated by the complex set of causal factors, and not simple facts, i.e., generated by a controlled experiment in which only one causal factor is permitted to change.
The additional problem in the case of human action is that it may not be possible to give an entirely material explanation of human valuing and choosing, whereas it is possible, at least in theory, to give an entirely material explanation of physical phenomenon.
Take a look at Ludwig von Mises’s book Human Action, pp. 30-32 and 17-18.
ParticipantIt is always more favorable for standards of living to specialize in areas of comparative advantage. Doing so generates higher incomes than not doing so. With the higher incomes, people can save and invest to accumulate capital which makes them even more productive. With their greater wealth they then can save and invest even more.
Americans both exported agricultural and extractive industry goods and attracted capital investment from abroad at the same time. The capital investment was invested in lines of production that eventual integrated America’s economy into the world’s advanced capital structure.
To use an analogy, A family who owns a farm, but no capital equipment for mining on his land or building a blacksmith shop and tools would be better served in obtaining mining equipment and a blacksmith shop and tools by specializing in agricultural products and selling them to others in exchange for their capital investment in the mining equipment and the materials to construct a blacksmith shop and blacksmith tools than in abandoning farming and trying to produce the mining equipment, blacksmith materials, and blacksmith tools himself.
ParticipantSuch a claim by the critics is a-historical. America started with a subsistence level of standards of living in colonial days. They were exporting agricultural (e.g., tobacco, rice, etc.) and extractive resources (e.g., timber, fish, etc.) to England. Yet, by the time of the American revolution, American standards of living were on par with those in England. America continued to have comparative advantage in agricultural and extractive industries during the 19th century as it was becoming an industrial power. Even today, we export large amounts of agricultural and extractive goods. America is the world’s leading exporter of natural gas.
Similar stories could be told about other countries such as Canada.
ParticipantThe analysis from Forbes shows what multinational corporations actually pay in taxes in various countries:
http://www.forbes.com/pictures/fidj45hkdk/hey-mister-tax-man/
The effective tax rate in the USA is 2nd highest among the countries in the study. The Bahamas have the lowest effective tax rate at 5-15% depending on the size of the corporation. The USA effective tax rate is 23% for domestic firms and 28% for foreign firms. Only Japan is higher at 37% domestic and 38% foreign.
ParticipantI think your reasoning is sound. The role of speculation in economic efficiency is certainly under-appreciated.
ParticipantAssuming a constant money relationship, the price of good #2 would be lower in the long run only if its cost structure fell sufficiently so that production increased its stock relative to the original increase in demand. However unlikely, this might happen if, for example, the extra profit from the original increase in demand for good #2 was used to finance capital investment in a technological breakthrough in producing good #2. Likewise, the price of good #1 would be higher in the long run only if its cost structure rose sufficiently so that production decreased its stock relative to the original decrease in demand.
ParticipantFor the causes of the “price revolution” in the 16th and 17th centuries, the evidence is more secure. The Spanish monetary inflation from the exploitation of the gold and silver mines of the new world. For example:
http://www.sgtbkhalsadu.ac.in/colleges/tutorial/112706112009204808.pdf.pdf
For the earlier period, the evidence is not so clear. David Hacket Fisher argues that the previous price inflation coincided with the beginning of the hundred year’s war and the black death. If that’s the case, then it was caused by a reduction in production and not an increase in the money stock. See his book, The Great Wave: Price Revolutions and the Rhythm of History.
http://csmres.jmu.edu/geollab/fichter/GS102/2008PowerPoints/29-GreatWave-GG102.pdf
The increases in the money stock prior to the price revolution of the 16th century came from silver mines in central Europe. Jim Bolton in his book, Money in the Medieval English Economy, 973-1489, estimates that the silver money stock in England increased 27 to 40 fold from 1086 to 1300.
http://eh.net/book_reviews/money-in-the-medieval-english-economy-973-1489/
Bolton relies on Martin Allen’s book, Mints and Money in Medieval England.
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