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jmherbener
ParticipantThat’s the reason the politically connected bankers and politicians will never adopt such a policy. The entire point of monetary inflation from their perspective is to enrich themselves at the expense of the rest of us.
Guido Huelsmann explains it in his book, The Ethics of Money Production.
http://library.mises.org/books/Jorg%20Guido%20Hulsmann/The%20Ethics%20of%20Money%20Production.pdf
ParticipantIf you want something by Mises, maybe Liberalism or Planning for Freedom.
ParticipantWhy not ask the questions that the insiders will ask themselves?
http://www.economicpolicyjournal.com/2012/10/the-agenda-for-major-bankster-insider.html
ParticipantThe Hayekian triangle is a pedagogical devise used to illustrate certain features of an economy’s capital structure. It’s pictured as a right triangle with an acute angle on the far left of its base and the right angle on the far right of its base. Its height is the value of consumer goods produced in the economy. As production moves through each stage, one moves from the left to the right accumulating value. The first stage of production is extracting raw materials, the second stage is producing primitive capital goods, the later stages are producing sophisticated capital goods. For example, iron is mined, refined, made into steel, the steel is formed into fenders for a car, then the car is assembled. At each stage value is being added and the extra value (i.e., the difference between buying prices of inputs and selling prices of outputs) is the interest rate when the economy is in equilibrium. So the “slope” of the hypotenuse is the rate of interest.
Rothbard improved on the triangle with the trapezoids he uses the depict the capital structure of the economy in his book, Man, Economy, and State. These devises are useful in analyzing the dynamics of a market economy. For example, how do production processes change through the capital structure if people’s time preferences decline (the slope of the hypotenuse flattens) or if the state generates monetary inflation and credit expansion.
Check out Chs. 5 and 6 of Rothbard’s book:
I think your suggestion about studying Hayek is wise. Learn about Austrian economics from Rothbard and Mises and then tackle Hayek.
To get an idea of Hayek’s contributions to Austrian economics as such, you might take a look at Joe Salerno’s introduction to Prices and Production and Other Essays.
ParticipantThis is why the state hates gold. It provides an (imperfect) escape from being victimized by its policies. If we don’t behave the way they want us to their schemes won’t work. States also crack down on the use of other escape hatches from their inflation, like foreign currencies and commodities. Of course, states don’t have to escalate their interventions just because they don’t work. But they have a tendency to do so.
ParticipantCritics of the ABCT tend not to describe it accurately. Here is Bob Murphy on Cowen’s view of ABCT.
On monetary contractions, Cowen is saying that the ABCT postulates an inflationary boom before the monetary contraction of the bust. So, he says, what about historical episodes in which there is a monetary contraction without a previous boom? Surely, the ABCT cannot explain them.
It’s an open question as to whether or not there are historical cases of such monetary contractions. We would have to look at the evidence to see. If there are, then the ABCT would not explain them. We would need to construct a theoretical explanation that takes account of the features of the actual case. What is causing the money supply to contract? Are financial markets affected and, if so, how? How does the monetary contraction affect banks and money substitutes, etc.?
Here is Roger Garrison’s article on Milton Friedman’s “plucking” model of recessions.
ParticipantThe U.S. didn’t leave the gold standard until 1933. The federal budget went into deficit in 1931. By 1934, Federal government expenditures were double their 1930 level. The Federal budget was in deficit every year from 1931-1946. The highest Deficit/Expenditures ratio in the 1930s was 55% in 1934. The highest ratio in the 1940s was was 69% in 1943.
http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/hist.pdf
Fiscal discipline is lax under a fiat money regime as the world had from the early 1930s until the end of the Second World War and after 1971.
ParticipantBase money is currency plus bank reserves. These show up on the liability side of the central bank’s balance sheet. Assets, including loans taken out by banks at the central bank, show up as assets on the central bank’s balance sheet. If banks borrow from the central bank and then take their reserves and use them to buy other assets, the liability side of the central bank’s balance sheet will fall while the asset side will stay the same. In other words, the central bank will build equity.
American banks have been holding the excess reserves created during the crisis, so the Fed’s balance sheet hasn’t changed. If European banks have been selling their reserves to buy other assets, then the monetary base and the liability side of the ECB’s balance sheet would shrink while the asset side would stay the same..
The same thing would happen in America, if American banks took their excess reserves and bought other assets, made commercial loans, bought real estate, etc. then the monetary base and the liability side of the Fed’s balance sheet would shrink but the Asset side of the Fed’s balance sheet would not change.
ParticipantApart from the fallacy of assuming that the demand curve for food is constant under changing conditions, your professor’s conclusion does not follow from his stipulations.
If an entrepreneur is selling a product at a price for which demand is inelastic, he can raise his price and increase his revenues even though he sells less output. No entrepreneur will price his product in the inelastic portion of his demand curve. Instead, regardless of how steep or flat the demand curve is for his product, he will price it at the unit elastic point (which is the midpoint) of his (linear) demand curve. At that point, his revenues will be as large as possible.
If the farmer’s costs are falling as he raises his price to take advantage of the inelastic demand, then his profit will skyrocket. As a consequence, other entrepreneurs will invest in farming and production will increase. Increased production by more entrepreneurs will reduce the demand curves for existing farmers and they will lower their prices to render the greatest revenue under the new conditions. This process of adjustment will continue until there is no more additional profit to be earned by further expansion in production.
Moreover, technology is not a force of nature that automatically lower costs. A particular technology is chosen by entrepreneurs as efficient, given his circumstances. New technologies are brought forth by saving-investing in research and development. Entrepreneurs will only invest in technologies that they anticipate will render their production more profitable.
Elasticity is discussed in the lecture on Competition and Monopoly.
ParticipantThe monetary inflation and credit expansion was directed to capital projects overseas. American companies expanded investment projects in foreign countries. Foreign central banks then held dollars as reserve against their own currencies, which they inflated setting off monetary inflation and credit expansion in Thailand, Malaysia, and other East Asian countries. By the mid-1990s, nearly 70% of Federal Reserve Notes were held overseas. (Our merchandise trade deficit, a net inflow of goods into America, is balanced by a capital account surplus, a net outflow of dollars and dollar claims to assets from America.)
ParticipantHayek-Novice, you might also take a look at Peter Klein’s short biography of Hayek.
ParticipantIt may be more accurate to say that Hayek thought Mises misunderstood the reason why central planners can’t calculate in socialism. Peter Klein, an expert on Hayek, makes some relevant comments in this article:
http://mises.org/page/1454/Biography-of-F-A-Hayek-18991992
Here is Mises on Hayek’s contribution to the economic calculation debate:
ParticipantOne difference between the Mises-Rothbard branch and the Wieser-Hayek branch of Austrian economics can be seen in their different arguments against central planning.
The M-R branch argues that entrepreneurs in a market economy can make economizing decisions for society at large by appealing to economic calculation of net income and net worth. Entrepreneurs can appraise the effect their production decisions will have in the future on their enterprises’ net income and net worth. In socialism, the central planners cannot appeal to economic calculation because the state owns all factors of production, therefore, there can be no prices of factors of production, therefore, there can be no calculation of net income and net worth and, therefore, no appraisement of the effect of their decisions in the future.
The W-H branch argues that entrepreneurs can make economizing decisions in a market economy because prices contain all the relevant information condensed into a useable form. The central planners cannot make economizing decisions because they lack the necessary information.
These two different views of the problem of central planning imply different views of the working of a market economy.
Take a look at Hans Hoppe’s article on this point.
ParticipantTom Woods has had a few rounds of debate with Ellen Brown.
http://www.tomwoods.com/blog/greenbackers-smear-ron-paul/
Concerning the article you link to she makes the following errors:
1. Banks cannot lend out their “required reserves” but they can lend out their “excess reserves.” On August 1, 2008, banks were holding some $44 billion in RR and less than $2 billion in ER. On August 1, 2012 they were holding $104 billion in RR and $1,500 billion in ER. Not only can they lend out their ER, but they can convert them to RR by creating credit with the issue of fiduciary media (i.e., checking account balances not backed with reserves). The ratio of reserves to checking account balances is around 5%. So banks can issue 20 times the amount of checking account balances than they have reserves. This means $30 trillion of M1 money when M1 on Sept. 10, 2012 was $2.4 trillion.
2. More money in the economy does not generate prosperity. Viable production depends on the spread between selling prices of outputs and buying prices of inputs. Additional money, no matter who gets it first, will be spent on all goods and factors of production. If homeowners and students get the new money first, entrepreneurs receive it next when the homeowners and students spent it to buy their products. Entrepreneurs spend the new money on factors of production, bidding up their prices.
Prosperity is generated by arranging production processes to best satisfy our demands as consumers. For that, we need a market economy.
3. The highest level M1 reached in 2008 was $1.6 trillion. The highest level for M2 was $8.2 trillion on Dec. 29. On Sept. 10,2012, M2 was $10.1 trillion.
Clearly, the money stock has not fallen since 2008.
September 27, 2012 at 10:14 am in reply to: Increasing interest rates on excess reserves (IOER) #17152Participant“Tiger by the Tail” was the title of a book by Hayek in which he argued that a central bank can seem in control of the boom, inflating the money supply and lowering interest rates, but there comes a point at which it is stuck with unattractive policy options: should it continue to inflate and risk price inflation or moderate monetary inflation and risk further slowdown in the economy. The central bank loses control and becomes the prey, not the predator.
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