[Jthomp76]

That is helpful, thank you!

[Jthomp76]

Wow!! On the other hand, is there not at least some benefit to the Chinese people in this example, that there are now more existing homes and people can eventually move out of the rice paddies and into the city? There are now more homes than there were before.

[Jthomp76]

But literally speaking, do we see a lot of incomplete buildings during an artificial boom? How do we actually see what you’re describing play out?

[Jthomp76]

But during an artificial boom, do we not see firms investing in capital equipment and consumer snatching up goods produced by this equipment?

[Jthomp76]

So liquidation would mean a bunch of people sold their houses which also drops prices? And this is wrong because the prices fell for a different reason? In other words, I was wrong?

[Jthomp76]

Is there a good article you can refer regarding the Austrian view of capital structure?

[Jthomp76]

You’re a genius. Thank you so much.

[Jthomp76]

Good article. Let’s say we somehow found out though that barter did not precede money. How would this trip up the Austrian School? Not sure I understand what difference this makes.

[Jthomp76]

If the dollar is the worlds reserve currency, why do the Chinese buy so many low yielding US treasuries? Why not purchase things it needs instead? Why do they want our bonds? Is it all part of the monetary game countries are playing today? In other words, Is it that they want to keep the dollar strong, so they hoard the dollars? And they prefer the yield treasuries bear to dollars just sitting in reserve?

[Jthomp76]

Is this why China and other countries purchase so many US Treasuries? Are they increasing the demand for dollars (and the purchasing power) by doing so?

[Jthomp76]

So are you saying that the exchange rate has nothing to do with price inflation is the U.S., for example? If China buys up a lot of our dollars, does that not take them out of circulation here in the sates?

[Jthomp76]

Dude, you are wicked smart! Thanks Doc!

[Jthomp76]

Dr. Herbener,
I’ve been taking an online class on money and banking with Columbia’s Perry Mehrling. I relayed your response above (not the most recent one but the one before) and here is what he says. I think I know what you’ll say but am curious if you have any thoughts I could chew on. Below is his response:

The “credit from thin air” that Herbener emphasizes is, in my view, the essence of banking, but I think of it differently. As I say repeatedly in the course, all banking is a swap of IOUs. The bank makes a loan to me, which concretely means creating an asset (the loan) and a deposit at the same time, these entries then being booked for me as an asset (the deposit) and a liability (the loan). No real resources change hands, just a swap of IOUs. But at the end of the day I have purchasing power that I did not have before, which I can then spend.

When I spend, and only when I spend, income is created for the person receiving the deposit, as well as saving at that very instant. If my spending was for an investment good, then both investment and saving go up in the aggregate. If my spending was for a consumption good, then my dis-saving wipes out my counterparts saving. Consumption goes up but not saving.

I don’t think 100% reserve banking is possible; indeed, according to my way of thinking, it is not really banking. I think central banking is a natural organic development that arises in all banking systems, it is nothing more than banking for bankers. I don’t think it is possible to eliminate central banking.

[Jthomp76]

If we had a full reserve banking system would not financial innovations resembling fractional reserve banks spring up a la the shadow banking system?

[Jthomp76]

Thank you. What was his incentive to end slavery?

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