Hayek is the Einstein in economics. His book explains everything that had happened in China's modern history, including the land reform, great leap forward and cultural revolution.
Prior to FDR's intervention the unemployment rate had never exceeded 10%, and was infact on a downward trend. It is factually incorrect to say that the policies of Roosevelt got us out of the Depression, or that charitable giving "dried up" (just as unemployment can't be explained by sudden mass laziness, people don't become uncharitable). One man's crisis is another man's opportunity, and FDR seized the opportunity for a massive executive power grab, altering the balance of power ever after.
@@ericrodwell8706 Oh man is it ever embarassing going back and looking at old, ignorant comments of mine. Go to college, people. RUclips will make you stupid.
Keynes was worried about the wages being too high comparatively to the market. Now we have inflationary policy with governments raising the minimum wage. Where's the market?
The market goes to the countries in the world that are not regulated to death. The countries that don't have bylaw officers shutting down lemonade stands. The countries that don't protect monopolies with higher wages and regulations that kill the little guy. Merica, you've been socialist for a while, and that is what the problem is.
Crony Capitalism is actually corporatism, and it is manipulated by government regulation and subsidies.... aka, the redistribution of wealth...aka, socialism.
Ok, so who determines what 'equality' is? You just gave more power to the government, and you mean to say you can trust them with that? Socialism takes options away from people, capitalism allows them to vote with their dollars on what their community needs. Wouldn't you like the choice? Or you have no problem giving that up to the first politician that promises everything to you?
Yes and the bank failures were due to the Federal Reserve Banks refusing to bail out the banks at that time. The lead up to the bank failures was also a massive supply of cheap credit by the central bank. That is what caused the massive boom of the '20s. When banks started failing after the boom ended, people stopped saving in banks and credit was sharply contracted which caused the deflation. But the lead up to the crisis was highly inflationary.
(final) and private sectors as well as individuals buying goods and services etc. Saw the Economy grow faster in a short period of time than it had in any other point in human history, ever.
@@zackerycooper1206 Worry not, Mr. Cooper. This poor sot is but a demoralization agent, the product of the indoctrination that we've seen in Western Academia for the last few decades. He will not reason, he will not question his own academic doctrines... not until he sees them backfire when revolution comes and he isn't put in charge of the 'utopia' wanted - and or is put to death by said utopia, which ever comes first.
Low interest rates encourage the borrowing of money. Since this borrowed money is only partially held in reserve, the same dollar is lent out multiple times to multiple people. This is an increase in the total amount of money in circulation. So it is the same as printing money.
Okay, first, let's stop for a moment. I do not support inflationary policies. Hayek is absolutely right in his opposition to inflation. My complaint over his comments is relatively small in context. All I'm saying is that it is mistaken to believe the malinvestment occurs in capital goods. The malinvestment is mainly in consumption spending. I believe reality proves me correct. Look at the current bubble (i.e. treasury bills, notes and bonds). Before then, real estate.
Where Hayek was wrong was saying that inflation engenders malinvestment in capital goods. From what I can tell, it stimulates consumption spending more than investment spending.
Actually the crisis in Europe is not a sovereign debt crisis - it was due to a banking crisis and a recession. The PIIGS were within EU borrowing limits. In a recession you can either put up taxes or cut public spending - or do a combination of both. The EU has instructed the PIIGS to make deep cuts in exchange for bailout packages. The bailouts were to plug deficits in public spending - caused by refinancing banks. Moreover, the Euro has took away the PIIGS option of devaluation.
A good rule of thumb for determining whether you're living in a free society or not is whether you're allowed to leave. Historically, the direction the guns are facing on your country's borders can tell you alot about the regime within... if they're directed at you, that is a bad sign. East Germany, North Korea, Cuba, USSR, all forced labor camps that kept what they considered the collective property of society in bounds with propaganda and the often realized threat of grave personal injury.
Also, I do agree with you that the economy can't be fragmented into airtight compartments, where one part can be destroyed without impacting another part. What I'm saying here is that inflation engenders consumption spending more so than investment spending, which is even worse.
I wasn't aware of this theory until you brought it to my notice. Thanks. I need to learn about it. Can you recommend any videos or sources that sheds light on this theory?
I think I'd have to disagree with you about the reason for the economic boom being mass spending cuts by the government. the boom started because of WW2 which was a mass mobilization of international government spending due to the war effort, as well as stimulus programs such as the Marshall plan which greatly grew the European economy, also in the 50s if I'm not mistaken, the U.S still spent significant amounts of money on the Korean war and the the new Interstate highway system etc.
Its not incompatible with "social darwinism" that compassion could be the adaptive trait that allows the fit to survive... that's the whole idea behind the theory, noone knows the traits that will enable individuals in a society to flourish beforehand, they emerge as the times change and social conditions evolve. In other words "progress" isn't something that can be designed through something as clumsy as public policy, it is organic and tomorrow's fittest won't necessarily resemble today's.
No it doesn't. Low interest doesn't necessarily lead to the printing of new money. You need fractional reserve banking, a bank to loan the money, and someone to borrow the money that pays it back. Or of course the Fed can just literally print it or type a few extra zeros into a bank's account. With FR banking, inflation happens even with high interest rates, just slower.
Well what we had at the time was massive deflation, right? So people decided to forgo spending today because technically a dollar saved today would be worth more tomorrow in real purchasing power. Not only that but people were feeling very uncertain about what was coming around the corner for them, so saving made sense... problem was they weren't saving in banks that could lend the money for productive new investment, but under their mattress thanks to all the bank failures.
cont. In a free market, loanable funds would be supplied through actual specie and private market actors, not the central bank. Banks also would either be prevented from engaging in FRB or at least be afraid to do it (because they wouldn't be bailed out if they failed). This market supply of credit reduces the possibility of savings gluts occurring, because bank failure would be more spread out and not concentrated. Banks would make poor decisions at different times, rather than all at once.
And in a free market interest payments go down as more and more people save thus decreasing the incentives to save. This does not happen in the current semi-planned economy.
Investment spending is a function of ONLY savings. When one invests, one HOPES for consumers, but one necessarily needs someone's savings. If inflation kills savings, it thus kills investments. Inflation may benefit the banking sector, but only because this sector touches the printed money first, and feeds the hungriest most lucrative sectors first, and makes money off of the margins in the most volatile times. As for Hayek, he openly encourages a minimum wage. Why?
Social Darwinism is used more often as a cudgel than it is understood by those who use the term. Human beings must adapt in order to survive, this has always been true. The "fittest" are those that adapt best to the conditions of their environment... this doesn't preclude being compassionate--infact it might demand it--it merely states that to exist in the world one must make use of oneself and the gifts of nature, cooperate with others, and that person is "fittest" to survive.
Unemployment happened before Keynesianism. It caused a lot of trouble - wars, simplistic strongmen coming to power. Unemployment benefits should manage fluxations in the labour market. Some people will take advantage - but that's a price worth paying. Number crunchers don't understand sociology.
It is the same in Toronto and New York...funny tho, I was able to snag "The Fatal Conceit" in Boston. I only frequent used bookstores so I look at it this way. People get rid of books that they have little or no use for (ie Marxist economics) and then they keep the gems like Hayek!
You're talking about libertarianism as a philosophy, though. Hayek made huge strides in economics specifically, far more than Rand, but that's because Rand was a philosopher, not an economist.
Oh I agree.. I was just joking. Rothbard, Hoppe etc I prefer as economists. In terms of Hayek and statism I won't disagree whilst he did have some contribution to the classical liberal movement in the 20th century from an economic perspective, I have no idea why Mises isn't seen as more prominent.
I never liked economics because I don't get to what degree economic decision making affect lives in a good or bad way. He look so sure when he talks but I don't know if he gets it. A man with a family is not a good. if my comment is poor some explanation is welcomed
This is exactly the situation in Greece also. It seems that in Mediterranean countries there is a misguided perception that to be a creditable intellectual you have to be a Marxist. It is sad because the regular people in these countries very rarely get to hear both sides of the argument on economic matters.
"In fact, central banking was introduced in the USA, so that the frequent panics of period would be resolved, and they were resolved for around a century." How do you square your statement with the 1930s?
While other countries were getting out of the great depression, we stayed in it for 10 more years until WW2. How was it exactly that FDR helped us get back on our feet? It sure didn't look like it. And please explain why even though we had a surplus of food, we had so many people starve? You can thank FDR for that.
"Unemployment compensation must not be higher than that of the market." - If only the U.S listened to Hayek. As he had said, it was much more tempting for young people to stay on unemployment than work for minimum wage. Which is part of the reason why we fail. Another point for Hayek.
This is not surprising. In Capitalism and Freedom, Friedman warns exactly this. It's very difficult to fund and spread free market, capitalist ideas in socialist countries precisely because of the hurdles you would face in such a system. E.g. get a permit from the govt. to rent a hall in order to voice your opinions. However, in free market, capitalist economies, funding and spreading socialist, Marxist or ANY other ideas is relatively easier precisely because people are free to buy and sell.
Government deficit spending & artificially cheap credit is inherently inefficient. Even when it isn't for some time, when it inevitably is, the only way to deal with malinvestment is liquidation. In which case you face a 'deflationary death spiral' of even your somewhat sound investments. So it's either you endure the recession, or through time you build up so many malinvestments your productive capacity is relatively sh&t. It's either you endure a credit crunch now, or something much much worse in the future. Currency collapse. Wealth isn't spending in undemanded/lesser demanded ventures. Wealth isn't over consumption. Wealth isn't distorted price signals. Wealth isn't having a job. Wealth is demanded production. It's having more & better goods/services.
The problem with the "paradox" of thrift is that it is not achievable in a real economy. Production only exists to fuel some sort of consumption, and people must consume at some point (or they will die of lack of basic necessities). The idea that everyone at any point could be saving so much of their money that the economy has some sort of demand shock is ridiculous. If everyone is saving their money then an increase in investment spending simply offsets the decrease in consumer spending.
If the Keynesian precept of increasing the aggregate demand by increasing the government spending to reduce unemployment is valid, then the government should increase the public payroll until there is no one left unemployed. Clearly, such a maneuver is not sustainable in the long run. You might just well drink beer to satisfy your hunger/need for food.
(continued) they do need to have better regulations, especially in the U.S where the banking system suffered severe deregulations in the 80s and 90s (leading to the great recession etc.), but banks hundreds of years ago as well as now increased their profit through spending the money of their clients, not just saving it. Plus look at the largest 20 years of growth in economic history (40s-60s) Argueably the most prosperous economic point in human history, mass spending from both the public
Inflation means comes from artificially low interest rates, which makes in turn makes people borrow more and put into long term investments such as housing or risky investments, because they are desperately looking for yield. This is what happened in the housing bubble. I recommend the talk by Peter Schiff on youtube "Why the meltdown should have surprised no one"
Governments that kept lending regulations in place did not suffer a crash - namely France, Holland, Belgium, Finland and Germany. There's also the failure of the 'ownership society' to consider - in that are low income families better off with social housing than mortgages. Especially when Bush takes away mortgage relief and lets manufacturing jobs ship out to China.
cont. The decision by people to no longer save in those failing banks was what was needed to destroy the system. But Hoover and FDR stepped in and intervened in the economy and prevented the natural solution, bank liquidation, and fueled AD through public works and eventually war. Then we got stuck with the same central banking system today, which still causes the business cycle. Today the FRS makes sure to keep interest rates low during a recession to try to fuel more "consumption."
You know our system is fucked up when people would rather collect unemployment than work a minimum wage job. We need to get rid of the minimum wage and decrease welfare simultaneously. This will decrease unemployment and make the system more efficient because people would no longer be supporting those without jobs.
Hey, Catalan, its hopeless to discuss any such issues with a few certain people from there from over the Atlantic. They think Europe is 'socialist' and say the US Democrats is a 'post-communist' party. Some even suggest the Libertarians aren't anarchist or socialist anymore and they think of them be equals to the Far Rights and Neo-Cons in the US. I mean, they still think it there that football is a game you play it with hands, what more to expect! ;-)
The reason for the economic boom in the 40's and 50's was a result of govt slashing spending when WWII was over, it left more money in hte private sector. But as far as saving, yes, saving money in a bank is better for an economy because that money is loaned to businesses to help them start, when it would otherwise not be possible.
How do banks make money? Yes they do save your money in the banks, but simply saving it does not ensure it's growth, spending is necessary to ensure that growth. By the logic that saving money is the best solution then it would make sense to just put your money under your mattress instead of putting it in a bank. Banks spend you money in investments to make you money. Modern Economic growth and standard of living would be impossible to sustain without banks and the extension of credit,perhaps
Germany and France's exposure was manageable - nowhere near as devastating hAS the Anglo/Saxon countries. The problem is German banks are exposed to the PIIGS who had a Anglo/Saxon party. The Keynesians are winning the argument. Britain's triple dip will decide the issue.
Ha, good point! What do you think about Joseph's Strumpeter's theory that capitalism will produce an intellectual class that would oppose capitalism, and ultimately cause its destruction?
"are you people suggesting we abandon central banking"- money is a commodity it must arrise from barter in order to function optimally in an economy they are also much cheaper to give to banks since they do not need to hire thousands of crackpot economists in order to keep fiat currency afloat. Your missing the point. We don't want a gold backed dollar. We want precious metals to be our dollars and to be controlled by private enterprises who are much more accountable to practices of inflation
Hayek and Friedman both believed there was a role for government in providing for the basic welfare of its citizens. The social-darwinist epithet doesn't apply to either of them, but then the term has been misapplied ever since Hofstadter misused and abused it the 40's.
This stupid idea that if prices fall nobody would spend is completely baseless & ahistorical. The entire industrial revolution & gilded age begs to differ. Natural market deflation encourages savings, which is then lent out to demanded ventures. In direct proportion to how much spending is detered & how productive they are. This frees up resources in the real economy & properly alocates them to where they're demanded. They're competing for scarce funds. Falling prices makes spending easier. Inflationary pressure always outruns wages since they're relatively more sticky. People *must* spend on necessities for example. Time is also valuable to people. You think nobody would ever buy a video game because it's price will drop in a few months? That's just logistically ridiculous. Of course they would. Savings encourage demanded, sound production. Prices falling make spending easier, & people spend when they feel like it. Let's say (for the sake of argument) that every business started failing because everybody was saving money. What would that do? *RAISE PRICES!* In which case people are encouraged to spend lol.
So even Keynes wasn’t a fan of his own policy if it got out of hand. If he was alive for long enough to take his words back, everything would be different
Are you people seriously suggesting that central baking should be abandoned, so that nations implement what the USA had in the 19th century? In fact, central banking was introduced in the USA, so that the frequent panics of period would be resolved, and they were resolved for around a century. You cannot compare the relatively primitive economies of the 19th century, to the complexities we have today. For me, an enemy of capitalism, it would be a massive blessing if liberal fundamentalists...
The sad part is that Hayek is not that amazing. Bastiat, a frenchman, is much more rigorous and fluid and he is at the genesis of this school. And of course, Rand is much more consistent.
Read into the paradox of thrift, it turns to Austrian perspective on it's head. Saving maybe good for individuals, but if everybody saves their money instead of spending then the GDP shrinks and the economy suffers.
it doesnt turn anything on the austrian prespective everyone knows the bloody paradox of thrift but its mere statement doesnt make it correct , bhom-bawerks capital theory later refined by hayek is a direct blow on the keynesian paradox , firstly savings have an intertemporal relation with future investment, the increase in savings also increases the supply of loanable funds and therefore a downward pressure on interest rates , wich makes the price of investment in capital goods higher in opposition to consumer goods wich by becoming less profitable and less appealing in the market , and therefore a change in the structure of capital goods is required , saving is also a market signal , the keynesian solution only makes it so that the price signals of intertemporal preference of the consumers for an adjustment of the production process to their demand become inflated and therefore create an illusion that those same business who are not longer profitable or in accordance with market demand , now seem to be. Secoundly when this process occurs naturaly in the market without monetary interference a drop in the demand for consumer goods is offset by an increase in intermidiate consumption or business expenditures wich GDP has to be subtracted from "to avoid double counting" since the value of those expenditures are assumed to be included in the value of the product in later periods
As a Libertarian Socialist, I actually agree with a massive amount of Hayek's economic theory. But I advocate for Keyne's theories in practice as the way I see it, capitalist markets are descent to destroy themselves, and thus under Keynesianism, the economy continue to decline, but also make life measurably better for those who are going down, thus reducing suffering in the destruction of capitalism, and making the transition into Market Socialism less destructive to people on an individual basis during the fall of Capitalism.
Look, capitalism is what it is, in reality, not in some Hayekian imaginary. Greece has been part of capitalism since day 1. In fact, it was a relatively successful capitalist country, reaching around $30,000 of per capita income by 2008. But the process of capital accumulation has reached its limit in Greece, as indeed in the rest of the European South. There have not been "mistakes" in the past 50 years, that is a too easy way out for capitalist apologists: "You know dude, there is never...
Obviously capitalism is failing in Spain, but you seem to be blaming the bookstores for having Marx on their shelves. Could you develop that logic a bit further?
such a genius, he even speaks so coherently and beautifully much like his writing. Most academics fail to do so.
+Namir Ahmad yeah, and in a second language.
Namir Ahmad yeah, true. he speaks plainly, honestly. I've always known that smart people speak clearly, because they know which words to use.
yet very humble (so he sounded)
Hayek is the Einstein in economics. His book explains everything that had happened in China's modern history, including the land reform, great leap forward and cultural revolution.
which book do you mean?
Are you sure you know about China's history?
Yes, he is a real genius
@@brotherbig4651 i think he is talking what china has become and the threat that the state is to its own people
Blackagar Blocagon The truth is China is growing so fast and is taking over the US as the strongest country in the world.
Beautiful display of truth, freedom, and some dang hard work and research!
Hayek was a genius, I really wish i could have met him.
I did. I served him at a restaurant. Only gave me 10 percent. SHocking
@@panushjo lol...
@@panushjo lmao
So true: Keynes' "general" theory was anything but. Thanks for uploading.
The last 2 minutes are absolutely fascinating insights!
Hayek is bae
Recommendable! The General Theory of Keynes was not general, but an excuse for career politicians!
The Road to Serfdom was an excuse for big corporations to screw over workers and implement austerity. On top of an excuse for career politicians.
@@MM-vs2et I recommend you read the Road to Serfdom one more time. Do you even know who Hayek was?
The pragmatic geneious of Hayek is indispensable!!
Prior to FDR's intervention the unemployment rate had never exceeded 10%, and was infact on a downward trend. It is factually incorrect to say that the policies of Roosevelt got us out of the Depression, or that charitable giving "dried up" (just as unemployment can't be explained by sudden mass laziness, people don't become uncharitable). One man's crisis is another man's opportunity, and FDR seized the opportunity for a massive executive power grab, altering the balance of power ever after.
@@ericrodwell8706 Oh man is it ever embarassing going back and looking at old, ignorant comments of mine. Go to college, people. RUclips will make you stupid.
But your comment was right brother. Sorry the woke virus got to you in college.
@@anthonywalton3264 I'm not. Fat, drunk and stupid is no way to go through life, son.
Brilliant man... Thanks for the video!
8:00 Hayek calls Keynes bicurious
I'm going to be reviewing more of his books, He's one of the best the economists in the world
Keynes was worried about the wages being too high comparatively to the market. Now we have inflationary policy with governments raising the minimum wage. Where's the market?
+Luke Purse where exactly?
The market goes to the countries in the world that are not regulated to death. The countries that don't have bylaw officers shutting down lemonade stands. The countries that don't protect monopolies with higher wages and regulations that kill the little guy. Merica, you've been socialist for a while, and that is what the problem is.
Crony Capitalism is actually corporatism, and it is manipulated by government regulation and subsidies.... aka, the redistribution of wealth...aka, socialism.
...but hey, keep giving govenrment more of your taxes and more of your rights, LOL
Ok, so who determines what 'equality' is? You just gave more power to the government, and you mean to say you can trust them with that? Socialism takes options away from people, capitalism allows them to vote with their dollars on what their community needs. Wouldn't you like the choice? Or you have no problem giving that up to the first politician that promises everything to you?
In what year was that episode recorded?
Whatvwould Hayak say about Greenspan and interest rates?
Yes and the bank failures were due to the Federal Reserve Banks refusing to bail out the banks at that time. The lead up to the bank failures was also a massive supply of cheap credit by the central bank. That is what caused the massive boom of the '20s. When banks started failing after the boom ended, people stopped saving in banks and credit was sharply contracted which caused the deflation. But the lead up to the crisis was highly inflationary.
No it was because some states did not aloud branches bank. Only local banks
Hi liberty pen, i love your new intro, so beautifull.
(final) and private sectors as well as individuals buying goods and services etc. Saw the Economy grow faster in a short period of time than it had in any other point in human history, ever.
Keynesianism is the first step on the road to serfdom.
oh yeah so many totalitarian countries in the west LOL. this Hayek's idea was really the stupidest.
@@nomos6508 Um you ever read anything about South American history?
@@zackerycooper1206
Worry not, Mr. Cooper. This poor sot is but a demoralization agent, the product of the indoctrination that we've seen in Western Academia for the last few decades.
He will not reason, he will not question his own academic doctrines... not until he sees them backfire when revolution comes and he isn't put in charge of the 'utopia' wanted - and or is put to death by said utopia, which ever comes first.
@@nomos6508 LOL, you think we're actually free here.
@@billmelater6470 what do you mean?
Amazing story about Hayek's encounter with Keynes.
Low interest rates encourage the borrowing of money. Since this borrowed money is only partially held in reserve, the same dollar is lent out multiple times to multiple people. This is an increase in the total amount of money in circulation. So it is the same as printing money.
Okay, first, let's stop for a moment. I do not support inflationary policies. Hayek is absolutely right in his opposition to inflation. My complaint over his comments is relatively small in context. All I'm saying is that it is mistaken to believe the malinvestment occurs in capital goods. The malinvestment is mainly in consumption spending. I believe reality proves me correct. Look at the current bubble (i.e. treasury bills, notes and bonds). Before then, real estate.
Where Hayek was wrong was saying that inflation engenders malinvestment in capital goods. From what I can tell, it stimulates consumption spending more than investment spending.
Actually the crisis in Europe is not a sovereign debt crisis - it was due to a banking crisis and a recession. The PIIGS were within EU borrowing limits. In a recession you can either put up taxes or cut public spending - or do a combination of both. The EU has instructed the PIIGS to make deep cuts in exchange for bailout packages. The bailouts were to plug deficits in public spending - caused by refinancing banks. Moreover, the Euro has took away the PIIGS option of devaluation.
A good rule of thumb for determining whether you're living in a free society or not is whether you're allowed to leave. Historically, the direction the guns are facing on your country's borders can tell you alot about the regime within... if they're directed at you, that is a bad sign. East Germany, North Korea, Cuba, USSR, all forced labor camps that kept what they considered the collective property of society in bounds with propaganda and the often realized threat of grave personal injury.
Also, I do agree with you that the economy can't be fragmented into airtight compartments, where one part can be destroyed without impacting another part. What I'm saying here is that inflation engenders consumption spending more so than investment spending, which is even worse.
It's the Adam Smith tie. The interviewer has one on too. And so does the other fella.
I wasn't aware of this theory until you brought it to my notice. Thanks. I need to learn about it. Can you recommend any videos or sources that sheds light on this theory?
Try the book The road to serfdom. :)
I think I'd have to disagree with you about the reason for the economic boom being mass spending cuts by the government. the boom started because of WW2 which was a mass mobilization of international government spending due to the war effort, as well as stimulus programs such as the Marshall plan which greatly grew the European economy, also in the 50s if I'm not mistaken, the U.S still spent significant amounts of money on the Korean war and the the new Interstate highway system etc.
So which system do you prefer?
Here's a hint though - you are "free" to type in anything you want.
If only Keynes would have lived longer. Maybe things would have been different for the better. Excellent video!!!
Its not incompatible with "social darwinism" that compassion could be the adaptive trait that allows the fit to survive... that's the whole idea behind the theory, noone knows the traits that will enable individuals in a society to flourish beforehand, they emerge as the times change and social conditions evolve. In other words "progress" isn't something that can be designed through something as clumsy as public policy, it is organic and tomorrow's fittest won't necessarily resemble today's.
No it doesn't. Low interest doesn't necessarily lead to the printing of new money. You need fractional reserve banking, a bank to loan the money, and someone to borrow the money that pays it back. Or of course the Fed can just literally print it or type a few extra zeros into a bank's account. With FR banking, inflation happens even with high interest rates, just slower.
Well what we had at the time was massive deflation, right? So people decided to forgo spending today because technically a dollar saved today would be worth more tomorrow in real purchasing power. Not only that but people were feeling very uncertain about what was coming around the corner for them, so saving made sense... problem was they weren't saving in banks that could lend the money for productive new investment, but under their mattress thanks to all the bank failures.
I always see him as that young gentleman in black and white
Thanks for confirming my opening 8 word sentence with a 5 line comment.
cont. In a free market, loanable funds would be supplied through actual specie and private market actors, not the central bank. Banks also would either be prevented from engaging in FRB or at least be afraid to do it (because they wouldn't be bailed out if they failed). This market supply of credit reduces the possibility of savings gluts occurring, because bank failure would be more spread out and not concentrated. Banks would make poor decisions at different times, rather than all at once.
with a job guarantee, proposed by people like L. Randall Wray or Pavlina Tcherneva, there would be no trade-off between full employment and inflation.
Have you done anything about that?
What is that necktie he wears? Milton Friedman always had that same one on, too.
And in a free market interest payments go down as more and more people save thus decreasing the incentives to save. This does not happen in the current semi-planned economy.
Investment spending is a function of ONLY savings. When one invests, one HOPES for consumers, but one necessarily needs someone's savings. If inflation kills savings, it thus kills investments.
Inflation may benefit the banking sector, but only because this sector touches the printed money first, and feeds the hungriest most lucrative sectors first, and makes money off of the margins in the most volatile times.
As for Hayek, he openly encourages a minimum wage. Why?
Social Darwinism is used more often as a cudgel than it is understood by those who use the term. Human beings must adapt in order to survive, this has always been true. The "fittest" are those that adapt best to the conditions of their environment... this doesn't preclude being compassionate--infact it might demand it--it merely states that to exist in the world one must make use of oneself and the gifts of nature, cooperate with others, and that person is "fittest" to survive.
Unemployment happened before Keynesianism. It caused a lot of trouble - wars, simplistic strongmen coming to power. Unemployment benefits should manage fluxations in the labour market. Some people will take advantage - but that's a price worth paying. Number crunchers don't understand sociology.
It is the same in Toronto and New York...funny tho, I was able to snag "The Fatal Conceit" in Boston. I only frequent used bookstores so I look at it this way. People get rid of books that they have little or no use for (ie Marxist economics) and then they keep the gems like Hayek!
You're talking about libertarianism as a philosophy, though.
Hayek made huge strides in economics specifically, far more than Rand, but that's because Rand was a philosopher, not an economist.
Yeah 1775-1821 was a great time for the poor.
Exactly😂. People believe in freedom untill their children get beheaded by another tribe. Its insane.
Oh I agree.. I was just joking. Rothbard, Hoppe etc I prefer as economists. In terms of Hayek and statism I won't disagree whilst he did have some contribution to the classical liberal movement in the 20th century from an economic perspective, I have no idea why Mises isn't seen as more prominent.
well if people save, then the free market interest rate drops and that incentiveces [sic] people to invest or spend
I cannot make out the accent, and the auto-captionsare just humerous. They need to add real captions.
I know what you mean. I have seen the same in The Netherlands, Germany, Portugal, France and Greece.
I never liked economics because I don't get to what degree economic decision making affect lives in a good or bad way. He look so sure when he talks but I don't know if he gets it. A man with a family is not a good. if my comment is poor some explanation is welcomed
This is exactly the situation in Greece also. It seems that in Mediterranean countries there is a misguided perception that to be a creditable intellectual you have to be a Marxist. It is sad because the regular people in these countries very rarely get to hear both sides of the argument on economic matters.
So with equality we are all equally misrable.
"In fact, central banking was introduced in the USA, so that the frequent panics of period would be resolved, and they were resolved for around a century."
How do you square your statement with the 1930s?
While other countries were getting out of the great depression, we stayed in it for 10 more years until WW2. How was it exactly that FDR helped us get back on our feet? It sure didn't look like it. And please explain why even though we had a surplus of food, we had so many people starve? You can thank FDR for that.
"Unemployment compensation must not be higher than that of the market." - If only the U.S listened to Hayek. As he had said, it was much more tempting for young people to stay on unemployment than work for minimum wage. Which is part of the reason why we fail. Another point for Hayek.
This was tried in the 18 century and led to a race to the bottom for wages. Employers will pay the least they can
This is not surprising. In Capitalism and Freedom, Friedman warns exactly this. It's very difficult to fund and spread free market, capitalist ideas in socialist countries precisely because of the hurdles you would face in such a system. E.g. get a permit from the govt. to rent a hall in order to voice your opinions. However, in free market, capitalist economies, funding and spreading socialist, Marxist or ANY other ideas is relatively easier precisely because people are free to buy and sell.
Hayek is the 🐐
Government deficit spending & artificially cheap credit is inherently inefficient. Even when it isn't for some time, when it inevitably is, the only way to deal with malinvestment is liquidation. In which case you face a 'deflationary death spiral' of even your somewhat sound investments. So it's either you endure the recession, or through time you build up so many malinvestments your productive capacity is relatively sh&t. It's either you endure a credit crunch now, or something much much worse in the future. Currency collapse.
Wealth isn't spending in undemanded/lesser demanded ventures. Wealth isn't over consumption. Wealth isn't distorted price signals. Wealth isn't having a job.
Wealth is demanded production. It's having more & better goods/services.
Did I just hear Hayak say hes in favor of a minimum salary? @ 4:50?
The problem with the "paradox" of thrift is that it is not achievable in a real economy. Production only exists to fuel some sort of consumption, and people must consume at some point (or they will die of lack of basic necessities). The idea that everyone at any point could be saving so much of their money that the economy has some sort of demand shock is ridiculous. If everyone is saving their money then an increase in investment spending simply offsets the decrease in consumer spending.
So what happened in the Great Depression when nobody wanted to spend
If the Keynesian precept of increasing the aggregate demand by increasing the government spending to reduce unemployment is valid, then the government should increase the public payroll until there is no one left unemployed. Clearly, such a maneuver is not sustainable in the long run. You might just well drink beer to satisfy your hunger/need for food.
(continued) they do need to have better regulations, especially in the U.S where the banking system suffered severe deregulations in the 80s and 90s (leading to the great recession etc.), but banks hundreds of years ago as well as now increased their profit through spending the money of their clients, not just saving it. Plus look at the largest 20 years of growth in economic history (40s-60s) Argueably the most prosperous economic point in human history, mass spending from both the public
Jealosy is a base emotion. You should get over it.
Honestly I didn't do anything, but I thought "Thank you Lord, for giving us Amazon!".
Inflation means comes from artificially low interest rates, which makes in turn makes people borrow more and put into long term investments such as housing or risky investments, because they are desperately looking for yield. This is what happened in the housing bubble. I recommend the talk by Peter Schiff on youtube "Why the meltdown should have surprised no one"
Governments that kept lending regulations in place did not suffer a crash - namely France, Holland, Belgium, Finland and Germany. There's also the failure of the 'ownership society' to consider - in that are low income families better off with social housing than mortgages. Especially when Bush takes away mortgage relief and lets manufacturing jobs ship out to China.
cont. The decision by people to no longer save in those failing banks was what was needed to destroy the system. But Hoover and FDR stepped in and intervened in the economy and prevented the natural solution, bank liquidation, and fueled AD through public works and eventually war. Then we got stuck with the same central banking system today, which still causes the business cycle. Today the FRS makes sure to keep interest rates low during a recession to try to fuel more "consumption."
So fucking relevant in 2020/21.
SET THE MARKETS FREE.
How is that profitable?
You know our system is fucked up when people would rather collect unemployment than work a minimum wage job. We need to get rid of the minimum wage and decrease welfare simultaneously. This will decrease unemployment and make the system more efficient because people would no longer be supporting those without jobs.
Hey, Catalan, its hopeless to discuss any such issues with a few certain people from there from over the Atlantic. They think Europe is 'socialist' and say the US Democrats is a 'post-communist' party. Some even suggest the Libertarians aren't anarchist or socialist anymore and they think of them be equals to the Far Rights and Neo-Cons in the US. I mean, they still think it there that football is a game you play it with hands, what more to expect! ;-)
Businesses can't begin, or grow, without capital and capital is a result of savings. Only spending, would make the economy incapable of growing.
The reason for the economic boom in the 40's and 50's was a result of govt slashing spending when WWII was over, it left more money in hte private sector. But as far as saving, yes, saving money in a bank is better for an economy because that money is loaned to businesses to help them start, when it would otherwise not be possible.
No it was he start of the social spending
I can't really understand xD the accent is too strong for me to handle. I'll just read his books lmao
Good German accent
How do banks make money? Yes they do save your money in the banks, but simply saving it does not ensure it's growth, spending is necessary to ensure that growth. By the logic that saving money is the best solution then it would make sense to just put your money under your mattress instead of putting it in a bank. Banks spend you money in investments to make you money. Modern Economic growth and standard of living would be impossible to sustain without banks and the extension of credit,perhaps
Germany and France's exposure was manageable - nowhere near as devastating hAS the Anglo/Saxon countries. The problem is German banks are exposed to the PIIGS who had a Anglo/Saxon party. The Keynesians are winning the argument. Britain's triple dip will decide the issue.
Ha, good point! What do you think about Joseph's Strumpeter's theory that capitalism will produce an intellectual class that would oppose capitalism, and ultimately cause its destruction?
Buckley would cry if he saw what his Firing Line has become .
No. Inflation comes from printing money. Even Peter Schiff says so.
"are you people suggesting we abandon central banking"- money is a commodity it must arrise from barter in order to function optimally in an economy they are also much cheaper to give to banks since they do not need to hire thousands of crackpot economists in order to keep fiat currency afloat. Your missing the point. We don't want a gold backed dollar. We want precious metals to be our dollars and to be controlled by private enterprises who are much more accountable to practices of inflation
Hayek and Friedman both believed there was a role for government in providing for the basic welfare of its citizens. The social-darwinist epithet doesn't apply to either of them, but then the term has been misapplied ever since Hofstadter misused and abused it the 40's.
It does. Investment spending is a function of what consumer spending. If you fuck screw with one, you'll screw with the other.
Must've misread it somewhere.
This stupid idea that if prices fall nobody would spend is completely baseless & ahistorical. The entire industrial revolution & gilded age begs to differ. Natural market deflation encourages savings, which is then lent out to demanded ventures. In direct proportion to how much spending is detered & how productive they are. This frees up resources in the real economy & properly alocates them to where they're demanded. They're competing for scarce funds.
Falling prices makes spending easier. Inflationary pressure always outruns wages since they're relatively more sticky.
People *must* spend on necessities for example. Time is also valuable to people. You think nobody would ever buy a video game because it's price will drop in a few months? That's just logistically ridiculous. Of course they would. Savings encourage demanded, sound production. Prices falling make spending easier, & people spend when they feel like it.
Let's say (for the sake of argument) that every business started failing because everybody was saving money. What would that do? *RAISE PRICES!* In which case people are encouraged to spend lol.
So even Keynes wasn’t a fan of his own policy if it got out of hand. If he was alive for long enough to take his words back, everything would be different
adorable
Are you people seriously suggesting that central baking should be abandoned, so that nations implement what the USA had in the 19th century? In fact, central banking was introduced in the USA, so that the frequent panics of period would be resolved, and they were resolved for around a century. You cannot compare the relatively primitive economies of the 19th century, to the complexities we have today. For me, an enemy of capitalism, it would be a massive blessing if liberal fundamentalists...
Wow
Yea sure, low interest rates mean lots of new money.
Funny, he has a German Accent, wow!
1977.
The sad part is that Hayek is not that amazing. Bastiat, a frenchman, is much more rigorous and fluid and he is at the genesis of this school. And of course, Rand is much more consistent.
best review I've ever read (sarcasm).
Read into the paradox of thrift, it turns to Austrian perspective on it's head. Saving maybe good for individuals, but if everybody saves their money instead of spending then the GDP shrinks and the economy suffers.
it doesnt turn anything on the austrian prespective everyone knows the bloody paradox of thrift but its mere statement doesnt make it correct , bhom-bawerks capital theory later refined by hayek is a direct blow on the keynesian paradox , firstly savings have an intertemporal relation with future investment, the increase in savings also increases the supply of loanable funds and therefore a downward pressure on interest rates , wich makes the price of investment in capital goods higher in opposition to consumer goods wich by becoming less profitable and less appealing in the market , and therefore a change in the structure of capital goods is required , saving is also a market signal , the keynesian solution only makes it so that the price signals of intertemporal preference of the consumers for an adjustment of the production process to their demand become inflated and therefore create an illusion that those same business who are not longer profitable or in accordance with market demand , now seem to be.
Secoundly when this process occurs naturaly in the market without monetary interference a drop in the demand for consumer goods is offset by an increase in intermidiate consumption or business expenditures wich GDP has to be subtracted from "to avoid double counting" since the value of those expenditures are assumed to be included in the value of the product in later periods
As a Libertarian Socialist, I actually agree with a massive amount of Hayek's economic theory. But I advocate for Keyne's theories in practice as the way I see it, capitalist markets are descent to destroy themselves, and thus under Keynesianism, the economy continue to decline, but also make life measurably better for those who are going down, thus reducing suffering in the destruction of capitalism, and making the transition into Market Socialism less destructive to people on an individual basis during the fall of Capitalism.
Look, capitalism is what it is, in reality, not in some Hayekian imaginary. Greece has been part of capitalism since day 1. In fact, it was a relatively successful capitalist country, reaching around $30,000 of per capita income by 2008. But the process of capital accumulation has reached its limit in Greece, as indeed in the rest of the European South. There have not been "mistakes" in the past 50 years, that is a too easy way out for capitalist apologists: "You know dude, there is never...
Obviously capitalism is failing in Spain, but you seem to be blaming the bookstores for having Marx on their shelves. Could you develop that logic a bit further?