Only the Austrians Understand Interest Rates
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- Опубликовано: 15 сен 2024
- Presented by Robert P. Murphy at "Austrian Economics and the Financial Markets," the Mises Circle in Manhattan on 22 May 2010 in New York, New York. Includes an introduction by Mises Institute president Douglas E. French.
Few people - if any - can be as entertaining when talking economics as Bob Murphy. Always a pleasure to hear him talk. Thanks for posting!
Hej Rune! Cool that we had and still have the same interests :D I also watched a bunch of stuff like this around 10 years ago.
Interest... USURY. IDIOTS. WHY IS the U.S.A. almost financially dead?? INTEREST AND USURY. PRAYING DAILY FOR A METEORITE TO CRATER THIS DUMP. YOU F*CKERS LIVE IN TOTAL ERROR, AND RELISH IT.
"If you can't trust central bankers and the heads of oil companies, who can you trust?" 😆
God.
@@TheMissgaol ok theist.
"God" you say ?? That's worse
Absolutely incredible watching this today, April 2nd 2020
Starts at 2:55
I love these lectures! Nothing illustrates the subtle beauty of the market process better than financial markets. I can't wait to see the rest of these lectures!
Fun fact: the more you understand Austrian economics the more you see how screwed we are to have to live in such exploitative and perverse system with no end in sight, no matter what country you live in.
the problem with being faster than light is that you can only live in darkness.
How dumb are you to use the term exploitative
Bro thats not a productive look into the whole situation, its rather nihilistic. I think what we should understand is how we can take advantage of the percieved knowledge asymmetry we get by learning austrian economics when compared to others schools and ethically share what we know to our loved ones that dont care about this shit and protect them.
jokes on you, i live in acountry where one does not have to realise that
I've come back and watched this video about 3 times in the past few years. Very well spoken
@Goodatconnect4 not exactly - Keynesians don't typically have a problem with the idea of "artificial demand" - in theory, they acknowledge that demand originates in consumer preferences, but in practice, they treat demand as if the only component that matters is the mechanical process of spending. Austrians, in contrast, believe that if you spend on arbitrary projects for the sake of spending, you cause distortions in the price system and structure of production. That is, demand can't be faked.
"arbitrary projects for the sake of spending" is a veiled way of referring to social security.
@@gymonstarfunkle136 No, it wasn't. Social Security is a corrupt and unsustainable mechanism to control the sheep, but it has nothing whatever to do with Keynesianism.
"That would be crazy the FED wouldn't create a trillion dollars just in 6 months"
Well well Bob, It's 2021
Burda türk görmeyi beklemiyordum
@@kav53103 Zamanında çok izlemiştim, hatta Türk bi ekip Walter Block ile Discord Q&A'i organize etmişti
And we have record inflation rates, as expected
Who else thought the thumbnail was George Costanza?
I really like Robert P. Murphy, he cracks me up, but in a good way.
@Goodatconnect4 Rather than saying "artificially-boosted demand" I would perhaps restate it to say "artificially-lowered costs". The reason I would rephrase it that way is that that by nature, demand is infinite - it is only the scarcity of time and resources that force us to prioritize. So, when we speak of artificially-boosting demand, what we are really talking about is lowering nominal costs to the consumer, but without the increase in supply that would normally signal that price drop.
I'm trying to learn economics and this is the only comment I've struggled to understand in the context of the real economy, how does demand increase manifest itself in lowering costs? What does lowering nominal costs to the comsumer mean? I understand why increases in supply signal prices to decrease, but I do not understand how what the Fed does, causes the increase in supply to never occur?
@Goodatconnect4 I would still say, 'yes', - at least to an Austrian - "artificial demand" is an oxymoron. Again, demand is a semantic construct to describe an aggregation of demonstrated consumer preferences. In its crudest form, Keynesianism concludes that demand is manifested in the act of spending. Since they see spending as merely a mechanical process - they believe that demand can be emulated by arbitrary spending - forgetting that the source of demand is in the mind of the consumer.
Having thought about it some more, the use of the term "artificial demand" does seem to focus on the symptoms rather than the initial cause of the illness: artificially reduced costs. It does seem odd to me now to say artificial demand. My thanks for you being so persistent and patient!
Goodatconnect4 I really like your humility and honesty.
Lol “the Fed will never print $1T in 6 months that would be insane”. That aged well.
@Goodatconnect4 No, as an Austrian, I don't recognize it as demand (by definition) BECAUSE it didn't come from consumer preferences. To be sure, the spending causes things to happen - and this is what leads Keynesians to say "See - we told you we could create demand through government spending!" - but because the "artificial demand" spending is driven by guesswork or worse, political favoritism, it leads to jobs being supported and goods being produced that may not have been requested by anyone.
That guy (Bob Murphy) is great. I put this on while I went for a run, great presentation, and information.
He called it. Libertarians everywhere called it. What a surprise we're in exactly the same situation in 2023.
this was 2010! Interest rates are still virtually 0 and it is now 2019!!
2020 at .25% makes the 2.5% in Dec 2018 seem beautiful by comparison
@gergenheimer I agree that the government cannot run a permanent deficit since this is a misuse of resources. However, anyone who has worked for a business must surely realise that "production" does in fact increase when spending rises, that many goods are not particularly scarce. Unemployment detroys effective demand and causes unemployment, even though business have spare capacity and the unemployed have needs. This is why govt should save in booms and spend in bust. But they dont...
Interest rate is just a metric which is affected by supply and demand.
¿Hay algún vídeo de esta conferencia traducido al español? Gracias.
Yes! last time an Austrian understood interest rates and gave an hard time to the banking community
"a) a any purported economy subject to interest ultimately terminates itself under insoluble debt; and
b) that there is one only solution to the breadth of present monetary irregularities, which categorically are,
1) inflation and deflation,
2) systemic manipulation of the cost or value of money or property, and
3) inherent, irreversible multiplication of debt in proportion to the circulation by interest."
rather than stabilizing the money supply as I suggest, and as Japan did, the US will find itself in a position of permanently ballooning money supply expansion, which is highly inflationary on top of exacerbating the debt problem we are trying to solve. We should understand that the intervention is aiming to allow debt reduction, not to sustain ever-growing levels of debt - this would be a road to ruin, exactly the road that would lead to either US default or hyperinflation possibilities.
@dfjpr What determines real wages is capital accumulation which leads to higher productivity. America's productivity is still the highest in the world and we still produce more than China does. The point being that its not a zero-sum game; trade between the US and China is mutually beneficial and if its not its because Americans PREFER to consume rather than save, which doesn't make them the bad guys. Murphy has a Mises Daily article on this called "Trade Deficits and Collectivism."
because the excess spending is not temporary one-off projects, but a fundamental deficit on paying its bills. The US has a debt spiral on its hands unless it can reorganize its spending so that revenues cover its core liabilities, and deficits are only used for one-off social programs to be terminated when the economy turns back up. If the US government doesn't get its house in order, then you can be sure that the economy will not redress itself, since
Watching this on 25th August 2022. It has aged well. Maybe because the truth is timeless...
@crossxlui thanks for the response. I read a book by Richard Koo, Chief economist of Nomura, about the japanese recession vs todays in the West. My understanding is that both are "balance sheet recessions", where it is no longer an issue of profitability, but of solvency due to a rapid plunge in asset values. In both cases there was an asset price bubble, the values were unjustified on a Discounted cashflow basis. This means that otherwise profitable businesses were temporarily (up to 10 years)
...as payments against interest obligations do not count against the previous principal, our perpetual re-borrowing of interest to replenish a circulation means therefore that the sum of debt will perpetually increase so much as periodic interest on an ever greater sum of debt....
"If money is introduced to circulation as debt subject to interest, then merely to maintain a vital circulation, we have to perpetually re-borrow whatever we pay against principal and interest obligations. Payments against the previous sum of principal thus are re-assumed as new principal, equal to the old - making it impossible to pay down the sum of debt...
@Goodatconnect4 You've got it. So, in some cases government policies and programs create things where there was little or no organic demand at all (i.e. Alaska's "bridge to nowhere"), but more often, they cause a distortion in the level of demand by altering the structure of prices, disguising the risk factors, imposing mandates etc. The housing bubble is an excellent example of this phenomenon. The excess of homes we built are the legacy of artificially-boosted demand, due to govt. policies.
But…he was wrong. The next few years saw no crash and no inflation.
yeah, about printing 1T in 6 months...
'Demand, by definition, is a conceptual aggregation of consumer wants, as observed by their actions in the marketplace.'
Not trying to start an argument. But is artificial demand an oxymoron in that context? As I understand it, artificial is used in the sense that any increase in demand that is not a consequence of of market actors, but government intervention, does not reflect market conditions and is merely an arbitrary stimulus (artificial: "not existing naturally").
@Eisen89 note that China, Germany, and Australia all ran budget surpluses, which is what keynes recommended, government savings which are now available to spend. US did not. My view as to events is eventually some price deflation from an austerity budget, accompanied by some continued deficit spending monetized by the Fed (base (equity) money supply inflation). Otherwise debt levels would have to stay ridiculously high, not to mention the coming unfunded US liabilities.
@underdg22 "What determines real wages is capital accumulation which leads to higher productivity."
Higher productivity determines the pool available for wages and profit, but wages are determined by supply & demand for labour, not productivity, so productivity generally adds to profit.
...Not only would this mean that there is ever less of a given circulation to devote to prices, much less increasing prices ostensibly tolerated by the non-existent "inflation," it would mean that as a consequence of this multiplication of debt in proportion to the circulation, that the system inherently, ultimately collapses under a sum of debt it can no longer afford to service."
... As to what the money should be spent on...
I had not spoken on this because I would hope it would basically be spent sensibly. The money has to be spent if a depression is to be avoided. Spending on social programs that would benefit society, such as repairing damaged roads, upgrading railway infrastructure, building new hospital and school facilities would create jobs and add value. This is fine since as soon as the deleveraging ceases, private demand will pick up and the market will ...
@27:00 is this what leads to moral hazard? I predict the next crash will be far worse than last one.
@wallstreetpro
IF Keynes had ever truly understood interest, he would have projected the present failure and its singular solution. He's a hero to "Wall Street Pros" because HE DIDN'T understand "interest" IN ANY WAY WHICH COULD SERVE A DUPED PUBLIC.
There's not necessarily reason for price inflation near term since the total money supply would stay the same if the Fed prints money whilst everyone reduces debt level. In this situation (which i believe to be the case) debt money falls, but base money rises to compensate.
Therefore, stocks, instead of falling because they are overvalued, could stay at the same price but the true value of the dollar fall instead; therefore the real ...
Seems to me that the financialism of US & UK coincides with the period of privatisation of state industry if the state ran water, gas and electric for instance, then these entities could be set up decentralized from main government with objective of providing lowest cost possible, then, in absence of a profit motive, they would be able to distribute services at or near their v low cost. As Enron demostrated, private have incentive to holdback supply in order to meet profit objectives.
I like how your preset definition of all private companies is Enron 😂😂. It's like implying all governments in history are 1920s and 1930s Germany.
Incorrect. Return to my "$1 million per citizen" scenario. In that example, money would flow like water. Most products would see huge increases in demand, but increased production still would be limited by finite resources, as well as by millionaire employees demanding $1,000 per hour to stay on the job. Prices would skyrocket. The supposed benefits of an increase in nominal spending would be quickly cut short by physical reality. Money facilitates exchange, but does not eliminate scarcity.
@jjrglobal "households have declined in actual number of wage earners per household." -
1. When I stated median income I was refering to the median income of a person, not of a household.
2. If employment levels are lower, that is a problem not a solution - we need jobs and income.
3. "Inflation adjusted personal real wages have risen substantially since the seventies" - the actual situation is that mean income has risen, but median and mode income have not.
@chotaboy66
Austrians would allow different monies to compete, so anyone can try to create their own money if they so wish.
"Banks don't create money..."
Yes they do. Or do you not count demand deposits as money?
17:10 When people are impatient, then they buy more. High price would LOWER yield or interest rate. I think this is a mistake made by the speaker.
I think interest rate is more a signal of risk than of postponing. People will not postpone if risk is low. Risk is the underlying power.
The concept of "artificial demand" is an oxymoron. Demand, by definition, is a conceptual aggregation of consumer wants, as observed by their actions in the marketplace. A reduction in consumer spending isn't a failure of demand, but rather a different, equally valid expression of their preferences. Deferred consumption, while it may require tough choices of producers in the short term, builds capital and releases resources so that the structure of production can be realigned for the future.
when i was a kid I always thought about printing money and asked teachers why we couldnt do it. Always got ridiculed, I had no idea of the existance of central banking.
Makes sense to me!
ps since 1970's, real profits have risen, but median wage-levels have stayed flat. I wouldn't regard this as a balanced economic growth of the kind that has benefitted the general population, so the problem goes all the way back 40yrs, and furthermore, our marketplace places profit as its nmber 1 target, but a democracy should represent its population, and the majority of the population happen to be wageearners - therefore rising real wages should be a major obective too, not just profit levels.
Although whoever is receiving the new money first clearly benefits the most, including banks, receivers of bank bonuses, and receivers of bailouts from toxic assets, equity and home owners, since these are all having their losses removed from them, but also owners of real assets, because dollar holders will have a net greater purchase power due to lower debt burden, even though this may not lead to more than reasonable price rises due to unwillingness to carry such huge debt anymore.
...By government deficit spending, the japanese stabilized the money supply, allowing everyone to save money from their incomes in order to get out of debt. This is the only way to pay down debt everyone at once since fiat money *is* debt. (taking out loans increases MSupply, paying off loans decreases it). For this reason, if the private sector wants to delever, public must deficit, but public deficit must be only just enough to fill the gap to 0% growth, and no more...
@mikemontagne
What is "vital circulation?" It certainly isn't a term used in economics.
I don't need math to point out that all debts aren't paid off at the same time. If they were then interest would indeed be a problem.
Obviously the biggest problem is that denying interest is like denying time preference, which on the other hand is like denying the existence of human action. Good luck with that.
I'd still buy land rather than gold. It's hard to make money off gold (or silver) bars while holding it. Land you can make money off of over the time it's simultaneously increasing in value.
perhaps if the US keeps inflating the money supply to cancel out value of chinese bond purchases, then eventually perhaps the chinese will be earning -ve return and dissuaded from buying $'s in order to protect the Yuan, so if yuan appreciates, this will reduce the yuan trade deficit; another option is to better regulate finance in order to force contraction there, lowering income levels, and making production income more desireable. All options reduce western wage earning power
But at the same time the money they create to buy that oil to sell at $10 a gallon devalues your money thus you're not really saving any money.
@Eisen89 if Keynes is right, and spending is all that matters, where's the recovery? Are you aware that Keynes (and Krugman) actually stated that burying jars of cash in abandoned mines and letting people dig them up would be a worthwhile, productive boost to a slumping economy? Surely you don't agree that burying and digging up green pieces of paper could bring prosperity to society - the idea is nonsense on its face.
not only do Austrians understand interest rates, we have economic common sense.
Lol these guys were predicting that interest rates would be 10%, gold would be at $10,000 and that we would be in hyperinflation and a stock market crash. Instead, interest rates are at zero, gold is *less* than it was when this video was produced (especially after inflation) and we have had inflation in the stock market but not at the grocery store. Mises and Paul Murphy said that it would cost $500 to fill up a tank of gas after QE2. They also said that China would stop lending us money (MMT proves that China never lends us money and we issue our own currency and we can set rates at anything we want) and that QE is inflationary (it isn't, banks have a chequing and saving account at the fed and it just means the Fed buys bonds from the savings account and deposits cash in the chequing, and of course banks dont lend out the cash in the chequing because everyone is already loaded with debt and is not creditworthy so they hold it at the Fed as excess reserves). Austrian economics was brilliant from 2000-2008 but has been a joke post 2008.
and MMT is a permanent committment to boom bust cycles. which is fine if youre smart enough to invest in fund stocks that recover after every bust, but the vast majority of people in a economic bust are more worried about having jobs the next day. There are 140 million people in the private workforce, at the peak of the coronavirus bust, unemployment numbers were in the high 30 millions. meaning nearly 1/3rd of workers lost their jobs. MMT worked out great for all the people that overdosed, killed themselves, or suffered stress induced strokes or heart attacks.
@@immaculatesquid The founder of MMT, Warren Mosler, is against big government and says to eliminate taxes for many of the middle and lower income groups since taxes dont fund government spending. MMT is not left wing or right wing, you can cut taxes to nothing with MMT. But Austrian economics needs to update their theory, especially since it is overwhelmingly clear that taxes do not fund government spending and that governments spend money into existence by logging on to their computer screens and adding digits, and those digits do not come from China, taxpayers, etc. and that bond vigilantes dont send interest rates, the central bank does
I can’t help think that the OP won’t age well.
@@jakebullet1731 Ikr... Look at the economy now. One thing that Bob Smith forgot to take into account is the time delay it takes for inflation to effect everyday items like food and gas.
...value of the stocks do fall, but their dollar price doesn't have to if we get sufficient inflation.
Also, spending would decline, but only in real terms, not in dollar terms. Therefore things could stay roughly the same, but that on balance, the economy would be carrying a lower debt burden due to the printing, and so our debt levels would have fallen and equity levels risen. In essence this does mean that the homeowners and stock owners are getting somewhat bailed out...
You know that the oil prices are already screwed by OPEC countries wright ? And then they are again screwed by speculation etc ... so what is the real price of oil ?
@Nintendomanwill lol, true. I suppose our under-production probably really began around 1970's, where financialism began to dominate economic activity, which is why in a very direct sense the enormous boom has created the bust. I think basically stabilising the money supply would allow the bust to drag out over a longer timeperiod. I'm not sure the West is willing to compete with the Chinese on industrial production, their pay is too low for staff in the west to accept until our wealth
As for the US - ability to pay-back its debts...
The US private sector is much healthier than the japanese was, roughly 4.5x lower debt level. However the government finances are in far worse condition! The government is running deficits on not just a temporary, but a permanent basis just to meet its ordinary bills. This is no good and will cause a future crisis. The government must be able to deficit spend now, but run a surplus when the economy recovers. It is currently unable to do this...
Oh if this could end with a reaction of him getting a glimpse at 2020-22.
Right. The reason why entrepreneurs can't tell the difference between low interest rates by saving from that of inflation of the money supply. So you'd call it artificially-boosted demand then?
Brilliant!
@gergenheimer ... they only spend, and on top of that we have a process of unlimited money creation going on which is distorting market signals and causing recurring bubbles to occur, not to mention diversion of savings from productive into ponzi-style speculative activities which do not add to society as inflation continues to punish work and savings. I cannot believe the US/UK think we're in a problem of too little spending right when our problem is not enough savings & their productive use!!
This talk aged like fine wine....😒
Hilarious, because it's true. Nice job.
@chotaboy66
So you're telling me that Austrians, who criticize fractional-reserve banking more than any other school of thought, don't understand how money is created? Is this a sick joke? First of all most Austrians do NOT support the current system where banks create more money through loans. Robert Murphy himself wrote articles on this very subject not too long ago: Google "Is Our Money Based on Debt?" & "What Does “Debt-Based” Money Imply for Interest Payments?"
@underdg22 "started around the time the US severed all our ties to the gold standard." this is true, it is now a one-way expansion process which subsidizes the financial sector. Altho artificial boom & bust as per austrian credit cycle theory wud still initiate artificial stimulus and crunch even under a gold standard if banks are allowed to lend multiples of deposits, as under fractional reserve. So inflation & deflation wud still be occuring and distorting business signals.
perhaps this is one way we can avoid a long-lasting decline in purchasing power of wage levels whilst still increasing productivity - by having decentralised nationalised public services/ utilities with a competitive ethos. Imagine - you can have a company act as if private, but profits return to the public, us, via lower price of use, and they would be more democratic than private firms by virtue of being publicly held and decentralised. If they get uncompetitive, they can still lay ppl off.
I love Jim Cramer!
@jjrglobal I'm not sure what you could possibly be referring to when you state "just a statistical trick used by the left" - surely a statistic gives information, if it is inappropriate information to the question then it may mislead, but other than that I don't see how you can play tricks with the statistic. In this situation, since the income distribution curve is negatively skewed, median income happens to be a more appropriate measure of the average person than does the mean.
bob murphy is awesome
I think I'm starting to get it. So you're saying that in Keynesianism, there's no such thing as artificial demand since all spending is evidence of demand? And that, therefore, to put artificial in front of demand is nonsensical?
"Imagine the US gov creating half a trillion in six months."
*crowd laughs*
Me in 2023: 😤
You, like most Keynesians, have fallen for an age-old fallacy - you see the superficial phenomena of an economy and conclude that the spending of money is the engine of economic growth and prosperity, as if spending was nothing but a mechanical process. Money isn't a magic wand, it is merely a technology that facilitates indirect exchange - the creation of new money out of thin air may incite a flurry of activity, but does not increase the wealth of society in any real sense.
beautifully said
So you wouldn't call it demand at all then? The spending shifts the market settings (demand, supply, etc.) in certain sectors and it is then impossible to tell what demand is "natural" and what demand is "artificial"? I think I get it now. So you're saying by the fact that it is the government doing the spending, it can't be called demand (because by definition it is not).
@chelonia1663
The Constitution doesn't define the value of the dollar.
Are you talking about the proposals of Mises, Rothbard, Salerno or the free bankers? Not to mention the actual economists in the Austrian tradition rarely deal with whether money should be constitutional or not. And please do offer an example of how any of the Austrian proposals resemble the Fed.
Mr. Murphy is correct: the title IS presumptuous. Austrians are as confused as Keynesians about interest rates.
chotaboy66 "Commercial banks create checkbook money whenever they grant a loan, simply by adding new deposit dollars in accounts on their books in exchange for a borrowers IOU" -Federal Reserve Bank of New York, "I bet you thought" p.19
I suppose you can justify your contradictory claim by articulating what consideration of value a bank gives up of its own when a purported borrower walks into a bank signing & issuing a promissory obligation / note before the checkbook entry ? so the question is what consideration of value does the bank give up or even risk of its own either before or even after the book entry for that matter , that in turn, might otherwise justify interest or a loan?
Read between the lines?.
” What they do when they *banks/money changers* make alleged loans is to accept promissory notes or the “ alleged borrower’s ” promissory note in exchange for credits to the alleged borrower’s transaction account (s). Alleged loans / assets and deposits / liabilities both rise by the amount of the alleged loan. “
Modern Money Mechanics, A Workbook on Bank Reserves and Deposit Expansion, by the Federal Reserve Bank of Chicago ( see Page 6, Paragraph 6 )
One could argue however, the only consideration the bank risks is the mere cost of publication, which is the mere cost to publish a further representation, ( purposed misrepresentation/ bank money or credit ) , that nevertheless evidences the former issuance of one of our promissory obligations or notes, which would,then, amount to about $2 to publish $200,000 the obligor, or the alleged borrower creates by their signature issuing a promissory obligation, before the banks book entry , where they, the * banks, money changers * give up no consideration commensurable, or equal, to the debt they unjustly falsify to themselves , however the local bank uses the alleged borrowers credit worthiness or the only lawful consideration given up by the obligor, which is the alleged borrowers promissory note to , then, borrow money from a central bank who in turn then publishes a further representation, which is a purposed misrepresentation of the former contractual obligation, or misrepresentation of the obligors issuance of a promissory note so as to then allegedly loan a further representation or a misrepresentation , ( bank money , credit ) to the alleged borrower.
Keeping in mind the $2 the bank may or might give up is redeemed in a fraction of the first loan repayment by the alleged borrower.
The interest the central bank charges to the local bank ,( using the obligor’s or alleged borrowers consideration to publish the bank money ), is always lower than what the local bank charges on an alleged loan to the obligor, or alleged borrower, thus, the difference in interest rates is the local banks unearned profit , or unjust reward for stealing, & laundering circulation, ( principal & interest ), into the hands of the central banking system .
Concluding both the central bank, & the local banks are risk nothing of their own really , the local banks always use ” the alleged borrowers consideration or our promissory notes, promissory obligation ”. ( not their own consideration ) , to borrow money that we the people always create upon conception.
Therefore NO new money ever comes into existence, not until, one of us issues a promissory obligation/ NOTE first , thus the bank money, or ANY representation did not even exist, not until an alleged borrower walks into a bank , ( money laundering office ) ,& signs a promissory obligation FIRST.
So logically the first question you should be asking yourself is who then creates & gives value to money if its neither the publisher or bank? & secondly do banks even make loans? , when the purported loan is essentially a theft of what value we give up to each other in an exchange , "X2" often because of unjustifiable but unwarranted interest & lastly why would you or I not endeavor to rectify todays falsified debt into what a debt ought to rightfully be, rather than trying desperately , at no avail, attempting ,then, to preserve the very hand that steals from all of us?, which to the latter "Austrian economics" is attempting to do, bereft of any formal proof or qualification for that matter.
australia4mpe.wordpress.com/category/testimony-of-a-banker-about-a-foreclosure/
I mean I can walk anyone through the minefield of banking obfuscation without stepping on one mine, but most if not all you insist on stepping on mines regardless what I say or write , making most of you " still " your own worst enemy sadly.
Watching this in 2023 hits different😂
lol
Spent too long on oil and fed analogy. Hypothetical but Fed Reserve Act doesn’t allow for this. Much better way to explain this stuff perhaps he’s better now 10 years later.
Yeah, true. So you'd recognize it as demand, just that it is not demand from the consumers?
@Eisen89 I appreciate your comments, In my view the main issue with this recession is that it is not a business cycle downturn, but a balance sheet recession. Or in other words, not an issue of profitability, but of solvency due to excessive debt. Japan had the same issue but much worse in 1989. My concern is that if we reinflate using debt, the problem remains indefinately, so printing may be better, but that perpetuates moral hazard and punishes savers by transferring wealth to speculators.
they could rebuild their equity. now, once you've got "zombie" but highly successful +ve cashflow companies, they are deleveraging. This contracts the money supply, just as the great depression, which prevents them from being able to delever, forcing economic breakdown. Koo has charts and comparatives with the US great depression demonstrating that the market under these bizarre conditions would have led to a likely economic contraction of circa 75%...
@dfjpr Right but there hasn't been any deflation, its been a one way street of expansionary police with minor exceptions. Someone's needed to figure out what to do with all the new dollars being pumped into the system and that's whats been behind the massive growth in the financial services sector. Inflation expands that sector of the economy.
@Xasew Did I come up with a new definition of money? of course not all I'm saying you haven't a clue how money is really created by the borrowers promissory note (pre expansion) which is evident just by the absurd article you quoted , banks don't spend ALL interest they charge back into circulation , what they do spend doesn't even come close to what is charged on purported bank loans NO WHERE NEAR IT, how can interest be justified even if just one penny less is not spent back into circulation.
Ah yes, the time-honored Keynesian refrain - if a stimulus effort fails, it can't be because the thinking behind it was flawed, it's just that we didn't spend enough. Let me ask you this - if digging cash out of the ground so that it can be spent into the economy is beneficial, why even bother burying it? If the volume of spending is what matters, why not just print-up $1 million per citizen and hand it out? According to Keynesian thinking, this would bring prosperity, right?
@chelonia1663
Ok, decipher that post and I'll respond.
The first phrase is an especially good example of clarity, don't you think? What about the last one? Created in the beginning of what?
@dfjpr The expansion of finance that your talking about started around the time the US severed all our ties to the gold standard. Since then the dollar has lost a lot of value; with the Fed pumping money into banks, the financial service sector grows in order to figure out where to put all this new money.
@chotaboy66
First of all we understand perfectly how money is created and do NOT support the current system.
Second of all interest is justified by the fact that time preference exists. We value current satisfaction higher than the same amount of satisfaction later. If we did not then we'd never act. All action is performed to alleviate some felt uneasiness. If we did not have a positive time preference, we'd never act on anything; we'd endlessly postpone our actions.
Love Robert Murphy. He's entertaining and hilarious. Don't know about that guy who introduced him. Don't know who he is but something about him was irritating.
@Eisen89 "First, the recovery is coming along slowly." I don't believe that. I believe that the public is cutting back and govt spending is replacing it. We're playing a game of poker where the loser ends up in excess debt. To recover, the govt would have to step up and get into enough debt for everyone to get out of debt. Trouble is, that would leave us back were we started, in excess debt. Unless they print money, which is a default since we had expected the debts to be repaid, not printed.
has leaked away to them some more. Hence over time we ought to see commodity prices in a long-term bull market in $ prices, since the US will be able to consume less and less as proportion of total world output. Having said that, if we allowed the money supply to cave-in, the bust would happen all at once, and our workers would very quickly be competing with the Chinese workers for employment, so living standards in the West would collapse heavily, pretty controversial. U wanna earn $200/month?
... were dropped into -ve equity. Therefore the "zombie" banks were perfectly viable businesses, but were technically insolvent. In fact so many businesses were technically insolvent that their closure would have largely disintegrated their economy, and goodbye 2nd largest economy in the world. we could close them, but why bother closing otherwise extremely competitive and profitable businesses such as Sony, mitsubishi, honda, nissan, nomura, they all had +ve cash flow, and so given enough time
Austrians would allow different monies to compete, so anyone can try to create their own money if they so wish.
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The advocating of interest simply can never have a positive competitiveness because interest is deflationary,if they endorse the very banks that obfuscate currency before expansion then further endorse usury at any rate it can only be deflationary on any currency 3RD GRADE MATHS,to defeat circulatory inflation via national debt one has to eradicate the circulatory deflation first.
@Xasew
If you or your purported "Austrian economists" *ever* understood interest, they could have at least explained *at least once* how it is even possible to maintain a vital circulation without engendering the present failure. The reason they haven't is they are dead wrong. See even that Griffin has turned 180 degrees recently. As to your assertion, you are aware then that bom Baewerk claims only "religious sentimentality" opposes interest. Wheres the math?