So can somone give me the Austrian explination of what would have happened about this time last year if we hadn't bailed out the big corporations? What would have prevented this "Domino effect" where because these banks and other companies fell apart, company after company began to fail.
I understand the basic concept of the buisness cycle but with the breaking of the bubble (which I understand was caused by the fed) then what would have stopped the entire system breaking down. Even if the market began to fix itself what would have helped to revive confidence?
What's so bad about companies failing if their assets aren't worth anything?
The Late Andrew Ryan:What would have prevented this "Domino effect" where because these banks and other companies fell apart, company after company began to fail.
Nothing. If it was necessary, then it would happen. And other companies with healthy balance sheets, better management and a track record of better decision making, would have bought up the bad assets/companies and carried on serving the market.
The Late Andrew Ryan:I understand the basic concept of the buisness cycle but with the breaking of the bubble (which I understand was caused by the fed) then what would have stopped the entire system breaking down.
The only reason why the entire system would break down, is it if was completely rotten to the core. But it wasn't. There were a lot of mistakes, but they could have been purged and corrected in a couple years IMO.
The Late Andrew Ryan:Even if the market began to fix itself what would have helped to revive confidence?
Confidence could have been improved by getting rid of bad entities, instead of propping them up in perpetuity. Is anyone any more confident in the economy today than they were 18 months ago?
Late Andrew Ryan: What would have prevented this "Domino effect" where because these banks and other companies fell apart, company after company began to fail.
liberty student: The Late Andrew Ryan:What would have prevented this "Domino effect" where because these banks and other companies fell apart, company after company began to fail. Nothing. If it was necessary, then it would happen. And other companies with healthy balance sheets, better management and a track record of better decision making, would have bought up the bad assets/companies and carried on serving the market. The Late Andrew Ryan:I understand the basic concept of the buisness cycle but with the breaking of the bubble (which I understand was caused by the fed) then what would have stopped the entire system breaking down. The only reason why the entire system would break down, is it if was completely rotten to the core. But it wasn't. There were a lot of mistakes, but they could have been purged and corrected in a couple years IMO. The Late Andrew Ryan:Even if the market began to fix itself what would have helped to revive confidence? Confidence could have been improved by getting rid of bad entities, instead of propping them up in perpetuity. Is anyone any more confident in the economy today than they were 18 months ago?
>with the breaking of the bubble (which I understand was caused by the fed) then what would have stopped the entire system breaking down
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
- Ludwig von Mises
The Late Andrew Ryan:.... Everyone who doesn't understand free market economics or isn't actually in the market.... Or likes what obama has done. So if the bailouts hadn't taken place then all the big banks would have been bought up and would be running in a few months and we'd be in super happy fun time again? Rather than the great depression Mk2 like the main stream says?
.... Everyone who doesn't understand free market economics or isn't actually in the market.... Or likes what obama has done. So if the bailouts hadn't taken place then all the big banks would have been bought up and would be running in a few months and we'd be in super happy fun time again? Rather than the great depression Mk2 like the main stream says?
Oh, you haven't heard? The government decreed that the recession is over!
In all seriousness: yes, it would've been rough. I don't think anyone here is trying to deny that. But it would only be rough for bad businesses and those who have a vested interest in them, and the rough patch would've passed much more quickly. As it is now, our economy really cannot truly recover because all of the players (corporations, politicians, and economists) that caused the problem to begin with are still around.
Life and reality are neither logical nor illogical; they are simply given. But logic is the only tool available to man for the comprehension of both.—Ludwig von Mises
Life and reality are neither logical nor illogical; they are simply given. But logic is the only tool available to man for the comprehension of both.
The Late Andrew Ryan: So can somone give me the Austrian explination of what would have happened about this time last year if we hadn't bailed out the big corporations? What would have prevented this "Domino effect" where because these banks and other companies fell apart, company after company began to fail. I understand the basic concept of the buisness cycle but with the breaking of the bubble (which I understand was caused by the fed) then what would have stopped the entire system breaking down. Even if the market began to fix itself what would have helped to revive confidence?
Basically, assets will be re-priced according to the new market conditions. Bad over-priced assets will be sold dirt cheap to new owners because they are no longer in demand. The market will weed out loss makers. That's about it.
The Late Andrew Ryan: Even if the market began to fix itself what would have helped to revive confidence?
Even if the market began to fix itself what would have helped to revive confidence?
People have nicely addressed every point but this one detail about confidence.
Confidence in what? In the banks? Well, let's figure this out slowly. A bank gets 10 dollars from me. It promises to return it to me instrantly the moment I ask for it. It then lends 9 of those dollars for two years to somebody else, still promising to give me those 9 dollars it doesnt have [and wont have for another two years], instantly when I ask for it.
So it's a bad thing that I find something fishy about this? I'm supposed to be confident that the bank will give me my 9 dollars that it doesnt have? If people lost confidence in the banking system that would be a huge step forward for mankind.
As for the gov's FDIC "insuring" my 9 dollars if the bank doesnt have it, there is a huge catch to that. Where will the gov get the 9 dollars to give me?The FDIC certainly does not have money put aside in a vault equal to all the money it insured, just in case people need it. In fact they have a drop in the bucket saved up just for show. If the s. hits the fan they will give everyone their money, by printing new money. Which means mass inflation. So I'll get my 10 dollars back in shiny new bills. And can buy one shiny new piece of bubble gum with it.
So what it boils down to is that losing confidence nowadays means fear of hyperinflation. Which is exactly what we should be having, this fear, because banks or no banks, Obama's trillion dollar deficits will cause it.
Thanks to the Mises' Fed video and Peter Schiff's YouTube videos for explaining this to me.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer