... then won't a recession result when private agents increase the money supply, too?
Say there's a gold standard in place; gold is money, and the supply of gold is the money supply. If there's random year to year fluctuations in gold production, or superior capitalist production allows an ever increasing production of gold, then won't the money supply expand eventually, lowering interest rates and so forth?
But it won't cause a recession, right, because it's "good money" when private banks issue it and "bad money" when the federal reserve issues it?
"countries like Chile, Sweden, Canada, and Australia each suffered through business cycles in the 1870s and 1880s despite having much less "distortionary" government intervention and such than we do today."
If only... if only you have read the papers indicated above...
You have to look at page 44 for a comparison with Bismans and Mougeot work. And the work of Larry Sechrest "Evidence Regarding the Structure of Production" is also worth telling, see Table 1 through Table 10.
Look, I'm not saying there's zero link between interest rates and credit booms. Raising interest rates will slow credit growth. It's a very crude tool to do this and will have other effects on the economy too, not all of them good, but it will work if that's your only objective.
I'm just saying that there are other things going on. Even freezing the monetary base and 100% reserve requirements wouldn't, by itself, get rid of credit growth.
According to Bordo, there's a -0.24 relationship between short term interest rates (I thought underpricing of long term interest rates was supposed to be the main factor, but whatever) and credit growth. This is the R value. The R squared value, the fraction of variance in the dependent variable (credit growth) explained by variance in the independent variable (interest rates), is the square of that. Which means that a whopping 6% of credit growth variance is explained by changes in short term interest rates (and presumably, by extension, central bank policy).
And with a sum of the credit growth-to-crisis lag coefficients equal to 0.5, the explained variance is 25%. So we're talking about 6% * 25% = less than 2% of financial crisis probability being explained by variance in interest rates (if monetary expansion-to-interest rates-to-credit growth-to-crisis is the only line of causality we're looking at).
And it's not like higher interest rates are costless, there are other objectives like reducing unemployment that central banks care about besides reducing the probability of financial crisis by one or two percent.
"If it were not for the elasticity of bank credit, which has often been regarded as such a good thing, the boom in security values could not last for any length of time. In the absence of inflationary credit the funds available for lending to the public for security purchases would soon be exhausted." Isn't the private sector able to produce inflationary credit too, though? Aren't financial derivatives and so forth (which played a much greater role in the crisis than any monetary base transactions) some type of inflationary credit in your book? | Post Points: 5
I should also note that the only way to completely get rid of credit growth would be to outlaw credit growth through far reaching financial regulations to eliminate all fractional reserve banking and paper currency, abolition of public property in land and application of all rents of land to private purposes, equal liability of all to work, and abolition of all forms of interest and credit.
"Even freezing the monetary base and 100% reserve requirements wouldn't, by itself, get rid of credit growth."
"According to Bordo, there's a -0.24 relationship between short term interest rates ... and credit growth."
"This is the R value."
"Aren't financial derivatives and so forth (which played a much greater role in the crisis than any monetary base transactions) some type of inflationary credit in your book?"
"I should also note that the only way to completely get rid of credit growth would be to outlaw credit growth through far reaching financial regulations to eliminate all fractional reserve banking and paper currency, abolition of public property in land and application of all rents of land to private purposes, equal liability of all to work, and abolition of all forms of interest and credit."
Ban-Evader:You're not presenting an argument. Nothing in those papers denies the fact that the two somewhat industrialized countries that tried free banking (Sweden and Australia) didn't magically stop having a business cycle, or even suggests that introduction of countercyclical policy didn't stabilize them.
What kind of "free banking" are we talking about here? Fractional-reserve or full-reserve? I highly suspect the former. This has been brought up before, so why are you ignoring it? I can only imagine it's because you're being intellectually dishonest and therefore trolling.
The keyboard is mightier than the gun.
Non parit potestas ipsius auctoritatem.
Voluntaryism Forum
Rodolphe Toppfer:"I should also note that the only way to completely get rid of credit growth would be to outlaw credit growth through far reaching financial regulations to eliminate all fractional reserve banking and paper currency, abolition of public property in land and application of all rents of land to private purposes, equal liability of all to work, and abolition of all forms of interest and credit." You have to prove it.
You have to prove it.
I second this demand.
I highly suspect the former. This has been brought up before, so why are you ignoring it?
Yep, because we were talking about empirical evidence and there isn't any real evidence for the latter.
Not without inflationary credit.
They are inflationary credit. A derivative isn't backed by anything besides an asset (like a house) or another financial security. You never said you were going to regulate mortgage backed securities so banks can't pile derivative upon derivative over fixed assets like they do all the time. They don't need deposits. Investment banks don't even generally hold deposits.
Can't you at least be a Ron Paul and say you oppose all financial regulations except Glass Steagall?
Ban-Evader, you know as well as I do that this entire discussion (such as it's been) has been theory-laden. So this is just more intellectual dishonesty on your part. Try again.
No it hasn't. It's been pages and pages of the "logic" of Austrian "economics" being twisted into novel geometric kaleidopretzelplexes and you've apparently only been skimming the parts around where you've hopped in and out of the thread. But there have also been certain posters who have substituted indiscriminate linkposting for argument, and some of them even made an attempt at empirical evidence.
Ban-Evader:No it hasn't.
Yes it has. Your OP itself is theory-laden.
Ban-Evader:It's been pages and pages of the "logic" of Austrian "economics" being twisted into novel geometric kaleidopretzelplexes and you've apparently only been skimming the parts around where you've hopped in and out of the thread.
Thanks for proving my point.
Be mad all you want - I couldn't care less.
What's your point? That my point is wrong, presumably?
My point is that this whole discussion has been value-laden. But you knew that already. I suggest you quit playing around.
I value helping people and creating and protecting jobs, you value defending the right of bankers to fuck the economy at all costs.
... And that refutes my point how?
See, this is what I mean. You're not interested in serious, rational discussion. You just want us to help you pat yourself on the back over your alleged moral superiority. FYI, I consider you to be morally bankrupt.