The Austrian Business Cycle Theory states that entrepreneurs are not able to distinguish between money that comes from genuine savings and money created through credit expansion by the Fed. But surely the Fed keeps track of how much money they loan into existence.. If entrepreneurs know this, shouldn't they be able to adjust the interest rate appropriately and not be fooled into malinvestments?
I know there are holes in this argument, but I'm having trouble putting together a cohesive counter-argument in my head..
CaptainMurphy:If entrepreneurs know this, shouldn't they be able to adjust the interest rate appropriately and not be fooled into malinvestments?
Smiling Dave:OK I found this: http://mises.org/Community/forums/p/15660/321482.aspx Caplan asks your q, I think. Scroll down to New Libertys post of refuting links.
cret:does the easy dollar come from a federal reserve purchase of a bank asset....a purchase made with dollars created from fed governor discretion and nothing more??? is it this process that lets the entrepreneur get a cargo van at 0 percent interest instead of 12 percent interest???
Z, "cret" was previously known as SThomper and Caravel (previously banned). What you're attempting to point out to him has been attempted many times before.
"The market is a process." - Ludwig von Mises, as related by Israel Kirzner. "Capital formation is a beautiful thing" - Chloe732.
chloe732:Z, "cret" was previously known as SThomper and Caravel (previously banned). What you're attempting to point out to him has been attempted many times before.
CaptainMurphy:Do you think if more investors were familiar with the ABCT, we would be able to lessen the severity of the recessions?
I came across this: http://mises.org/journals/aen/aen19_3_1.asp
Here's the relevant quote:
SHOSTAK: Writing in Economica in 1943, Lachmann criticized Mises's theory of the business cycle on grounds that expectations could prevent it from taking place. The idea is that businesses expect the bust and refrain from investment expansion, thereby muting the impact of new money coming into the economy. Hence, the business cycle is recast as an information- coordination problem rather than a theory about cause and effect.
The incorrect assumption here is that bad expectations are somehow the cause of the business cycle. The actual cause is the introduction of counterfeit money, which redistributes wealth and leads businesses to make calculation errors. You can have any kind of expectations you want but they will not and cannot obviate past events. This new money is an economic error which must work itself through the economy in some way.
You cannot use psychology to explain the consequence of real events. What people believe about the future cannot change the reality of cause and effect. The business cycle is a consequence of a real act of damage that, once set in motion, cannot be undone. Guido H�lsmann prefers to recast the business cycle theory into a general theory of error cycles, which gets to the core of the issue at hand: government intervention leading to bad decisions.
Wish I could ask him more about this. Like, whats the difference between "information-coordination" and "bad decisions" and "calculation errors".
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
."" Just go for it, real capital/savings be damned!". The price of this false signal gets paid during the inevitable bust when the value of the capital, time, and labor invested into the idea go "puff!" into thin air.""""
why would it necessarily be a false signal??? would an entrepreneur not do some research???
would a lender not do some research before lending out fed created dollars? couldnt valid investmetns be funded this way as well???
. It's your own responsibility to discern the truth for yourself. No one else can tell you what is true and what isn't............
i would also say its a responsibility of those who have a solid notion of the truth to not lie about it.
i thought these forums were for distributing and querying.
i beleive some of the posters her eto have econo9mics degrees and versed in teh field. if not, then my malcalulation. if i get a response to a question asking iof somethign is true i then try to confirm it with other sources. much of the federal reserve webpages i do not understand.