Ludwig von Mayses (Ludwig von Mises) explained how a government credit expansion has led to an imbalance in the economy.
Ludwig Von Mayses experienced the neglect of economists around the world, as he warned the credit crisis in 1920. We ignore the great Austrians at your own risk and today.
Ideas Maysesa on business cycles were set out in volume in 1912 "Theorie des Geldes und der Umlaufsmittel" ( "Theory of Money and Credit"). Little interest in this work is not surprising, since it was published only in German and was not a direct guide to action.
Taking their cue from David Hume (David Hume) and David Ricardo (David Ricardo), Mayses explained how the banking system was given the opportunity to expand lending and, with it, expanding the money supply, as well as how these changes affect the government . Left on their own interest rates would adapt in a way that would be involved only the actual and the required number of credits. But when credit is imposed by force (call it the forced lending) - occur inherently absurd things.
Imposed by the Government of bank credit expansion distorts our "time preference", or our commitment to saving to consumption. Imposed by the Government, artificially low interest rates, demand from investors that led to increased borrowing and capital investment in excess of normal levels. This leads to a temporary increase in employment, wages and consumption.
Usually, any chance of an explosion in the lending sector rapidly absorbed by the system: errors in pricing adjusted immature investments are liquidated, a process similar to a pliable tree that gives the wind, and then returned to his former position. However, when the government keeps interest rates artificially low in order to cover all the higher capital investment, which otherwise may become very unstable, it creates the conditions for collapse. All seem wise for a while, but eventually, everything is collapsing under own weight through a reduction in lending, or, worse, the banking collapse.
The system greatly susceptible to error, both from the policy - and from the business. To expand the government takes credit system is quite capable of management and flexibility, and converts it into a system where there is a huge cyclical volatility.
"Theorie des Geldes" not become a textbook for politicians. 1920 remembered a bold new era of the Fed, which has encouraged an inflationary credit expansion and, with her permanent prosperity. Stop panicking, cheknutye Kraut! It is very sad that the poor Ludwig was almost alone in his views about the collapse, which comes after the credit expansion. In mid-1929's, he stubbornly declined an advantageous offer on the work of the Vienna bank Kreditanstalt, testily explaining his fiancee that "a great crisis is approaching, and I do not want my name in any way been connected with him."
We all know what happened after. Almost the entire scenario Maysesa was true: too dependent on debt financing banks have collapsed (including Kreditanstalt) business stopped, started in unemployment. Brittle wood broke. Following logigke Maysesa - a failure of capitalism or the price paid for arrogance?
Decision Maysesa logically follows from his warnings. You can not fix what is already broken, breaking it again. Must stop the forced lending. Stop pumping. Do not encourage consumption and promote saving and debt repayment. Allow organizations ruined bankrupt (without any electoral support). Distortions in the system, or other principles, because of which the system will inevitably collapse, should be removed, in which case all will grow higher and higher.
Mayses began to notice some respect for his work only after the "Theorie des Geldes" was published in English in 1934. It is unfortunate that it took for people to have experienced no effects from the economic misery in order to start listening to what had been the sole intellectual and scientific explanation of what is happening.
But then fate played a cruel joke Mayes, because at the same time in 1936 that was published by John Maynard Keynes (John Maynard Keynes) "General Theory of Employment, Interest and Money." Keynes was an energetic, fresh and modern. And he wrote in English! And this guy brazenly offered to combat unemployment by running the printing press and the depletion of state coffers.
He was against Mayes. No matter what Keynes lost his last shirt after the collapse of the stock market. His book was peppered with mathematical fantasies (even by Greek letters), and that meant the severity and modernity of his work. To add salt to the wound, or Keynes, or anyone else, not even denied Mayes. He simply ignored.
Fast forward 70 years, during which we have repeatedly experienced the disappointment of Keynesian, shows that at the end of the gold standard, it has led to sustained inflation with intermittent chrede inflationary recession and banking crisis that culminated in the work of Alan Greenspan (Alan Greenspan) "Great Moderation "(" The Great deterrence ") and the subsequent plunge in the housing and banking sectors. Where are we? At the point of in-depth analysis, based on economic logic, we go through trial and error, or are in the phase of the objective empiricism? Or again in the beginning of the road?
Interest rates are close to zero, monetary engines stalled, as never before, as a self-proclaimed Keynesian government, returning us to brave the era of prosperity and government-sponsored debt. And, more than ever, the system generates a highly uncertain, making the economic system, which could be sustainable - in the precarious its analogue.
It is interesting that the guy who wrote the screenplay, portrays our never ending story, where the government promotes the credit expansion, inflation and collapse, so hard is not taken into account. Should we again experience the consequences of this tragic history
Ludwig Von Mayses experienced the neglect of economists around the world, as he warned the credit crisis in 1920. We ignore the great Austrians at your own risk and today.
Ideas Maysesa on business cycles were set out in volume in 1912 "Theorie des Geldes und der Umlaufsmittel" ( "Theory of Money and Credit"). Little interest in this work is not surprising, since it was published only in German and was not a direct guide to action.
Taking their cue from David Hume (David Hume) and David Ricardo (David Ricardo), Mayses explained how the banking system was given the opportunity to expand lending and, with it, expanding the money supply, as well as how these changes affect the government . Left on their own interest rates would adapt in a way that would be involved only the actual and the required number of credits. But when credit is imposed by force (call it the forced lending) - occur inherently absurd things.
Imposed by the Government of bank credit expansion distorts our "time preference", or our commitment to saving to consumption. Imposed by the Government, artificially low interest rates, demand from investors that led to increased borrowing and capital investment in excess of normal levels. This leads to a temporary increase in employment, wages and consumption.
Usually, any chance of an explosion in the lending sector rapidly absorbed by the system: errors in pricing adjusted immature investments are liquidated, a process similar to a pliable tree that gives the wind, and then returned to his former position. However, when the government keeps interest rates artificially low in order to cover all the higher capital investment, which otherwise may become very unstable, it creates the conditions for collapse. All seem wise for a while, but eventually, everything is collapsing under own weight through a reduction in lending, or, worse, the banking collapse.
The system greatly susceptible to error, both from the policy - and from the business. To expand the government takes credit system is quite capable of management and flexibility, and converts it into a system where there is a huge cyclical volatility.
"Theorie des Geldes" not become a textbook for politicians. 1920 remembered a bold new era of the Fed, which has encouraged an inflationary credit expansion and, with her permanent prosperity. Stop panicking, cheknutye Kraut! It is very sad that the poor Ludwig was almost alone in his views about the collapse, which comes after the credit expansion. In mid-1929's, he stubbornly declined an advantageous offer on the work of the Vienna bank Kreditanstalt, testily explaining his fiancee that "a great crisis is approaching, and I do not want my name in any way been connected with him."
We all know what happened after. Almost the entire scenario Maysesa was true: too dependent on debt financing banks have collapsed (including Kreditanstalt) business stopped, started in unemployment. Brittle wood broke. Following logigke Maysesa - a failure of capitalism or the price paid for arrogance?
Decision Maysesa logically follows from his warnings. You can not fix what is already broken, breaking it again. Must stop the forced lending. Stop pumping. Do not encourage consumption and promote saving and debt repayment. Allow organizations ruined bankrupt (without any electoral support). Distortions in the system, or other principles, because of which the system will inevitably collapse, should be removed, in which case all will grow higher and higher.
Mayses began to notice some respect for his work only after the "Theorie des Geldes" was published in English in 1934. It is unfortunate that it took for people to have experienced no effects from the economic misery in order to start listening to what had been the sole intellectual and scientific explanation of what is happening.
But then fate played a cruel joke Mayes, because at the same time in 1936 that was published by John Maynard Keynes (John Maynard Keynes) "General Theory of Employment, Interest and Money." Keynes was an energetic, fresh and modern. And he wrote in English! And this guy brazenly offered to combat unemployment by running the printing press and the depletion of state coffers.
He was against Mayes. No matter what Keynes lost his last shirt after the collapse of the stock market. His book was peppered with mathematical fantasies (even by Greek letters), and that meant the severity and modernity of his work. To add salt to the wound, or Keynes, or anyone else, not even denied Mayes. He simply ignored.
Fast forward 70 years, during which we have repeatedly experienced the disappointment of Keynesian, shows that at the end of the gold standard, it has led to sustained inflation with intermittent chrede inflationary recession and banking crisis that culminated in the work of Alan Greenspan (Alan Greenspan) "Great Moderation "(" The Great deterrence ") and the subsequent plunge in the housing and banking sectors. Where are we? At the point of in-depth analysis, based on economic logic, we go through trial and error, or are in the phase of the objective empiricism? Or again in the beginning of the road?
Interest rates are close to zero, monetary engines stalled, as never before, as a self-proclaimed Keynesian government, returning us to brave the era of prosperity and government-sponsored debt. And, more than ever, the system generates a highly uncertain, making the economic system, which could be sustainable - in the precarious its analogue.
It is interesting that the guy who wrote the screenplay, portrays our never ending story, where the government promotes the credit expansion, inflation and collapse, so hard is not taken into account. Should we again experience the consequences of this tragic history
From Mr. Spitznagel founder and chief investment officer at hedge fund Universa Investments LP, the Santa Monica unit. California
The Man Who Predicted the Depression, The Wall Street Journal
November 6
The Man Who Predicted the Depression, The Wall Street Journal
November 6
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