The Business Cycle

[thespacialone]

I understood the only effective restriction as to what might be construed "legal" tender was the exclusive relationship the Federal Reserve credit system had with Washington. Is this not so?

The Fed has an effective "monopoly" on means of exchange because their means is the only one the federal government will recognise for payment of its taxes. But it's only an apparent monopoly (based on a real cartel arrangement), not a real one, as explained by Bill Still in The Money Masters.

[rubywardle]

Interesting post. I have made a twitter post about this.

[jenminnis968]

this video inspires me! thanks for the awesome video. I really appreciate it :)

[ginettezortman]

i love to start a business like this one.

[jeanneknight1]

cool videos. indeed, cool and clean.

[heavens2kadonka]

Absolutely love your ending statement: a "mixed economy" is little more than Munchausen Syndrome by Proxy.

[apowers7]

no because if you print more money the value of currency goes down. Its called devaluing. I think it is the other way around banks raise or lower interest rates to encourage lending or savings.

[robbieYAHU]

thanx for making time to post a very informative yet simple and understandable vid.

i luv the truth...it sets you free....yet most people hate the truth......we must all become lovers of the truth.

i also loved the last remark about gov. being like that BAD mother...keep up the good informing clips. peace4peace

[BlackFlame281]

Why is it that when the FED lowers interest rates, all business don't over accumulate. instead, you have only homes or internet companies over investing in capital. Could anyone help me with this?

[fringeelements]

@BlackFlame281

Booms take certain shapes. Lets say the money supply is expanded AND the internet is genuinely profitable. What will happen is people will associate the general boom with technology because the funny-money is going where it can get the most profit. People will then overinvest in tech.

So yes, the recession is general - the DOW fell when the NASDAQ fell, but it is more pronounced in the sections which are genuinely booming b/c of mass psychology.

[Shadyhunter04]

For anyone wanting something more technical and detailed than fringelelement's example I suggest you look at the following video: watch?v=zhoFOyy7rbo

Roger W. Garrison makes a great visual representation unifying how savings and investments work in growing an economy, and how artificial monetary injections work in distorting that and causing business cycles.

[darklord220]

Is there a text version of this I can send to my friends?

[algman]

the last analogy used in this video was well played sir. kudos.

re: poisoning the economy then regulating it.

[JP2times2007]

Isn't the argument in your video here a strawman argument? logically it seems to make sense but it still remains an abstraction. I think if you gave a real example it might help your argument. I mean anyone can prove something with imaginary production scenarios, savings and interest rates, And abstract theory is necessary for theory building but it remains simply abstract if you don't bring it down to a concrete level with real scenarios. I think it would help your video

[stealthswimmer]

there are plenty of real examples. This is a simplification to show how business cycles work. For a detailed description you can watch "Austrian Theory of the Trade Cycle" on Youtube. As for the examples themselves - stock market bubble, housing bubble, the "roaring 20s" leading to the Great Depression

[JP2times2007]

@stealthswimmer is the point then of activist monetary policy on behalf of states even under the gold/commodity standard that cause a business cycle? moreover, is the claim that under a free market situation bereft of state intervention void of business cycles?

P.S. I am not trying to be a dick or sarcastic I just want to know the idea here. I am trying to get a better grasp of the Austrian view of states and markets.

[MillionthUsername]

@JP2times2007

It's fractional reserve banking (FRB) which causes the business cycle we all know.

Since you can have FRB in a free market, you could still have cycles, but there are better checks on the practice. It is likely that FRB would have failed completely without the state since its banks are always technically insolvent.

But speculation frenzy could also cause a localized cycle, not the big credit cycles modern central banks and states create.

[JP2times2007]

What are your thought of the pre-fed days specifically the 1873-1893 downturn not caused by inflated credit markets but competition among fixed productive capital? It seems that competition in many industries (railroads) involved big fixed investments with long turnover times. Bc costs couldn't be recouped before a new competitor/technique/capital stock entered the market there was huge price deflation and crisis. The bus cycle is caused by overaccumulation rather than govt provoked specualtion.

[fringeelements]

During those years prices fell, production rose, and the US shifted from agriculture to manufacturing. Idiot economists call this period a depression b/c they think falling prices are always bad. They tried to say the US was in depression following WW1 and WW2, but that was too obviously false. 1873 - 1893 however is unmemorable enough that they can say it was.

In 1873 there was a panic caused by fractional reserve banking. This is explained just fine by the theory put forward in this video.

[fringeelements]

And stop repeating cartelist propaganda. The railroads hated the easy entry into the railroad industry because new firms kept breaking up their attempts to cartelize. They made up some BS "long-term uncertainty" arguments, bribed a few congressmen and got land grants - which were localized monopolies. They couldn't cartelize on a free market, they had to buy off the state. This is basic rent-seeking.

[JP2times2007]

@fringeelements I agree with the cartelization part, capitalists have the tendency to cartelize and buy off hte state to protect their interest. I think you are dismissing the the disastrous effects of competition in large fixed capital industries. Railroad economists weren't decrying lowered prices, but the low levels of investement related to declining profit rates and return on fixed capital; unemployment from cost-cutting. Check out Perelman The end of Economics ch 3 on this Its a good read

[MillionthUsername]

@JP2times2007

The pre-fed days still had FRB causing credit expansion booms, leading to malinvestment, and then crashing when credit dried up.

Whenever FRB banks became insolvent, the gov't stepped in to help their favorites (bailout) and kept the system going as they proceeded to centralize banking more and more by making them buy gov't bonds for reserves and creating a pyramidal structure.

Lincoln got it rolling, and it accelerated to the point where the Fed took over in 1914..

[Surhotchaperchlorome]

To add to the point at the end, the State then puts the blame on its favorite whipping boys: businesses, business people, and speculators.

[Weaselheadx]

@fringeelements I totally agree. Unfortunately, a lot of people buy into the guy.

[Satanicallyfree]

God I love your videos when I'm high man. Make so much sense. People are so disillusioned and stupid.

[Weaselheadx]

I've pointed the same thing out over and over again, and I get responses like"well Krugman says this and he won the Nobel Economics Prize...blah blah blah" Appeals to expertise instead of actual arguments. It annoys the shit outta me.

[fringeelements]

Krugman's not an expert. His predictions are worse than that of a completely uneducated average person. He is anti-educated, he is worse than worthless.

[Igentenos]

oh..i think ive got it

[sniffsnarff]

This is a good analogy. I think I heard it first from Peter Schiff..but anyways, it's strait up Austrian..which is to say, "this is reality -- the markets actually do work like this"..and so, I dig it.

[ElGeecho]

One of the better explanations of the business cycle I have encountered..

[theneedledrop]

Glad you're uploading the old vids again, Ryan.

[cataclysmiceclipse]

Toaster strudle!!!

[ASubHumanOfSociety]

Thanks for putting it back up.

[GuardofLiberty]

Great, you put it back up. Yet unfortunately millions of people still don't get this.

[junior00bacon00chee]

hahaha i cracked up on this one...."this government program goes against the morality of....a dream i had last night."

this is the type of precision and clarity that chops nonsense into pieces. this is just good wholesome common sense, straight from the ant and the grasshopper.

if you don't fucking have savings you cannot have production! deliberately overstating savings cannot magically create sustainable production, but only distort the allocation of the existing savings!!!

[Stargazer5781]

That's not what causes the business cycle! It's because of fluctuations in aggregate demand! Nuh uh, it's because of changes in technology! Nuh uh, it's because of lack of supply! Nuh uh, it's because of changing economic policies in the government! Nuh uh, it's because of a failure of the market to accurately represent the labor theory of value! Nuh uh, GOD DOES IT!

I'll never understand how mainstream economists can believe so much BS when the Austrian theory is so elegant :-)

[fireman12888]

@Stargazer5781 lulz the economy when up some points b/c I bashed all my windows.

[PanzerDivisionBOM]

@Stargazer5781

My personal favorite would be the one offered by Keynes: animal spirits!

It's like economics meets voodoo meets Bob Barker. :P

[Shadyhunter04]

@Stargazer5781 It's wall street greed, immigrants, China, and free trade! They're Took' Our Jowrbs!

/s

[thespacialone]

@Stargazer5781 Absurd as it sounds, under the Keynsian paradigm doesn't it fundamentally come down to the "animal spirits" of entrepeneurs?

[Stargazer5781]

@thespacialone Obviously you can't divorce human behavior from their psychologies, but the question is - why do all these entrepreneurs start doing the same thing at the same time? The reason is because of price signals brought about by an over-expansion of credit.

[hellavadeal]

Down with the fed.

[bwelkk]

We are children in a world where every adult has Munchausen syndrome. The solution is to grow the fuck up, move out and take care of ourselves.

[Safnerism]

Fantastic clear and concise vid on the ABCT.

[thebeartaxes]

This video goes against the morality of the dream i had last night.

[chris3443]

@thebeartaxes lmao

[VALsacount2]

Our economy is poisonous!

[abortabraham]

Paul Krugman responds: I'm 12 years old and what is this?

[swinewarrior]

like you think everybody is fuckin thick

[flynn2008]

Mises and Hayek for the win.

[qtronman]

You're an empiricist.

[spawktalk]

@qtronman The austrians use a praxeology ... a priori methodological individualism

[comradepinko]

Legal tender laws just cover payment on debts, so if you own a shop you can actually refuse to take dollars if you want to barter instead.

You can't however sell something on credit and then refuse dollars, since this is payment on a debt.

[darklord220]

FEAR THE BOOM AND BUST!!!! FEAR IT!!!!

nice vid ryan

[qtronman]

Haha, I like your videos where you're explaining stuff.

[enotdetcelfer]

NARF