‪"The Cluster of Errors" - The Austrian Theory of Boom and Bust (Part III of III)‬

[ibringthereals]

the circular reasoning is circular

[maridejun]

@ibringthereals you fail at bringing an argument to bear on a point.

[ibringthereals]

@maridejun I don't accept your conclusion because it's unsupported by a meaningful relationship with reality. You're not talking to children or naive students, Jackass.

[ibringthereals]

For all their talk about Start Ups, how many of these Hayek groupies have started a business, or even attempted to start one to know what these "Job Creators" actually know?

How many take free American infrastructure for granted, and all the things businesses use but would rather pay for, or build, produce or supply because the margins are too low to justify their effort?

The rap stuff is distracting.

And you used an interracial couple to show "make things worse"? deerpty deerps

[CLeach13]

@ibringthereals I would love to start my own bussiness, problem is because of governemt regulation it is far to expensive for majority of americans to get off the ground with their bussinesses, one of the reasons why our jobs are being sent over seas as well. Most people i know who have started their own bussinesses had to go over seas to do so. The only states that dont have infastructure problems are those that handle them, themselves, without federal intervention.

[spark300c]

Market manipulation which includes sudden retraction of the supply money for gain of the bankers. 1920 the bankers lean like crazy and plan a day they would recalled the loans that day was . plus the saving rate is over looked. plus the boom mind set where people were not looking were the demand was coming form just the price. the deficit reserve ratio requirement from the world for all banks in the 1980 was change from 10 to 1 to 8. loanable funds run out in 2008.

[Motive11331]

Unrestrained panic seems to be the human thing to do. If the market starts to fall, everyone goes ballistic and sells, and the economy drops off even faster.

Our economy is a blazing pile of cash. The govt's response is to pour money onto it. They'll get lucky. Maybe they throw so much money onto the pile that it covers the flames like a blanket and puts them out. But then, the bottom of the pile is still smoldering, preparing to do even more damage when it inevitably goes up again.

[regelemihai]

I still don't get it. What's the difference between "real savings", and the money that the Fed injects into the banks? Aren't both savings and liquidity provided by the central bank just money available for investment? The bank simply lends money; whether that money comes from the Fed or from the savings that exist in the banks is irrelevant.

[aivanther]

@regelemihai Except when the Fed injects money, it's creating more. It's not adding goods or services, just cash. More cash means inflation, and consumer prices ends up rising.

[regelemihai]

Yes but, I'm talking about what constitutes "real savings." If the amount of savings that existed in the banks (not artificially printed money by the FED) was very large--just as it is now with the money printed by the Fed--then the result would be the same. Money is money; it doesn't matter if comes from people or the Fed. That's what I wanted to communicate.

[ibringthereals]

@aivanther -- inflation, in a world where the elephant is labor, in places like China, where they pay employees 106 dollars per month?

These Hayek groupies just don't account for all the facts or factors. It's a obstructed point of view they're sell, bad, corny rap or no rap.

[CLeach13]

@ibringthereals while keysians think if you spen more money less effectively then prosperity emerges. China is following the us down that road, just look at the real estate boom bust cycle china is going through, they have whole cities deserted because of over construction. Its sad when a rap video is more informative than a economics text book :(

[djb5255]

The worst part for banks here is that they literally have no way to remain competitive by practicing sound business.

[ecnerwal999]

LIBERTARIANMONARCHY . COM

[sfjeff1089]

Aptly named video! Unless he meant someone else's errors...

First problem is assuming the conclusion in the question. "How long have you been beating your wife?" The question is not why there is a business cycle, but whether the business cycle got worse since the fed was created. Actually the business cycle was much worse before the fed was created than after. So his question, why is the business so bad since the fed was created is just plain ludicrous.

[spark300c]

@sfjeff1089 reason being they have let people forget about the great depression before they try ticks again. the other bust were bad not as bad plus the generation that live through the great depression save a lot more which act buffer for shocks.

[HandyMan101]

When I see Ben's face, I just want to kill him.

[axe863]

ITS A TRAP 1:13 

[axe863]

Once one accepts the potential for strategic based inefficiencies, one cannot artificially limit it to Fed actions in an interdependent system

[HeilLoki]

I'm from Austria and i can tell you... well, our politicians dont even talk about austrian economy... they are 100 % Keynesians... and i hate it.

[axe863]

@HeilLoki Why do Austrians appear to have,on average, the biggest egos? Ive been to Europe seven times and no country's average level of ego seems ( I have a limited sample size and there is a subjectivity of memory) to compare. Im not trying to push down your country

[HeilLoki]

@axe863 What you mean exactly? Do you mean, that they have big egos about themselves personally or that they are very proud of their country? I read a study, that says, that we're prouder of our country than most (not all of them) of the other europeans countries, but we're miles away from the US-level. ;) I never heard, that we ourselves have big egos. I cant confirm that. 7 trips to europe for some weeks, just isnt enough time for this big variety of cultures - a small sample size indeed. ;)

[axe863]

@HeilLoki Well, America is number 1 in a lot of things ;) lol :P.... I was talking about self driven ego. Austrians sort of remind me of individuals from Connecticut.

[HeilLoki]

@axe863 Interesting to hear that. I really never heard or read that. Many austrians use to think that about germans... but that is explainable with our history. We've got some kind of inferiority complex to our "big brother" germany. Never calls us "germans", because we hate to hear that. In fact we are ethnical germans, just dont tell us about it. ;)

[HeilLoki]

@axe863 Fun fact about austrias history: Austrias Leader (Kurt Schuschnigg) said just days before Hitler annexed Austria to Greater Germany: "We are the better germans!" That was his main point why he didnt want us to be a part of Germany. That's so funny! Maybe that explains why some of us seem to have a big ego. ;)

[axe863]

@HeilLoki Lol maybe its in my blood :P I am Hungarian and we were the inferiors in the Austro-Hungarian empire..

[HeilLoki]

@axe863 If we would ever try to go back to monarchy or if we would try to rule some other country, i would become a rebel immediatly! Watch the movie "V for Vendetta" and you know, what i would do!

The Habsburgs were from Switzerland - blame the swiss! LOL

I was in hungary last year and i was amazed! I really liked it. I didnt stay long there, but hungarians are really nice people... especially female hungarians... ;)

[axe863]

@HeilLoki The Austrian Imperialist trying to get with my Hungarian women...How dare you !!!! LOL :P

[axe863]

@HeilLoki "I was in hungary last year and i was amazed! " Why did you have such low expectations? :P Im just messing you. This really ballooned out from a simple question :P

[HeilLoki]

@axe863 Well, only 20 years after the fall of the "Iron Curtain" they really made a great country. I indeed didnt expect that. They also have Texacos. We dont have them here in Austria. It's open 24/7... that would be impossible in Austria! I was amazed about that country and how they know, what freedom and capitalism is all about, but we still are stuck with ridiculous socialist ideas... ;) Well, it keeps up ballooning... LOL

[HeilLoki]

@axe863 Second fun fact: People in Salzburg think that people in Vienna are arrogant. People in Vienna think that people in Salzburg are arrogant.

[axe863]

@HeilLoki I admit that I only have a limited sample and I may have become hyper-sensitive to arrogance (filter out all non-arrogance and exaggerate arrogance because of prior idiosyncratic events that have biased me).

[charonme]

Why are the entrepreneurs fooled? It's a prisoner's dilemma. If no businesses would respond to the fake interest rates, everybody would be better off. But if some of them give in, they would make a lot of money at the expense of the others while the boom lasts. So exactly according to the prisoner scenario, everybody does the wrong thing.

[TheGrindsprint]

@charonme I have been thinking along those lines to. I wonder if it still could be that we are slowly learning to respond more and more rationally in the back of our collective mind. Game theory in economics is very interesting!

[charonme]

@TheGrindsprint true, however while the elites are allowed to manipulate the currency, the response of entrepreneurs IS rational in the context of the situation, it's not an "error" or "being fooled". 

[TheGrindsprint]

@charonme yeah, but they are being lead to behave in a certain way. it´s not that far from being fooled. What I meant was that maybe we can "learn" to respond slower and more moderately to artificial market effects. sort of adapt to a situation were we are being controled when we don´t want to be, so we learn to be imune to the means of control. sorry for the weird wording :S

[windham666]

could someone give me a link to this video without the bullshit rap? it was so distracting, ruined the vid. thx.

[NotRadicalLogical]

I'm no expert on this but it seems pretty obvious to me when you understand what interest rates represent, a low interest does not equal a bust when there is actual savings to back it up. If there's no money in the bank rates should be high, credit would be harder to get since there's less money, the interest rate would represent that- in the market that would happen naturally, in order for the fed to set rates it has to know how much money each bank has and act responsible.

[metzger90]

@NotRadicalLogical Yeah that is all well and good, but the fact is that the Fed is a cartel of central planning for the financial industries, and subsequently every other industry. They are in bed with the businesses that they see as "to big to fail." I wish we could move away from the Federal Reserve and people could see that it is only an instrument of legal counterfeiting used by the US government to add another tax on us.

[Darthwannabe]

@NotRadicalLogical but the fed doesn't act responsibly...

[NotRadicalLogical]

@Darthwannabe I totally agree, i just said it to simply make the point. Even if the fed did know how much money each bank had (and the information was accurate) and they acted responsibly it still wouldn't work as well, but even a 1st graded could figure out that today there's no money in the bank and rates need to be higher (how higher? Only the market knows for sure but anything higher than right now (2012)).

[Wormtail81]

I like how he points out that this does not always apply. It is not a one-size-fits-all solution. That's the mark of a rigorous thought process.

[DukeofWellington91]

@Wormtail81 True but I think almost every major cyclical swing in the last hundred years can be explained as such, all three of the major systemic crisis in the last hundred years 1929, 1970s and 2007- can all be very accurately explained by Austrian theory.

[oiuoiu988]

i just wanna say, i never quite realized how much i disagreed with hayek until i heard larry white explain it. hayek was an amazing intellect from a LONG time ago. larry white's kind of a douche.

[CurtHowland]

@oiuoiu988 Have you visited Mises.org or /user/MisesMedia ?

[oiuoiu988]

@CurtHowland

yes.

[CurtHowland]

@oiuoiu988 Ok, just curious.

I've found Hayek to have given ground on a few too many fronts for my tastes. It may very well have been him "recognizing reality", by admitting that printing fiat money "could" work if done "right", but I prefer the position of standing firm that printing money simply does not create wealth.

Like Milton Friedman, Hayek makes a good introduction, but I prefer to ride the wave of that initial plunge directly to the more principled anarcho-capitalists.

[oiuoiu988]

@CurtHowland

what about freedom? do u wish to abolish my right to trade in fiat dollars if i want? we just need to end legal tender laws. if people choose hard money then fiat money will be worthless. if people choose fiat money over hard money, then so be it. afterall, value IS subjective. people often confuse and misrepresent rothbards position on free banking but his position was the same as mine.

[CurtHowland]

@oiuoiu988 "do u wish to abolish my right to trade in fiat dollars if i want?"

Where did I ever say that?

As you say, abolishing legal tender laws will let people choose whatever form of currency they want for money. I expect that gold/silver will be generally used, but I see no reason why shares of Microsoft wouldn't be usable as money too.

When I said "more principled anarcho-capitalists", how could I have not meant Rothbard, Hoppe, Block, etc?

[oiuoiu988]

@CurtHowland

look, this exchange does not make sense, "do u wish to abolish my right to trade in fiat dollars if i want?"

Where did I ever say that?

i asked you a question and you answered as if i assumed i knew the answer WITHOUT ASKING THE QUESTION.... the one you were responding to.

thats weird.

the reason i brought up rothbard is because i assumed thats what you were talking about... so i dont even get what your question means... its like your communicating in a weird way.

huh?

[CurtHowland]

@oiuoiu988 "thats weird."

Not at all. I never said anything about abolishing choice, and agree with you that getting rid of legal tender laws is a good thing that will increase freedom and lead to stronger currencies being used.

"its like your communicating in a weird way."

Yes. It's called "agreement". Maybe that's never happened to you on YouTube before.

[oiuoiu988]

@CurtHowland

no it is weird because asking "where did i ever say that?" implies that you think i accuse you of saying that. me asking the question demonstrates that i havent made an assumption about it. you copying and pasting my question demonstrates that you were aware that i was asking it... i could go on, but do you see what i mean about weird communication?

[CurtHowland]

@oiuoiu988 "just because something is exchangeable doesnt make it money"

Money is a function. Be it rocks (Polynesia), cowrie shells (North America), obsidian (Asia minor), cattle (pretty much everywhere), tobacco, wheat, silver, gold, copper, slaves, women, salt, whatever.

Money is whatever people use for money. It is the medium of exchange, the use of which allows economic calculation.

Even fiat currency is money, when not used as wallpaper.

[oiuoiu988]

@CurtHowland

so is money basically just an emergent feature of voluntary interaction, like interest rates and private property?

[CurtHowland]

@oiuoiu988 It certainly seems to be, but there are far more eloquent people who have defined it prior to me.

"The Theory Of Money And Credit" for instance.

[oiuoiu988]

@CurtHowland

well then we agree on that much.

[CurtHowland]

@oiuoiu988 "do you see what i mean about weird communication?"

No, I still see where you ask me a question that has nothing to do with what I had been saying.

Ok, let me change that. Yes, it is weird for you to ask something completely outside of anything that had been said before, implying that I had asserted somewhere that anyone's freedom needed to be curtailed.

[oiuoiu988]

@CurtHowland

"No, I still see where you ask me a question that has nothing to do with what I had been saying."

ohhhhh, so im not allowed to ask questions that you dont approve of first? just admit what happened man. its right there for all to see. there are obviously people out there who wish to make paper money illegal, i wondered if you were one of them after reading your comment. you responded as if i had assumed you were one of those people when obviously i had not.

[CurtHowland]

@oiuoiu988 "so im not allowed to ask questions that you dont approve of first?"

Don't be a jerk.

"i wondered if you were one of them after reading your comment. you responded as if i had assumed you were"

Indeed, that's how you worded your question. For example, "When did you stop beating your wife?"

I, personally, do not wish anything to be "illegal". I abhor statute law.

[oiuoiu988]

@CurtHowland

your example is nothing like what i said. you dont want murder to be illegal?

[oiuoiu988]

@CurtHowland

the only relevant distinction to be made is that inter-subjective consensus on whether murder is acceptable or not was reached long before statute law, or anything like it, was even conceived of. it is still codified by statute law. its not analogous to the speed limit.

and its Ought, not Aught.

did the quotes around illegal have something to do with statute law? because you said you dont want anything to be "illegal"..

notice i did not pu quotes around illegal when i asked.

[CurtHowland]

@oiuoiu988 "its not analogous to the speed limit."

You have it backwards. I was showing how it was different from a speed limit, and you agree it is nothing like a speed limit.

So we agree, again, but you don't seem to realize it.

[oiuoiu988]

@CurtHowland

it must be analogous in order for you to make the comparison. the comparison is BASED ON THE PREMISE OF SIMILARITY, i think im done with this.

[CurtHowland]

@oiuoiu988 You don't understand that I was showing they are not analogous.

"i think im done with this."

Excellent. Thank you for your time.

[AranelVetinari]

@oiuoiu988 'S a matter of rhetoric. Your question was interpreted as if it did not require an answer, as a rhetorical device, rather than an honest to goodness question. It was interpreted as an accusation.

[oiuoiu988]

@AranelVetinari

well thank you for pointing this out. my question was an honest to goodness question. do you find it strange that he's having such a hard time admitting it?

[oiuoiu988]

(cont)

what the quotes were meant to express or denote but you didnt. so why dont you tell me how i could have "re-formulated" my question... please, because at this point it's getting ridiculous that i have to explain this stuff to you. how could i have asked it differently? this seems to silly to be real so do me a huge favor and convince me i'm wrong and i'll gladly admit i'm wrong.

[CurtHowland]

@oiuoiu988 "so why dont you tell me how i could have "re-formulated" my question."

Ok, let's try a few variations:

"Would you make fiat currencies illegal?"

"Would you prohibit fiat currencies?"

"How would you deal with fiat currencies?"

and for the other question,

"What about things like murder?"

Notice that they ask the same question, but without the accusation. Where you see "ZERO assumption", I see "abolish my right" which is an unwarranted attack.

[oiuoiu988]

@CurtHowland

thats because youre either paranoid or just stupid. there is no difference between "abolish my right" and "prohibit" and "make illegal". congrats, youre a moron.

[CurtHowland]

@oiuoiu988 I see.

Well, it was nice agreeing with you where we did.

Have a nice day.