The Austrian Business Cycle Theory Explained

The manipulation of interest rates by the Federal Reserve means the US does not really have a free market economy. This manipulation is what causes the economic boom-bust cycles.

Category:

Film & Animation

Tags:

• business cycle theory
• free market economy
• federal reserve
• interest rates

[anyelina1111]

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[ViewpointLibertarian]

Awesome job! I plan to make a video soon about why libertarians need Austrian economics and an explanation of the Austrian business cycle theory.

[ronhelwig]

What to do? As much as possible, just stop using their money and start using gold and silver. It doesn't have to be heavy ounces, google "Shire Silver".

[theredscourge]

@MrChris4251 There is a way for gold's value to increase or decrease, but it is only for the population rate versus the gold production rate to become drastically different, or for people to just arbitrarily decide that there a few other things they value, so they start to value it more instead.

[theredscourge]

@MrChris4251 In Ancient Rome, you could buy a fine toga and a few clothing accessories for an ounce of gold. Today, you can buy a fine suit and a few clothing accessories for an ounce of gold.

[MrChris4251]

@stalrunner your wrong about gold. The relation between the value of currency, in this case the u.s. dollar, and gold is different. The value of gold does not change. It is the value of the dollar that changes value in relation to gold under the gold standard. There is plenty of gold for the money of the world because gold's value can't increase or decrease.

[stalrunner]

@Mysteryskatin It wouldn't be the states competing. It would basically be a barter system (I offer you a good or service in exchange for a good or service.). Eventually, people will open up banks and print notes backed by commodities that people deposit.I guess we oughta look at how the first monetary/banking systems were developed, and it would probably happen the same way now.

[Mysteryskatin]

@stalrunner In theory I could see it working, though I don't see it being very practical in our highly corporatized society. It's a nice idea, but lacking in practicality. It would inevitably pit states against eachother if they had competing currencies, leaving some states to prosper, while other lag behind. Even if it would be beneficial, it would not solve our economic problems.

[stalrunner]

@Mysteryskatin Competing currencies have been tried recently, and were successful until the government shut them down. The best example is the Liberty Dollar (Wikipedia it). If we allowed that to happen, people would choose the best alternatives. Sure, people who hang on to their Fed notes longer than others will be screwed, but it will fix our problems in the long run.

[Mysteryskatin]

@stalrunner The cost of gold could adjust to an acceptable point, but only AFTER it was made the standard, and it being made the standard without enough of it to cover all currency would be catastrophic. Creating an exchange rate of whatever is necessary to make the system work, simply would not work either, nor is it how a free market society would work. Competing currencies may actually be beneficial, not sure, but I think the vast majority of Americans would disagree with the idea.

[stalrunner]

@Mysteryskatin You're argument ignores the law of supply and demand. If we were to have a gold standard, the exchange could be something like 0.001 oz of gold =$1.00. The dollar would be worth about $1.50 in today's numbers. But, the plan is not to simply re-implement the gold standard for the dollar, but to legalize competing currencies, which would allow for a solution to be developed by the free market.

[Mysteryskatin]

A gold standard simply could not be used without a complete revaluation of the price of gold, which would be detrimental to the economy in itself, because there is not enough gold in the world to account for the massive international trade. The gold standard also would inhibit job growth. It simply is not the way to go in a modern economy.