Economic Coordination and the Business Cycle (by Graham Wright)

Article for easy linking at: http://vforvoluntary.com/business-cycles

His channel:
http://www.youtube.com/user/grahampwright

"This presentation is inspired by the Austrian Theory of the Business Cycle and the Austrian School of Economics in general. The intellectual home of Austrian Economics is The Ludwig von Mises Institute at www.mises.org.

My blog is:
http://managainstthestate.blogspot.com/"

POSTED WITH PERMISSION FROM GRAHAM P WRIGHT

Category:

Education

Tags:

• economic
• coordination
• business
• cycle
• austrian
• economics
• von
• mises

[rye8n]

correction, at 4:40, you said business cycle wouldn't occur. Well, this is incorrect. Men after all, are not perfect beings. Men do make mistakes, an entrepreneur could potentially employ resources and capital to produces goods or services that is not demanded by the market. And the profit/loss system will signal the entrepreneur he's making a loss thus resources and capital will be sold, that process is the business cycle. However the free market does provide a quicker way to recover.

[Nielsio]

@rye8n That's not a business cycle. A business cycle is defined as a market wide cluster of errors.

[hob976]

This video was OUTSTANDING. Perfectly paced information clearly expressed in a straight forward, slowly compounding format.

.

Sometimes I come across a presentation that is perfectly designed to help a viewer LEARN information. This is one of those times.

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MORE PLEASE.

[zbigniewzapora]

@McDicker96

Which just means that consumers don't do whatever person criticizing would like them to do. Typical central planner complex.

[DoctorCapitalist]

I have a criticism of this. It implies that investors look at interest rates as a guide to what they should invest in. (long term or short term)

[nonagressionist]

@rye8n All goods cycle, and people make good decisions and bad decisions all the time which is why prices and supplies of things fluctuate. On the whole things are pretty smooth. This is not the same thing as a business cycle where everybody is doing things based upon being tricked into thinking there are lots of cheap resources because money is cheap. The bust comes when the lie can no longer be hidden. Government likes the lie because it makes people do stuff, and they think that's an economy.

[TheStfu1000]

@louisisbetterthanyou you seem like the most knowing commenter on here. is it right to say that malinvestment is caused (ie the cause of businesses making less profits or going bust) because when interest rates were artificially low they thought this meant their consumers were saving, so busineses decided to invest profits/take out loans to long term production/general improvements. why do they do this exactly? also does the boom simply refer to this increased spending by businesses? ty

[TheStfu1000]

@McDicker96 when you say interest rates you have to say whether it's high interest for lending to the bank or high interest from borrowing from the bank surely. what do you mean trick business into thinking theres going to be a high demand for capital goods. like capital goods are what businesses use. idk.

[TheStfu1000]

@McDicker96 so the businesses invest when interest rates are low but this causes a business cycle how? people are still going to have some money to buy their products later on just not as much as the businesses expected right?

[McDicker96]

@McDicker96 high interest rates=save your money and gain interest. low interest rates=take out a loan and start a business. high interest rates=low supply of savings meaning less investment in higher order good. low interest rates=high supply of savings available for higher order goods. Artificial low interest rates trick business into thinking there is going to be high demand for capital goods(factories real machinery) on paper low interest rates make plans work but in practice they fail.

[McDicker96]

@TheStfu1000 because interest rates determine how much money you get from saving rather than starting a business. If interest rates are very high then it makes sense to refrain from starting a business because it will cost alot of money to pay back the loans. If interest rates are low then its easier to pay back loans. This means business on the margins who base their projections on low interest rates are assuming that people have the money saved to buy their products when in fact they don't

[TheStfu1000]

@McDicker96 yeah i got all that. but thanks anyway. but i was looking for understanding of why it would be a malinvestment. the only reasoning you gave related to that question was 'because interest rates are a laarge factor in determing the future success of a business'... why are they? thats my question.