My Understanding Of Austrian Business Cycle Theory

[Lightfiend]

My Understanding of Austrian Business Cycle Theory

What I have learned so far about Austrian Business Cycle Theory, thanks to Robert Murphy at the Mises Academy.

Explains the Boom-Bust cycle and how it is caused by The Federal Reserve.

 

[Oddball]

Even though boom-bust cycles aren't necessarily created by the Fed, they certainly are exacerbated by them.

Good link.

 

[Kevin_Kennedy]

Dude's correct, any expansion of credit whether it's by a central bank or government will cause the boom-bust cycle.

 

[william the wie]

Two interesting takes on this are:
"Applied Value Investing" by Joseph Calandro jr. Tries to unify Graham and Dodd's "Security Analysis" with the works of Von Mises and Rothbard to eliminate the micro/macro division in economics.
"Panic" by Redleaf & Vigilante. Although less explicit than Calandro it also has an economic theory of everything.

Until Huerta or one of the other modern heavy hitters of the Austrian school runs the numbers there won't be an explicit general theory with enough rigor to work but it does seem to be congealing.

 

[mascale]

Capitalist money has intrinsic value of itself, like in Adam Smith. Socialist Money, of central governments--A Marxist Concept--is valued for its use in pricing and exchange.

The Great Socialist Credit market of the United States is over $50 tril., but "educated" management fails at personal values completely, and won't accept that. The managers tried to include lower income households in the General Prosperity that the Clinton Administration had created. The "educated managers" then took the money away from the lower income sectors, and did military-like, engineering procurements instead.

The Socialist Credit Market, however, accepts a great deal of failed personal values, the larger it is. The failed personal values of the US educated managers created a panic. Even the banking business stopped doing business, and accepted even more Socialist Credit Market Bailouts. Without doing further business, they repaid it all, at 8.5% APR, within in a few months.

With virtually no credit market, but with lots of Adam Smith kinds of beads and trinkets money, Haiti and East Africa would be said far less fortunate. The civilized West, of failed personal values, finally sent in the plague of "relief workers," with failed personal values.

The distorted concept of failed personal values, called "orphans," even made the newspapers.

"Crow, James Crow: Shaken, Not Stirred!"
(The Political Science department, wherein Elinor Ostrom draws Socialist Credit Market money, barred any presentation of that over 35 years ago. They all continued to draw the Socialist Credit Market money which they personally refused to let billions learn about!)

 

[Paulie]

If there's anyone in here who speaks dumbass, that can translate what the fuck this mascale dude just said, hit me with it.

 

[eagleseven]

If there's anyone in here who speaks dumbass, that can translate what the fuck this mascale dude just said, hit me with it.

I'm pretty sure he's an algorithm created by a drunk programmer.

 

[Neubarth]

If there's anyone in here who speaks dumbass, that can translate what the fuck this mascale dude just said, hit me with it.

I'm pretty sure he's an algorithm created by a drunk programmer.

I usually key off of the first thing that he writes that seems to make sense and try to respond to it. There is no way that I could ever respond to the whole post. I think he is having fun, so try to have fun with him.

 

[Neubarth]

Capitalist money has intrinsic value of itself, like in Adam Smith. Socialist Money, of central governments--A Marxist Concept--is valued for its use in pricing and exchange.

I have often wondered about the Marxist Concept of money. If it is valued for its use in pricing and exchange then the Marxists have a firm grasp of capitalism.

 

[Neubarth]

I do not know that the Austrian School has ever proved that raising and lowering the discount/overnight rate has any real effect on the economy. It has always seemed to be a reaction to treasury Note rates rather than a leader of same.

 

[mascale]

Over 100 years ago, then U. S. banks had their own notes. Then the Socialist Concept of Centralized Credit happened. By 1963, then no concept of a gold-backed currency even appears on the notes.

No more beads and trinkets, of the metallic money of Adam Smith.

Then notice that less than 1% of Total Net Debt was really at risk in the sub-prime problem. Then notice that panic happened, because of that. The panic mainly happened since the Republcans had failed at Socialist, market-oriented, economics: Which the Clintons had done. The Clinton Administration had propped up lower incomes to the extent that Clinton, and not Bush, would be regarded comically as the first African American president in U. S. history.

Later it could be shown that 20% Afrikaner, 80% not too up on things, actually suited Bush II, Terms I and II, far better than it fit the two Clinton terms.

For a sense of humor, Marx had a concept of intrinsic value of beads and trinkets, but also an inflationary concept of paper money and bank notes.

Fortunately, for Socialists, there are those in America not entangled in foreign intellectual conspiracies: Of any time at all in the history of humanity! Mascale is not a "Creator," even, but an "Originator!" A good sense of humor, actually: Runs the World(?)!

"Crow, James Crow: Shaken, Not Stirred!"
(The Mathenomics of Arithmetic easily escaped the educated people!)

 

[mascale]

Economists and bankers tend to relate money unit inflation to interest rates. A restricted supply of money is then regarded a desirable income if preservation of the purchasing power of the money is desired.

The Austrians post-translation(?), possibly from the original Aramaic(?), then tend to focus on ordinal individual prefences, money or none.

A behaviorist wouldn't do that, and even the Nobel Committee decided on a prize in economics for someone: Not in an economics department. Someone with audience analysis background, such as myself, would follow along the Marshall McLuhan concept that money is a medium of mass communication.

Even profits are a signal of ordinal preferences, as long as the supply of the mass medium money is available to communicate the ordinal preferences, in the market place.

Recently, housing became affordable. An expansion of the credit market was under way. Then the access media was or were taken away. The supply turned more and more exclusivly rich-ward.

As a counter, "Cash for Clunkers" was universal, if restricted to a particular preference. As a counter, Schedule M in the US Tax Code was universal. As a counter, housing purchase incentives were universal, if requiring qualifications.

Widespread Wealth Worldwide is about an arithmetic resolution of what the mass medium money is about.

Maybe even soon you will get beamed up!

The Austrians would tend to suggest that the affordable housing of the sub-prime market was a form of madness, even worldwide. Billions don't have adequate housing, but still the affordable housing would be said a madness.

It is not altogether clear if von Mises had celebrated Yale University, and the U. S. Ivy League, in the "analysis(?) he made of lending gone mad. Mostly, universally, the lot of them failed to do the math of how the demand for the assets was going to become sustainable. Taking the neighborhoods away clearly became an untenable option, clearly created, and maybe even intended--emaybe even according to SEC!

"Crow, James Crow: Shaken, Not Stirred!:
(Great White Father in Washington sent Long Knives to protect buffalo hunters. Teepees of many nations no longer abundant. Many nations died.)

 

[Madeline]

Capitalist money has intrinsic value of itself, like in Adam Smith. Socialist Money, of central governments--A Marxist Concept--is valued for its use in pricing and exchange.

I have often wondered about the Marxist Concept of money. If it is valued for its use in pricing and exchange then the Marxists have a firm grasp of capitalism.

I just read "The Wealth of Nations" again not long ago. I don't claim to fully understnd it, but still:

If money is not used for either pricing or exchanging, what value does it have? As a collectible? Does this poster mean gold coins rather than paper money? Is he referring to the time value of money?

I'm completely lost. Have been since the Op. But trying to follow this thread is more interesting than anything else on USMB today.

 

[JW Frogen]

Money is a psychological concept, a promise written on a piece of paper.

The value of that paper is based on the mass psychological belief, or not, in the promise.

 

[Madeline]

Over 100 years ago, then U. S. banks had their own notes. Then the Socialist Concept of Centralized Credit happened. By 1963, then no concept of a gold-backed currency even appears on the notes.

No more beads and trinkets, of the metallic money of Adam Smith.

Then notice that less than 1% of Total Net Debt was really at risk in the sub-prime problem. Then notice that panic happened, because of that. The panic mainly happened since the Republcans had failed at Socialist, market-oriented, economics: Which the Clintons had done. The Clinton Administration had propped up lower incomes to the extent that Clinton, and not Bush, would be regarded comically as the first African American president in U. S. history.

Later it could be shown that 20% Afrikaner, 80% not too up on things, actually suited Bush II, Terms I and II, far better than it fit the two Clinton terms.

For a sense of humor, Marx had a concept of intrinsic value of beads and trinkets, but also an inflationary concept of paper money and bank notes.

Fortunately, for Socialists, there are those in America not entangled in foreign intellectual conspiracies: Of any time at all in the history of humanity! Mascale is not a "Creator," even, but an "Originator!" A good sense of humor, actually: Runs the World(?)!

"Crow, James Crow: Shaken, Not Stirred!"
(The Mathenomics of Arithmetic easily escaped the educated people!)

You're hurting me. I like it. Do it again, please?

I've been reading this for twenty minutes and I still cannot understand it at all....and yet I keep laughing.

 

[editec]

Capitalist money has intrinsic value of itself, like in Adam Smith. [

You ever read Adam Smith's Wealth of Nations?

Socialist Money, of central governments--A Marxist Concept--is valued for its use in pricing and exchange.

Based on the above, I rather doubt it.

 

[mascale]

Money had value on its own at one time. Even in the New Testament, talents were silver, and a denarius was a coin of lesser value.

The New Testament also alludes to the concept of central government-currency, of Sid Ceasar, or someone. The Deity is separate from the state, even in the New Testament. In fact, Romans had household deities, and rarely interfered with the deities of what became the provinces.

Wealth of Nations comments on the fact that the economy, described mercantile, didn't even work well for the poor, even then. Money still had value, all by itself. The Austrians actually had a concept of saving it. Other economic models even have the same concept.

Karl Marx had a concept of money with intrinsic value of its own. Paper money and bank notes were all about inflation.

In modern times, prices tend to double every ten years, or were doing so until the credit market was starting to go ballistic. Milton Friedman's silly concept of "too much money, chasing too few goods and services," didn't work too well, in practice.

"Crow, James Crow: Shaken, Not Stirred."
(Her Majesty's PM, at Davos two years ago, did however so want to re-invite the international community--and of the older empire--into the concept of sources and uses of credit. The managers from the North American Colonies did not attend. Billions worldwide would have guessed that would happen, in advance!)

 

[jillian]

You ever read Adam Smith's Wealth of Nations?

Based on the above, I rather doubt it.

One would think that they'd realize how randian/laissez faire economics have failed every time they've been attempted. While the austrians have some interesting ideas if you wish to live in a dickensian nightmare, most economists realize that far more success has been had using keynesian economic principles. the private sector does not always make good decisions as corporations are amoral and act solely for their own benefit. yet, what benefits corporations does not always benefit the public and, certainly, it absolutely destroys the middle class.

there seems to be a correlation between people who believe in this type of economic slash and burn and those who think only landed gentry should vote.

interesting.

 

[Paulie]

You ever read Adam Smith's Wealth of Nations?

Based on the above, I rather doubt it.

One would think that they'd realize how randian/laissez faire economics have failed every time they've been attempted. While the austrians have some interesting ideas if you wish to live in a dickensian nightmare, most economists realize that far more success has been had using keynesian economic principles. the private sector does not always make good decisions as corporations are amoral and act solely for their own benefit. yet, what benefits corporations does not always benefit the public and, certainly, it absolutely destroys the middle class.

there seems to be a correlation between people who believe in this type of economic slash and burn and those who think only landed gentry should vote.

interesting.

jill, real austrian econ has never been practiced. There is no laissez faire in the US.

There are still, and have been for a long time, a plethora of convoluted regulations in all economic sectors of the country that benefit big business and stifle all other.

Too many of you mistake a slight amount of deregulation in a certain sector of the economy for being 'laissez faire', and that couldn't be further from reality.

There are way too many regulations that are benefitting only the 'too big to fail' companies, and stifling a significant amount of potential competition within the market.

Forget "laissez faire". Can we at least start with reforming the regulatory standards in the country so that they open up the ability for the little guy to actually compete with the big boys?

 

[Oddball]

Money is a psychological concept, a promise written on a piece of paper.

The value of that paper is based on the mass psychological belief, or not, in the promise.

In the case of worthless fiat currencies, you're correct...In terms of specie and notes redeemable for such, that his value which is intrinsic.