There was once upon time, not just parakeet--doing nature's call, but also an upaid Austrian, who may have even wanted to be a wallpaper hanger.
The Ludwig von Mises Institute," published "How The Business Cycle Happens," of Murray N. Rothard, September 6, 2005. This below appears, which explains the outcome of a credit expansion, (like is now underway). The summary is in the last paragraph:
"In sum, businessmen were misled by bank credit inflation to invest too much in higher-order capital goods, which could only be prosperously sustained through lower time preferences and greater savings and investment; as soon as the inflation permeates to the mass of the people, the old consumption-investment proportion is reestablished, and business investments in the higher orders are seen to have been wasteful.[8] Businessmen were led to this error by the credit expansion and its tampering with the free-market rate of interest.
The "boom," then, is actually a period of wasteful misinvestment. It is the time when errors are made, due to bank credit's tampering with the free market. The "crisis" arrives when the consumers come to reestablish their desired proportions. The "depression" is actually the process by which the economy adjusts to the wastes and errors of the boom, and reestablishes efficient service of consumer desires. The adjustment process consists in rapid liquidation of the wasteful investments. Some of these will be abandoned altogether (like the Western ghost towns constructed in the boom of 1816-1818 and deserted during the Panic of 1819); others will be shifted to other uses. Always the principle will be not to mourn past errors, but to make most efficient use of the existing stock of capital. In sum, the free market tends to satisfy voluntarily-expressed consumer desires with maximum efficiency, and this includes the public's relative desires for present and future consumption. The inflationary boom hobbles this efficiency, and distorts the structure of production, which no longer serves consumers properly. The crisis signals the end of this inflationary distortion, and the depression is the process by which the economy returns to the efficient service of consumers. In short, and this is a highly important point to grasp, the depression is the "recovery" process, and the end of the depression heralds the return to normal, and to optimum efficiency. The depression, then, far from being an evil scourge, is the necessary and beneficial return of the economy to normal after the distortions imposed by the boom. The boom, then, requires a "bust."
Since it clearly takes very little time for the new money to filter down from business to factors of production, why don't all booms come quickly to an end? The reason is that the banks come to the rescue. Seeing factors bid away from them by consumer goods industries, finding their costs rising and themselves short of funds, the borrowing firms turn once again to the banks. If the banks expand credit further, they can again keep the borrowers afloat. The new money again pours into business, and they can again bid factors away from the consumer goods industries. In short, continually expanded bank credit can keep the borrowers one step ahead of consumer retribution. For this, we have seen, is what the crisis and depression are: the restoration by consumers of an efficient economy, and the ending of the distortions of the boom. Clearly, the greater the credit expansion and the longer it lasts, the longer will the boom last. The boom will end when bank credit expansion finally stops. Evidently, the longer the boom goes on the more wasteful the errors committed, and the longer and more severe will be the necessary depression readjustment.
Thus, bank credit expansion sets into motion the business cycle in all its phases: the inflationary boom, marked by expansion of the money supply and by malinvestment; the crisis, which arrives when credit expansion ceases and malinvestments become evident; and the depression recovery, the necessary adjustment process by which the economy returns to the most efficient ways of satisfying consumer desires.[9]"
So Central banks create credit, which they just naturally put into nonsense businesses, which fail, and then a Depression happens because there is suddenly nothing else left to do! "Seig. . . .!"
Possibly anyone should return to the opening sentence. Ludwig von Mises was never paid for this stuff, and the parakeet likely had a far better grip on reality!
Missing is that problem of the "income scale." Frivolous, or possibly even implied, gay bankers making nonsense loans may look like the start of the credit crisis, now in play, but the sub-prime lender also had rational basis to expect a return. The buyer could flip the house to a more credit-worthy borrower, or the economy could make the buyer an actual paying customer.
Enrepreneurs are miscast as "forecasters," in the idiocy thinking of the unpaid Austrian, and so they have no clue about the concept of "paying customers," to begin with.
So what in fact happened?
The Total U. S. Credit maket found 2% or less of itself in jeopardy. There were bad bundled loans that had gone unregulated, or missed in any audits, and a small amount of "errors(?)" of lending were exposed. One or two reliable giants were affected, confined mostly to the one credit market, (USA), and so the U. S. federal government provided some bridge loan funding to some banks, mostly now re-paid. Other governments had their own problems to deal with, and did.
Now there is an Ivy League educated, federal administation in place, of the opinion that the main shock is over, and that no Tsunamis are occurring. Consumers will get a one-time, equal-amount kind of national cost-of-living adjustement. The one-time COLA is not precisely the outcome decades of properly done, equal amount COLA's
There is a problem with income scale, and how the raises of it are computed.
The reason that a recovery is under way, according to the unpaid Austrian, and the followers: Is that banks, even now. are causing a depression, with new credit(?)--or not enough new credit(?)!
The Austrian probably couldn't get a paycheck, especially now!
"Crow, James Crow: Shaken, Not Stirred!"
(They don't know that white man speak like snake, especially in Austria?)
