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marjerita Post-snowy walk to brunch, tucked under a warm blanket, gonna curl up with Ben #bernanke for some snow day reading... #nerdlife #rvasnowmageddon2016 3w

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freedomisthesolution ECONOMIC DEPRESSIONS, THEIR CAUSE AND CURE
"We live in a world of euphemism. Undertakers have become "morticians," press agents are now "public relations counselors" and janitors have all been transformed into "superintendents." In every walk of life, plain facts have been wrapped in cloudy camouflage.

No less has this been true of economics. In the old days, we used to suffer nearly periodic economic crises, the sudden onset of which was called a "panic," and the lingering trough period after the panic was called "depression." The most famous depression in modern times, of course, was the one that began in a typical financial panic in 1929 and lasted until the advent of World War II. After the disaster of 1929, economists and politicians resolved that this must never happen again. The easiest way of succeeding at this resolve was, simply to define "depressions" out of existence. From that point on, America was to suffer no further depressions. For when the next sharp depression came along, in 1937–38, the economists simply refused to use the dread name, and came up with a new, much softer-sounding word: "recession." From that point on, we have been through quite a few recessions, but not a single depression." (CONTINUED BELOW)
#endthefed #federalreserve #capitalism #freemarket #freemarkets #laissezfaire #socialism #bernanke #yellen #centralbank #corporatism #fascism #democraticsocialism #feelthebern #recession #bubble #crashandbern #auditthefed #economiccollapse #inflation #fiat #goldstandard #austrianeconomics #mises #rothbard #hayek #capitalist #randpaul #liberty #freedomisthesolution
3w
  •   freedomisthesolution "The correct and fully developed theory of the business cycle was finally discovered and set forth by the Austrian economist Ludwig von Mises, when he was a professor at the University of Vienna. Mises developed hints of his solution to the vital problem of the business cycle in his monumental Theory of Money and Credit, published in 1912, and still, nearly 60 years later, the best book on the theory of money and banking. Mises developed his cycle theory during the 1920s, and it was brought to the English-speaking world by Mises's leading follower, Friedrich A. von Hayek, who came from Vienna to teach at the London School of Economics in the early 1930s, and who published, in German and in English, two books which applied and elaborated the Mises cycle theory: Monetary Theory and the Trade Cycle, and Prices and Production. Since Mises and Hayek were Austrians, and also since they were in the tradition of the great 19th-century Austrian economists, this theory has become known in the literature as the "Austrian" (or the "monetary over-investment") theory of the business cycle." (CONTINUED BELOW) 3w
  •   freedomisthesolution "Building on the Ricardians, on general "Austrian" theory, and on his own creative genius, Mises developed the following theory of the business cycle:

    Without bank credit expansion, supply and demand tend to be equilibrated through the free price system, and no cumulative booms or busts can then develop. But then government through its central bank stimulates bank credit expansion by expanding central bank liabilities and therefore the cash reserves of all the nation's commercial banks. The banks then proceed to expand credit and hence the nation's money supply in the form of check deposits. As the Ricardians saw, this expansion of bank money drives up the prices of goods and hence causes inflation. But, Mises showed, it does something else, and something even more sinister. Bank credit expansion, by pouring new loan funds into the business world, artificially lowers the rate of interest in the economy below its free-market level." (CONTINUED BELOW) 3w
  •   freedomisthesolution "On the free and unhampered market, the interest rate is determined purely by the "time preferences" of all the individuals that make up the market economy. For the essence of a loan is that a "present good" (money which can be used at present) is being exchanged for a "future good" (an IOU which can only be used at some point in the future). Since people always prefer money right now to the present prospect of getting the same amount of money sometime in the future, the present good always commands a premium in the market over the future. This premium is the interest rate, and its height will vary according to the degree to which people prefer the present to the future, i.e., the degree of their time preferences.

    People's time preferences also determine the extent to which people will save and invest, as compared to how much they will consume. If people's time preferences should fall, i.e., if their degree of preference for present over future falls, then people will tend to consume less now and save and invest more; at the same time, and for the same reason, the rate of interest, the rate of time discount, will also fall. Economic growth comes about largely as the result of falling rates of time preference, which lead to an increase in the proportion of saving and investment to consumption, and also to a falling rate of interest." (CONTINUED BELOW) 3w
  •   freedomisthesolution "But what happens when the rate of interest falls, not because of lower time preferences and higher savings, but from government interference that promotes the expansion of bank credit? In other words, if the rate of interest falls artificially, due to intervention, rather than naturally, as a result of changes in the valuations and preferences of the consuming public?

    What happens is trouble. For businessmen, seeing the rate of interest fall, react as they always would and must to such a change of market signals: they invest more in capital and producers' goods. Investments, particularly in lengthy and time-consuming projects, which previously looked unprofitable now seem profitable, because of the fall of the interest charge. In short, businessmen react as they would react if savings had genuinely increased: they expand their investment in durable equipment, in capital goods, in industrial raw material, in construction as compared to their direct production of consumer goods.

    Businesses, in short, happily borrow the newly expanded bank money that is coming to them at cheaper rates; they use the money to invest in capital goods, and eventually this money gets paid out in higher rents to land, and higher wages to workers in the capital goods industries. The increased business demand bids up labor costs, but businesses think they can pay these higher costs because they have been fooled by the government-and-bank intervention in the loan market and its decisively important tampering with the interest-rate signal of the marketplace." (CONTINUED BELOW) 3w
  •   freedomisthesolution "The problem comes as soon as the workers and landlords — largely the former, since most gross business income is paid out in wages — begin to spend the new bank money that they have received in the form of higher wages. For the time preferences of the public have not really gotten lower; the public doesn't want to save more than it has. So the workers set about to consume most of their new income, in short to reestablish the old consumer/saving proportions. This means that they redirect the spending back to the consumer goods industries, and they don't save and invest enough to buy the newly-produced machines, capital equipment, industrial raw materials, etc. This all reveals itself as a sudden sharp and continuing depression in the producers' goods industries. Once the consumers reestablished their desired consumption/investment proportions, it is thus revealed that business had invested too much in capital goods and had underinvested in consumer goods. Business had been seduced by the governmental tampering and artificial lowering of the rate of interest, and acted as if more savings were available to invest than were really there. As soon as the new bank money filtered through the system and the consumers reestablished their old proportions, it became clear that there were not enough savings to buy all the producers' goods, and that business had misinvested the limited savings available. Business had overinvested in capital goods and underinvested in consumer products." (CONTINUED BELOW) 3w
  •   freedomisthesolution "Thus, the Misesian theory of the business cycle accounts for all of our puzzles: the repeated and recurrent nature of the cycle, the massive cluster of entrepreneurial error, the far greater intensity of the boom and bust in the producers' goods industries.

    Mises, then, pinpoints the blame for the cycle on inflationary bank credit expansion propelled by the intervention of government and its central bank. What does Mises say should be done, say by government, once the depression arrives? What is the governmental role in the cure of depression? In the first place, government must cease inflating as soon as possible. It is true that this will, inevitably, bring the inflationary boom abruptly to an end, and commence the inevitable recession or depression. But the longer the government waits for this, the worse the necessary readjustments will have to be. The sooner the depression-readjustment is gotten over with, the better. This means, also, that the government must never try to prop up unsound business situations; it must never bail out or lend money to business firms in trouble. Doing this will simply prolong the agony and convert a sharp and quick depression phase into a lingering and chronic disease. The government must never try to prop up wage rates or prices of producers' goods; doing so will prolong and delay indefinitely the completion of the depression-adjustment process; it will cause indefinite and prolonged depression and mass unemployment in the vital capital goods industries. The government must not try to inflate again, in order to get out of the depression. For even if this reinflation succeeds, it will only sow greater trouble later on. The government must do nothing to encourage consumption, and it must not increase its own expenditures, for this will further increase the social consumption/investment ratio. In fact, cutting the government budget will improve the ratio. What the economy needs is not more consumption spending but more saving, in order to validate some of the excessive investments of the boom." (CONTINUED BELOW) 3w
  •   freedomisthesolution "If Coolidge made 1929 inevitable, it was President Hoover who prolonged and deepened the depression, transforming it from a typically sharp but swiftly disappearing depression into a lingering and near-fatal malady, a malady "cured" only by the holocaust of World War II. Hoover, not Franklin Roosevelt, was the founder of the policy of the "New Deal": essentially the massive use of the State to do exactly what Misesian theory would most warn against — to prop up wage rates above their free-market levels, prop up prices, inflate credit, and lend money to shaky business positions. Roosevelt only advanced, to a greater degree, what Hoover had pioneered. The result for the first time in American history, was a nearly perpetual depression and nearly permanent mass unemployment. The Coolidge crisis had become the unprecedentedly prolonged Hoover-Roosevelt depression.

    Ludwig von Mises had predicted the depression during the heyday of the great boom of the 1920s — a time, just like today, when economists and politicians, armed with a "new economics" of perpetual inflation, and with new "tools" provided by the Federal Reserve System, proclaimed a perpetual "New Era" of permanent prosperity guaranteed by our wise economic doctors in Washington. Ludwig von Mises, alone armed with a correct theory of the business cycle, was one of the very few economists to predict the Great Depression, and hence the economic world was forced to listen to him with respect. F.A. Hayek spread the word in England, and the younger English economists were all, in the early 1930s, beginning to adopt the Misesian cycle theory for their analysis of the depression — and also to adopt, of course, the strictly free-market policy prescription that flowed with this theory. Unfortunately, economists have now adopted the historical notion of Lord Keynes: that no "classical economists" had a theory of the business cycle until Keynes came along in 1936." (CONTINUED BELOW) 3w
  •   freedomisthesolution "There was a theory of the depression; it was the classical economic tradition; its prescription was strict hard money and laissez-faire; and it was rapidly being adopted, in England and even in the United States, as the accepted theory of the business cycle. (A particular irony is that the major "Austrian" proponent in the United States in the early and mid-1930s was none other than Professor Alvin Hansen, very soon to make his mark as the outstanding Keynesian disciple in this country.) What swamped the growing acceptance of Misesian cycle theory was simply the "Keynesian Revolution" — the amazing sweep that Keynesian theory made of the economic world shortly after the publication of the General Theory in 1936. It is not that Misesian theory was refuted successfully; it was just forgotten in the rush to climb on the suddenly fashionable Keynesian bandwagon. Some of the leading adherents of the Mises theory — who clearly knew better — succumbed to the newly established winds of doctrine, and won leading American university posts as a consequence.

    But now the once arch-Keynesian London Economist has recently proclaimed that "Keynes is Dead." After over a decade of facing trenchant theoretical critiques and refutation by stubborn economic facts, the Keynesians are now in general and massive retreat. Once again, the money supply and bank credit are being grudgingly acknowledged to play a leading role in the cycle. The time is ripe — for a rediscovery, a renaissance, of the Mises theory of the business cycle. It can come none too soon; if it ever does, the whole concept of a Council of Economic Advisors would be swept away, and we would see a massive retreat of government from the economic sphere. But for all this to happen, the world of economics, and the public at large, must be made aware of the existence of an explanation of the business cycle that has lain neglected on the shelf for all too many tragic years." - Murray Rothbard 3w

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atdavis11 Five years ago @andrewmeaddavis and I picked out the smallest and sickest dog at the shelter, and he's been thanking us every day since. Or maybe I just eat a lot of peanut butter. #bestbuds #adoptdontshop #bernanke 1mon

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eoingil #tummytime while Granda reads #bernanke biography 1mon

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ehszypula Great year or greatest year for finance/economic books? On 2016 I plan to cut back on buying books so I had to sneak in former Federal Reserve Chairman Bernanke's memoir of his colossal role throughout the 2008 financial crisis. #couragetoact #bernanke #bookstagram #federalreserve 1mon
  •   legendonnelly You need to provide your finance book list! 1mon
  •   ehszypula @legendonnelly scroll through some of my old posts for picks. If you want something specific let me know! I've probably got one for you. 1mon

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2mon lalala_fx
Normal Martin Lever

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openyoureyeswill We exchanged gifts last night...#Christmas gifts this year for me = a back massager, socks, and #bernanke book. The same gifts a 80 year old man would get... #xmas #holidays 2mon

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monkeytrader007 My present to myself this Christmas. Comes with high expectations. #bernanke 2mon
  •   instagr_amit Informative but kinda dull. Geithner's Stress Test is awesome ! 2mon
  •   comradavid Wow dedication 2mon

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