I think that America’s Next Depression is being written online, in real time, over at Prudent Bear.

Here is a nice little report titled Consumer Cash Flow:

We apply the standard corporate cash flow statement model to U.S. households. Using this format, we discover that U.S. households are now limited to one basic source of cash flow: new debt … The statement shows that “Net Cash provided by Operating Activities” is not sufficient to provide for Repayments of Debt. Households have to borrow just to pay principal payments on debt. Effectively, no investing activity occurs without additional borrowing … U.S. households require access to new cash sources in excess of 13% of GDP in order to maintain a strong economy. Since current operating cash flow generates only 2% of GDP, households depend on minimum debt financing needs of about 11% of GDP.

Just goes to show that the best businessmen are Austrian in their thinking. Kyosagi, author of the “Rich Dad, Poor Dad” series, is a good example. Though he doesn’t mention Austrian econ, he encourages readers to follow business cycles and be contrarian. For example, when the stock market bubbled in the late 90′s, he got out and invested in real estate and commodities, which were depressed at the time. I’ll bet he got out of real estate a few years ago. He’s always trying to avoid the bubble.

True, nearly all Economics textbooks in Swedish universities are in English. But unfortunately, they also nearly all share Paul Krugman’s view of the ABCT being worthy of as much serious study as the Phlogiston theory of firem so I have a feeling they wouldn’t accept even if they got it for free.

I consider myself lucky that nearly all my teachers are pro-austrian. The very first text I was told to read as an undergraduate was David Hume’s Of Money.

I understand that it is the fed and only the fed that provides the fuel, the new bank reserves necessary for the banking industry’s credit expansion. And since most of my understanding of the banking industry is derived from the writings of Rothbard, I have to give a second thought before taking issue with what he says on the topic. However, I find, given the history of the Fed, as spelled out by Rothbard, this particular statement is unexpected:

“The banks are virtual pawns of the government, and have been since 1913. Any guilt for credit expansion and the consequent depression must be borne by the federal government and by it alone.”

The reason I question this is that it has struck me from start to finish that there is a perfectly synergistic relationship between the fed, the government and the banking community. The benefits are reciprocal. The banks earn interest on fake credit, and the government borrows and spends this fake money. The bankers of the 1900′s and their politicians fiercely agitated for the creation of the fed and the government provided it. It seems to have been and continue to be a very “win-win” situation between the two entities.

This is a quibble, yet it just makes me curious that maybe I have missed something important in the details of Rothbard’s writings. It seems to me that if the banks are pawns of the government, then so are such establishment corporations as Halliburton which also collude with the government in robbing the tax-payer. And they just seem a bit too influential to qualify as pawns by any definition I’m familiar with.

So I’m doing my nightly reading of MES to my kids last night when I read the following in reference to the consequences of a higher interest paid to capitalists investing in a less appealing industry than general:

“The burden of the lower prices at each stage of production, then, falls on the purely specific factors in the industry, those which must be devoted to this industry if they are to be in the production system at all. In the long run of the ERE, these will not be capital goods, since capital goods always need to be reproduced, and the equivalent resources can gradually or rapidly leave the industry, depending in each case on the durability of the capital good and the length of the process of its production. The specific factor may be labor, but this is not empirically likely, since labor is almost always a nonspecific factor that may shift to several occupations. It is therefore likely to be specific land factors that bear the brunt of the lower return.”

To this my 12 year old asks “What’s special about land factors that makes them more nonspecific than capital goods?” To which I was forced to answer, “Don’t know, Rothbard doesn’t elaborate.”

But it seems to have been bouncing around in the back of my head today because an answer seems to have occurred to me and that answer is “Nothing, in fact the higher interest must be paid via a relative constriction of supply of each stage of production resulting in higher prices paid for the product of each stage, including the final consumer product, rather than a reduction in return to any factor of production including land.”

Therefore, I am tentatively saying that Rothbard was mistaken about land factors bearing the brunt of any lowered return, in fact there is no lowering of return by any factor. Higher prices paid for each factor in fact is responsible for the increased price spread in each stage of production in such industries.

Anyone agree or disagree?