Comments (7)

• corpus delicti

  "... Even a profit-seeking public enterprise could not be unbureaucratic. Attempts have been made to eliminate bureaucratism through profit sharing by managers. But since they could not be expected to bear the eventual losses, they are tempted to become reckless, which then is to be avoided by limiting the manager's authority through directives from higher officials, boards, committees, and "expert" opinions. Thus again, more regulation and bureaucratization are created."

  -- Strike One!

  "Public opinion always wants 'easy money,' that is, low interest rates. But it is the very function of the note-issuing bank to resist such demands, protecting its own solvency and maintaining the parity of its notes toward foreign notes and gold. If the bank should be excused from the redemption of its certificates, it would be free to expand its credits in accordance with the politicians' wishes. It would be too weak to resist the clamor of credit applicants. But the banking system is to be nationalized, in Deumer's words, 'to pay heed to the complaints of small industrial enterprises and many commercial firms that they are able to secure the necessary credits only with great difficulties and much sacrifice.'"

  -- Strike Two!

  "A few years ago it would have been necessary to elaborate the consequences of credit expansion. There is no need for such an effort today. The relationship between credit expansion and rising goods prices and foreign-exchange rates is well known today. This has been brought out not only by the research of some economists, but also by the American and British experiences and theories with which Germans have become familiar. It would be superfluous to elaborate further on this."

  -- Strike Thr....

  Hang on, it seems Dr. Deumer scored a home run.

  I must write a pamphlet sometime: "How to win against Ludwig von Mises in three easy steps:"

  Step 1: Ignore Him
  Step 2: Ridicule Him
  Step 3: Fight Him
  Result: You Win

  You know... just like they did with Gandhi!

  "First they ignore you, then they laugh at you, then they fight you, then you win." --Gandhi

  Ahh... I knew I forgot some minor detail :-)

  Published: October 31, 2008 11:27 AM

• Marco Saba

  I am on the side of total free market: let the business of issuing money and credit be really free for everyone and let the market establish winner and losers. I just would like to test if a new money with a fully shared monetary rent (shared between ALL the players) can gain a real global support. Isn't it interesting? A new 'public seigniorage money.' Each player is due his own share of flesh.

  Published: November 1, 2008 9:58 AM

• Roland

  Hello and sorry for this semi-offtopic question,

  I've read a couple of times that Mises has predicted the great depression, yet nowhere could I find a source or quotation.

  Surely the great depression can be seen as inevitable and logical conclusion of the policy of the time by reading Mises' work which was created before it, but did he actually predict it or not? (I mean did he actually predict the concrete case of the United States Federal Reserve going from an inflationary policy to a tight monetary policy and causing the depression?)

  I would greatly appreciate any links (or even hints) to sources.

  Thank you,

  Roland

  Published: November 2, 2008 3:37 AM

• Ireland

  Roland, the depression is not caused by switching from one policy to another. If it were, we'd just order them to never switch.

  Instead it is the first policy, the inflationary intervention into money market, which causes both the boom and following bust. The tight policy is symptom of the bust coming, not the cause.

  As for the prediction, we can start with the work laid down in 1912, "The Theory of Money and Credit", more specifically in these two paragraphs on Credit and Economic Crises (click the links to read the original)
  

  
  
  Certainly, the banks would be able to postpone the collapse; but nevertheless, as has been shown, the moment must eventually come when no further extension of the circulation of fiduciary media is possible. Then the catastrophe occurs, and its consequences are the worse and the reaction against the bull tendency of the market the stronger, the longer the period during which the rate of interest on loans has been below the natural rate of interest and the greater the extent to which roundabout processes of production that are not justified by the state of the capital market have been adopted.
  
  

  
  

  Published: November 2, 2008 4:28 AM

• Roland

  Ireland,

  Thank you very much for your answer, however quotation is a general description of the business-cycle and not a specific prediction of the great depression.

  What I am looking for is something more concrete, comparable to the writings of Peter Schiff who has been warning about the subprime crisis for years.

  A quotation from Mises about the great depression (not a general description about the business cycle, but a concrete warning that the boom of the 20s will end in a depression as soon as the Fed is forced off the inflationary path in order to save the currency) would be a great ammunition against individuals who are still thinking that the depression just "happened".

  P.S.: As a person who has read many if not most of Mises' books of course I know that the inflationary policy is not sustainable and sooner (a small recession) or later (a large depression or even the destruction of the currency) the price for the imaginary prosperity has to be paid. However, just like Chemotherapy will inflict a lot of pain to the patient in order to avoid even greater pain (or death) in the future, the return to tight monetary policy was not the underlying cause for the great depression, but it surely was the trigger.

  Published: November 2, 2008 5:25 AM

• Ireland

  Hello Roland, I doubt that an austrian citation can be found in support of the thesis that "Federal Reserve going from an inflationary policy to a tight monetary policy [caused] the depression" or that "return to tight monetary policy [...] was the trigger". It was all going to tumble down anyway, tightening was just last desperate steering to make it land on a hard place instead of a rock.

  Hence the suggestion to re-check with ABCT for validity of these ideas before one attempts to defend them. But having read much less from Mises' works, I stand to be corrected.
  

  Published: November 2, 2008 9:59 AM

• Dalton Y. Amile

  Roland: In response to your question, the Federal Reserve did not institute "tight" monetary policy. In effect, the monetary base was actually expanding; if you will go to the Fed's website you will see this represented graphically. It was the bank panics that caused the contraction in the money supply. When the public pulls cash out of the banks, the monetary base cannot expand and the money supply falls. They are two completely different variables. I hope that answers your question.

  Published: November 2, 2008 1:27 PM