The View From 1776

Economic Booms And Subsequent Recessions

Ludwig von Mises explains, in Malinvestment, Not Overinvestment, Causes Booms.

Posted by .(JavaScript must be enabled to view this email address) on 05/25 at 01:07 AM
  1. How can there be problems when jj and da's betters are in charge! HUH., huh., !!!
    Posted by .(JavaScript must be enabled to view this email address)  on  05/25  at  10:45 PM
  2. Another thing that happens in "rate cutting environments," is a bunching of expansion due to human nature.

    When the FED starts cutting rates, why borrow when they first cut? Wait until the bottom is reached and possibly the first step back up in rates is seen.

    At that point, thousands of businesses that wanted to expand, view the time as right to borrow before rates go higher. Since each business weighs its borrowing decision on its own and not whether or not other businesses in their sector are borrowing and expanding too, we can easily get too much expansion at the same time that leads to the next "inventory recession" which all recessions since WW II have been until this one.

    This recession is a "credit expansion collapse" of the economy and thus, the things that created an illusion of growth in the other recessions don't work as well. We are having trouble just creating an illusion of improvement because the cost of what improvement we get creates more problems than it solves in the long term.

    The government's own accountants say this is unsustainable. The President admits it is unsustainable but, says we will address that problem later. Later means when it is much worse of a problem since we are already at the point where we can't tax or grow out of this.

    Cutting spending would start a depression now and yet, if we don't, we add risk to a dollar collapse with each month we increased debt and thus, interest on debt. It is the interest that is the real problem, not the amount of debt.

    For example, if w were to not borrow anymore and just have interest rates return to normal, we could easily quadruple the interest on debt and totally destroy any sound budget.
    Posted by JanPBurr  on  06/02  at  10:45 AM
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