From: Michael S. Lorrey (retroman@turbont.net)
Date: Tue Sep 05 2000 - 20:51:46 MDT
Forrest Bishop wrote:
> >
> > >Capitalism over-stokes the growth curve
> >
> > The business cycle, or boom-bust cycle, appears to be an artifact of
> > fractional-reserve lending, or fiat-currency issue. The same dynamic was
> > apparent at least a far back as the South Seas Bubble of 1721-3 (?).
Sorry, boom bust cycles precede fractional reserve and fiat currency lending in
the US by many decades. Properly managed reserve systems dampen boom/bust cycles
so that rather than having lots of people starving to death, you merely have a
small percentage go bankrupt.
> >
> > > and hides its fallout by shunting it to a slave underclass (such as
> > > sweatshop workers in the 3rd world) and by playing games with illusory
> > > fiat-money which has no physical foundation.
> >
> > Fiat "money" issued by a central bank is the antithesis of a free market,
> > and therefore of "capitalism". It is a form of command economy, which is why
> > Marx advocated it. A truely free market will either have free banking, or
> > preferably no fractional reserve lending banks whatsoever. This of course
> > requires a modicum of education among traders as to the history and nature
> > of banking and money, which is entirely absent in the government-approved
> > textbooks used in US public schools. This greatest of cons can only be pulled
> > on the ignorant.
A truly free market as you describe would require that all participants have
total access to all information available in that economy, so everyone is making
decisions based on their true best long term rational self interest. A reserve
system does not act as a command economy, it is rather a feedback governor that
allows the engine to operate in a significantly wide range, but prevents it from
choking itself off or reving itself to disintegration.
> >
> >
> > > 4. As for free markets - until such time as the planet's GNP is so huge
> > > that rationing becomes irrelevant,
> >
> > This is not a possibility.
>
> An expansion of the above, with facts and figures, is posted at:
> http://216.46.231.211/credit.htm
>
> The Credit Bubble Bulletin - by Doug Noland
> On the Manipulation of Money and Credit
>
> September 1, 2000
> “Sooner or later, the crisis must break out as the result of a change in the
> conduct of the banks. The later the crack-up comes, the longer the period
> in which the calculation of the entrepreneurs is misguided by the issue of
> additional fiduciary media (i.e., banknotes and checking accounts not fully
> backed by money). The greater this additional quantity of fiduciary
> money, the more factors of production have been firmly committed in the
> form of investments which appeared profitable only because of the
> artificially reduced interest rate and which prove to be unprofitable now
> that the interest rate has again been raised. Great losses are sustained
> as a result of misdirected capital investments.” Ludwig von Mises, Von
> Mises on the Manipulation of Money and Credit.
> ...
> Instead of understanding that a negative savings rate is indicative of a
> severely distorted bubble economy, the bullish consensus sees the
> continued borrowing and spending binge as evidence of a sound and
> stable prosperity. It is this momentous gap between the perceived
> supreme health of the current environment and the actual reality of
> massive financial and economic imbalances that is disturbingly
> reminiscent of the bubbles of 1929 in the U.S., 1989 in Japan, and 1996 in
> SE Asia.
Sorry, the three episodes you speak of were not due to continued borrowing and
spending, but due to outright fraud and misinformation across wide sectors of
the economy disintegrating the metastable system of the bayesian market.
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