I've long felt that this succinct summation of the austrian business cycle is not just the easiest to understand of any, but thoroughly revelatory. This is can easily be a 'eureka' moment for the layman.
It was for me. I used to think the theory was a bunch of bunk because I'd only heard distorted or misrepresented accounts of it. As soon as I heard this lecture, I was cured lol.
Moz Boy Because: a. They’ve been indoctrinated to believe in fiat money. b. They’d rather stick with the status quo than confront uncomfortable realities.
Excellent explanation. Just explaining that interest rates have a function in the economy and that savings are freeing up existing resources should make it very clear what's wrong with simply pumping more money into the economy.
With regards to the brick layer, there seems to be more to the story or maybe Im over analyzing this ? The quarry where bricks are made (THE FED), home hardware( BANKS) and the little guy (brick layer). The little guy cant get enough bricks to finish his project, he goes to the home hardware store to get more bricks, where he is able to get them cheap because the quarry was selling the bricks for free(QE) and actually paying the home hardware store, to buy the bricks from them, so the home hardware store sells them cheaper to the customer, but of course this doesnt happen, the hardware store charges the normal price with only a fraction of a discount, so they make more money looking good on the market. The brick layer gets more bricks at a cheaper price but only a fraction cheaper then previous, to build more houses, This results in the market looking amazing because profits are higher, dividends are better, more houses being built but the problem is, 1 - no one can afford the new houses 2- there isnt enough people who are looking for bricks houses. 3 the home hardware store isnt getting paid for the bricks from the quarry, and now must rely on the little guy but he stopped buying bricks because no one is buying the houses. The home hardware store sells will start to decrease, the brick layer has built so many houses that are empty. The market starts to become weak, so the quarry says will keep giving cheap bricks, but no one is buying homes this time and the market gets flooded with BRICKS. Result = more bricks but no demand.
no. the Fed isn't a quarry, as it's not making bricks - it's only handing out promises to deliver some bricks, without producing any. the quarry in your example is the economy, not the Fed. creation of paper money out of thin air doesn't create any real resources to back up that money.
Tomasz Malinowski goood point, I guess I was trying to use the bricks as money in my example. Using a material asset for trade, was the idea behind my example and yes I know fiat currency isnt truly a material asset but into todays society it is see as that.
I've long felt that this succinct summation of the austrian business cycle is not just the easiest to understand of any, but thoroughly revelatory. This is can easily be a 'eureka' moment for the layman.
It was for me. I used to think the theory was a bunch of bunk because I'd only heard distorted or misrepresented accounts of it. As soon as I heard this lecture, I was cured lol.
Yes!
This is brilliance from Tom Woods.
Why is such a simple cycle of so few events so hard for so many people to understand?
Moz Boy Because:
a. They’ve been indoctrinated to believe in fiat money.
b. They’d rather stick with the status quo than confront uncomfortable realities.
I keep coming back to this video. One of the best videos out there with woods
Excellent explanation. Just explaining that interest rates have a function in the economy and that savings are freeing up existing resources should make it very clear what's wrong with simply pumping more money into the economy.
Exactly right. As Woods says, the whole point of the Austrian view of interest rates is that we actually believe they mean something
i was reminded of this today after stephan molyneux's cursory review of the crisis. this explanation is a classic.
Wow! So well explained. Thanks a lot Tom Woods
The knowledge that Tom Woods knows
Tom Woods could explain nuclear physics to a rodent and it would go on to get a PhD.
With regards to the brick layer, there seems to be more to the story or maybe Im over analyzing this ? The quarry where bricks are made (THE FED), home hardware( BANKS) and the little guy (brick layer). The little guy cant get enough bricks to finish his project, he goes to the home hardware store to get more bricks, where he is able to get them cheap because the quarry was selling the bricks for free(QE) and actually paying the home hardware store, to buy the bricks from them, so the home hardware store sells them cheaper to the customer, but of course this doesnt happen, the hardware store charges the normal price with only a fraction of a discount, so they make more money looking good on the market. The brick layer gets more bricks at a cheaper price but only a fraction cheaper then previous, to build more houses, This results in the market looking amazing because profits are higher, dividends are better, more houses being built but the problem is, 1 - no one can afford the new houses 2- there isnt enough people who are looking for bricks houses. 3 the home hardware store isnt getting paid for the bricks from the quarry, and now must rely on the little guy but he stopped buying bricks because no one is buying the houses. The home hardware store sells will start to decrease, the brick layer has built so many houses that are empty. The market starts to become weak, so the quarry says will keep giving cheap bricks, but no one is buying homes this time and the market gets flooded with BRICKS. Result = more bricks but no demand.
no. the Fed isn't a quarry, as it's not making bricks - it's only handing out promises to deliver some bricks, without producing any. the quarry in your example is the economy, not the Fed.
creation of paper money out of thin air doesn't create any real resources to back up that money.
Tomasz Malinowski
goood point, I guess I was trying to use the bricks as money in my example. Using a material asset for trade, was the idea behind my example and yes I know fiat currency isnt truly a material asset but into todays society it is see as that.
Hello temujin
fuck around and find out innit
i
The best intro out there