@@gorkemvids4839 you can never do it perfectly, because perfect information is impossible to obtain, but you can make decent approximations and employ various means to mitigate the negative effects of the errors in your judgement.
@@Max-nc4zn Having a government manipulate you with false information is not the same as judgment errors or mistakes, you can't make decent approximations against those.
Guys this video is fantastics, you deserved a lot more subscribe and likes for this, this is acutally mirroring the current market situation. Keep going, you must be shine in the future. Thanks for this video
Modern economies suffer boom-bust cycles the source of which is the operation of land markets (land broadly defined as all of nature and assets with an inelastic supply). Whether money and credit are systemic as well or better described as externalities continues to be the subject to intense debate. Ricardo was on the right track as he developed his "law of rent," if he had only extended his analysis beyond that of agricultural land. The real high rents arise as a claim on production as population growth occurs in cities. As Henry George observed, it is the failure of the community to collect societally-created rents to pay for public goods and services that forces government to tax earned incomes, tax capital goods and tax commerce -- all such taxes imposed serious deadweight losses on economic output while enriching non-producing "rentier" interests. The result is and has been a land market cycle lasting an average 18-21 years going back several hundred years.
It doesn't just "trick" the market. It distorts fundamental incentives & capabilities. Reserves fuel credit creation. Banks compete to drive down rates as to attract borrowers. Credit is now cheap & inflationary. Savings (since they're a liability) are paid less in interest, & are now discouraged because of this inflationary pressure. This cheap credit gets allocated to undemanded/lesser demanded ventures, while at the same time more people are spending instead of saving. Bubbles in the economy form (along with our dependency on them), speculation & volatility increase, our time preference of consumption & production is worsed, inflationary pressure effects every price differently because of relative stickiness (so price signals are distorted), resources are misallocated, real wage growth is hindered because wages are more sticky, inequality increases as asset owners are granted artificial appreciation, & the poor are priced out of the market (forcing them into debt). Especially to buy assets like housing.
@@austinbyrd4164 thats incorrect, if I choose to spend, the money just ends up in someone else’s account, the total supply stays the same whether I keep it or not.
@@austinbyrd4164 the Austrian theory rests on the idea of a natural rate, and how without the fed higher savings would lower rates. That’s just not true unless we are talking about cash. Most savings arent deposited via cash anyway, usually via check, which causes total supply of money in banks to stay the same.
Mises o tym pisał, potem jeszcze głębiej pisał o tym Hayek, za co dostał nobla. Rothbard zresztą też popierał tę teorię. Odpisujemy po polsku bo wymieniłeś polski tytuł:)
Could someone please confirm my understanding is correct? 1:00: "Interest rate merely express the existing supplies and demand, not the other way round". This means: by right, the interest rate would simply reflect s the money supplies and demands. Artificially adjusting the interest does not really change the fundamental (consumer's) supply and demand.
When demand comes down, so does supply of those products or commodities. People save more and hence that money is available for investments by entrepreneurs into long term investments like building roads, houses, improvements in products, services etc. So when interest rates are low, entrepreneurs get the signal that now is the time to make long term investment as people are saving and not spending. When interest rates rise, entrepreneurs do not undertake investments. So market based interest rates are a signal to the entrepreneur. By artificially creating low interest rates, it is an incentive for the entrepreneur to start investing despite not people not saving money. So when the entrepreneur starts a project, it becomes unfeasible as the there is too much liquidity in the market and the central banks raise the internet rate. This makes the entrepreneurs investments bad or makes it malinvestment to continue further. Thus bringing downturn in the entire economy, leading to recession. Thus, after creating artificial booms with low interest rates, central banks create busts with high interest rates. (And the banks get to repossess real goods and resources by creating money out of thin air)
Why was the Central Bank even created for to begin with though? I mean, are there booms and busts in the natural market or why would government interfere?
Booms and busts without the central banks would be very few and not an industry or economy-wide phenomenon. But with the central banks fiddling in the market economy, the entire economy turns into recession and depression with higher booms and lower busts
the only problem i have with this is the assumption that entrepreneurs will make malinvestments when credit is cheap and interest rates are low, well, they make malinvestments all the time, so it is about the quantity of malinvestments?
@@austinbyrd4164 Absolutely not. Human condition is the last part of economic theory left. Humans will repeatedly do stupid things like assume "This time, it's different!" It's never different and malinvestment always leads to economic busts.
@@life_of_riley88 I've since changed my stance on this. If you don't take advantage of low rates, you'll lose compared to your competitors. Absolutely true, it inherently creates malinvestments.
Please also include the Keynesian debunkings of this theory. Not everybody is going to learn about them by reading an actual economics textbook. Lots of people will only watch videos like these and come away with the impression that the Austrian business cycle theory tells you everything you need to know. And they they will vote based on that false belief.
@@nvonliph Agreed, Keynes best response when asked: "What happens when eventually the currency and free markets eventually reject your expansionary theory?" His answer: "Well who cares, we'll all be dead!" We are nearing that point.
@@thotslayer9914 stirner was actually a rationalist. He would have likely agreed with the Austrians, unlike the self contradicting empiricist propagandists. Although, given his moral theory, depending on how well connected to the state he was, he might have pretended to agree with the keynesians, marxists or fascists.
@@thotslayer9914 in the Austrian view, economic power would be no more than the means a person has to satisfy their ends. It is possible to have an economy consisting of only one person. "My power is my property. My power gives me property. My power am I myself, and through it am I my property." -Stirner. The individual and his property are the only things that aren't spooks. The foundation of Austrian economics, the action axiom, is equivalent to psychological egoism, and the laws of economics are all that follows from it.
The unit of value, or utility, that some economists use is called "utils" but Austrians reject the concept of measurable units of value, utility, satisfaction or happiness, which are all pretty much the same thing within the context of economics.
@@novinceinhosic3531 according to how economics should be done: praxeology. Economics cannot be treated as a science like physics and chemistry. It has to be deductively demonstrated from action.
Main message I suppose: live within your means and detail your plan and outcomes.
you can't do that with false information.
@@gorkemvids4839 you can never do it perfectly, because perfect information is impossible to obtain, but you can make decent approximations and employ various means to mitigate the negative effects of the errors in your judgement.
@@Max-nc4zn Having a government manipulate you with false information is not the same as judgment errors or mistakes, you can't make decent approximations against those.
Brilliant video! We really need someone to present real economics in simple ways such as this!
Thank you! 😊
All the stimulus introduced into the economy during Covid finally made these concepts crystal clear to me.
That was like Borat talking about economics over Avatar ost, amazing!!
Excellent visuals aids and editing . Mises Hayek Rothbard would be very proud
Beautifully explained. Keep up the good work.
Great job. Thanks for sharing
Guys this video is fantastics, you deserved a lot more subscribe and likes for this, this is acutally mirroring the current market situation. Keep going, you must be shine in the future. Thanks for this video
Thank you. Really well explained!!
Modern economies suffer boom-bust cycles the source of which is the operation of land markets (land broadly defined as all of nature and assets with an inelastic supply). Whether money and credit are systemic as well or better described as externalities continues to be the subject to intense debate. Ricardo was on the right track as he developed his "law of rent," if he had only extended his analysis beyond that of agricultural land. The real high rents arise as a claim on production as population growth occurs in cities. As Henry George observed, it is the failure of the community to collect societally-created rents to pay for public goods and services that forces government to tax earned incomes, tax capital goods and tax commerce -- all such taxes imposed serious deadweight losses on economic output while enriching non-producing "rentier" interests. The result is and has been a land market cycle lasting an average 18-21 years going back several hundred years.
It doesn't just "trick" the market. It distorts fundamental incentives & capabilities.
Reserves fuel credit creation. Banks compete to drive down rates as to attract borrowers. Credit is now cheap & inflationary. Savings (since they're a liability) are paid less in interest, & are now discouraged because of this inflationary pressure. This cheap credit gets allocated to undemanded/lesser demanded ventures, while at the same time more people are spending instead of saving.
Bubbles in the economy form (along with our dependency on them), speculation & volatility increase, our time preference of consumption & production is worsed, inflationary pressure effects every price differently because of relative stickiness (so price signals are distorted), resources are misallocated, real wage growth is hindered because wages are more sticky, inequality increases as asset owners are granted artificial appreciation, & the poor are priced out of the market (forcing them into debt). Especially to buy assets like housing.
This is just completely incorrect. Banks can’t lend out reserves, that also means that more savings doesn’t lower the interest rate.
@Oleg Igoverich never said they do lol. They fuel credit creation.
In a free market under a scarce currency, more savings = lower rates
@@austinbyrd4164 thats incorrect, if I choose to spend, the money just ends up in someone else’s account, the total supply stays the same whether I keep it or not.
@Oleg Igoverich Huh? How is that relevant to the discussion?
@@austinbyrd4164 the Austrian theory rests on the idea of a natural rate, and how without the fed higher savings would lower rates. That’s just not true unless we are talking about cash. Most savings arent deposited via cash anyway, usually via check, which causes total supply of money in banks to stay the same.
Dude are you the chief economist for the Mexican drug cartels? What is with the drug analogies?
Drugs is a business.
If you look at the drug war from a purely economic point of view, the role of the government is to protect the drug cartel Monopoly
@@cacosta560 how so?
@@s3tch2t20 scares small cartels that can’t afford to corrupt government. In America scares small bussiness that can’t afford lawyers
Please, link the previous video if you want people to watch it beforehand.
As I remember it was written in a book called "Marksizm. Krytyka" by Bawerk, Mises and Rothbard. This part belongs to Ludwig von Mises, am I right?
Mises o tym pisał, potem jeszcze głębiej pisał o tym Hayek, za co dostał nobla. Rothbard zresztą też popierał tę teorię. Odpisujemy po polsku bo wymieniłeś polski tytuł:)
Ahhh entendi. É por isso que o plano do ciro gomes de brincar com a taxa de juros não vai dar certo.
Could someone please confirm my understanding is correct? 1:00: "Interest rate merely express the existing supplies and demand, not the other way round". This means: by right, the interest rate would simply reflect s the money supplies and demands. Artificially adjusting the interest does not really change the fundamental (consumer's) supply and demand.
When demand comes down, so does supply of those products or commodities. People save more and hence that money is available for investments by entrepreneurs into long term investments like building roads, houses, improvements in products, services etc.
So when interest rates are low, entrepreneurs get the signal that now is the time to make long term investment as people are saving and not spending.
When interest rates rise, entrepreneurs do not undertake investments. So market based interest rates are a signal to the entrepreneur.
By artificially creating low interest rates, it is an incentive for the entrepreneur to start investing despite not people not saving money. So when the entrepreneur starts a project, it becomes unfeasible as the there is too much liquidity in the market and the central banks raise the internet rate.
This makes the entrepreneurs investments bad or makes it malinvestment to continue further. Thus bringing downturn in the entire economy, leading to recession.
Thus, after creating artificial booms with low interest rates, central banks create busts with high interest rates.
(And the banks get to repossess real goods and resources by creating money out of thin air)
@@leenasawdekar9339 Thank you. Beautiful explanation.
Why was the Central Bank even created for to begin with though?
I mean, are there booms and busts in the natural market or why would government interfere?
Booms and busts without the central banks would be very few and not an industry or economy-wide phenomenon.
But with the central banks fiddling in the market economy, the entire economy turns into recession and depression with higher booms and lower busts
That voice sounds fammiliar to me... Aren't you Polish youtuber?
the only problem i have with this is the assumption that entrepreneurs will make malinvestments when credit is cheap and interest rates are low, well, they make malinvestments all the time, so it is about the quantity of malinvestments?
Victor Krepsky Yeah they make more malinvestments but that stems from the distortion of interest rates.
@@tommyrosati9326 but wouldn't they know that interest rates are artificially low, therefore continue being cautious?
@@austinbyrd4164 Absolutely not. Human condition is the last part of economic theory left. Humans will repeatedly do stupid things like assume "This time, it's different!" It's never different and malinvestment always leads to economic busts.
@@life_of_riley88 I've since changed my stance on this. If you don't take advantage of low rates, you'll lose compared to your competitors.
Absolutely true, it inherently creates malinvestments.
Please also include the Keynesian debunkings of this theory. Not everybody is going to learn about them by reading an actual economics textbook. Lots of people will only watch videos like these and come away with the impression that the Austrian business cycle theory tells you everything you need to know. And they they will vote based on that false belief.
could you post links to some good keynesian rebuttals?
@@nvonliph Agreed, Keynes best response when asked: "What happens when eventually the currency and free markets eventually reject your expansionary theory?"
His answer: "Well who cares, we'll all be dead!"
We are nearing that point.
Bust is, price inflation without real money supply increase. isn't it?
@@thotslayer9914 stirner was actually a rationalist. He would have likely agreed with the Austrians, unlike the self contradicting empiricist propagandists. Although, given his moral theory, depending on how well connected to the state he was, he might have pretended to agree with the keynesians, marxists or fascists.
@@thotslayer9914 in the Austrian view, economic power would be no more than the means a person has to satisfy their ends. It is possible to have an economy consisting of only one person.
"My power is my property. My power gives me property. My power am I myself, and through it am I my property."
-Stirner.
The individual and his property are the only things that aren't spooks. The foundation of Austrian economics, the action axiom, is equivalent to psychological egoism, and the laws of economics are all that follows from it.
The issue is we do not measure value in joules. We speculate everything.
The unit of value, or utility, that some economists use is called "utils" but Austrians reject the concept of measurable units of value, utility, satisfaction or happiness, which are all pretty much the same thing within the context of economics.
Maybe with quantum computers we will be able to put a halt to speculation
One should note that this is only one theory, which doesnt allign with the mainly accepted theory
Other theories are simply wrong. Mainstream economic is a joke. Austrian economics is real and sound economics
@@novinceinhosic3531 according to how economics should be done: praxeology. Economics cannot be treated as a science like physics and chemistry. It has to be deductively demonstrated from action.
Cheap credit.
This accent gets on my nerves!
better than indian accennt
I actually like it