Introduction. What issues we face today?
What next with our economy? How safe are our savings? How stable is our currency and our banking system?
Why has none of the so-called "mainstream Ökomomen," the pundits say the representatives of today's prevailing economic school (macroeconomics, Neoclassic) can predict this crisis?
first have the Austrian school
The only the current world economic crisis predicted, were the economists of the so-called Austrian School of economics, which in 1928 the collapse of the stock exchanges on "Black Friday" in October 1929 and the bursting of the U.S. housing bubble in 2007 have predicted as a prelude to the stock market crash of 2008 as only one. Much like today was the real cause of the global economic crisis from 1929, the inflationary monetary policies of the U.S. central bank increased the money supply between July 1922 and July 1929 by a total of 61.8%, resulting in a boom in the capital goods industry was triggered by soaring stock prices. Technically, the price drops on "Black Friday" was triggered by panic selling of many private investors due to a new financial product, that is debt-financed private equity purchases. When the "Fed" interest rates increased and the loans could not be served, had the investors sell their shares at any price, creating a chain reaction was created.
Back to the Austrian school. Who or what is the Austrian school of economics?
Let me put this in a few words to go beyond the scope of this event is not:
Perhaps we should first of the now conventional wisdom in economics called to show the differences:
The so-called macro-economics tries to aggregate, so theoretical entities such as national income, consumption, savings, investments, etc., to explain macroeconomic relationships in models. In uncritical use of these units, which are only abstract art greats, but it can be a significant reality of loss and the loss of the ability of the economy to provide useful services practice. I say that human action - and nothing else is economy - can not be explained in fixed formulas or computational statistics. The real understanding of economic processes can take place only from the analysis of action of individuals, as the micro economy, especially the Austrian school has been doing for a long time. The most important representatives of the Austrian School are:
Carl Menger (1840 - 1921)
Eugen von Böhm-Bawerk (1851 - 1914)
Friedrich von Wieser (1851 - 1926)
Ludwig von Mises (1881 - 1973) Friedrich August von
Hayek (1898 - 1992)
Fritz Machlup (1902 - 1983)
Hans F. Sennholz (1922 - 2007)
Murray N. Rothbard (1926 - 1995)
Israel M. Kirzner (b. 1930)
George Reisman (b. 1935)
Pascal Salin (b. 1939) Hans-Hermann Hoppe
(b. 1949) Jesús Huerta de Soto
(b. 1956)
Guido Hülsmann (b. 1966)
Ludwig von Mises is certainly the most famous and most important representative of the Austrian school, some say, the greatest economist ever.
Mises was born in 1881 in Vienna and was a student of Prof. Eugen von Böhm-Bawerk, Austrian Finance Minister at that time.
His works, as has been his early thesis: "Theory of Money and resources" of 1912 are milestones in the national economy. In his early work provides von Mises is the first time determines a real analysis of the phenomenon of money as commodity money, the demand (ie value) by its (yesterday) purchasing power.
Von Mises said in his book "The social economy" in 1922 the collapse of real existing socialism (then Soviet-style only) operating systems.
founded in 1927 by Mises, the Austrian economic research institute, together with his student, Friedrich August von Hayek, who receives the 1974 Nobel Prize in Economics.
The Great Depression of 1929 was von Mises therefore predict so well because he was the only realistic theory of the artificial inflation caused by Business cycles had developed, which explains the current crisis precisely. I come back later and I will quote from a lecture by Professor von Mises, because his comments very clear and understandable for everyone.
In his main work: "The political economy" (1940) (extended English version: Human Action (1949)) developed deductively from Mises economics. So he headed from knowledge of the case based on general laws. Von Mises major economic problems encountered by purely theoretical (not empirical) analysis. This micro-economic theory approach (also methodological individualism) throughout his Work. Mises calls this praxeology or theory of human action.
The Austrian school relies on statistical surveys, but not so in a logical, as it were mathematical conclusions. Logic stings so observing what is known also to many a-priori principles from mathematics:
. "The shortest distance between two points on a plane is a straight line"
The examples of the Austrian school recognized by the rebuttable not economic laws are as follows:
It can only be part of the loaned or invested, which corresponds to the same proportion of previously angespartem capital.
production must precede consumption. = What is now being consumed, it can not be consumed again in the future ("You can not have a cake and eat it").
fixing prices below the market clearing price lead to lasting shortages.
Without private ownership of productive resources, there can be no factor prices, and without factor prices is a cost accounting impossible.
taxes are a burden on producers and reduce production below the level reached otherwise.
Why do I mention today the findings of the Austrian School. The answer is: Who
the right recipes for overcoming wants to know the crisis that has to deal first with the real causes of the crisis:
present Unfortunately almost all of the electronic media commentators and politicians of all parties incorrect explanations, partly out of ignorance, some calculating. It is spoken by a collective greed insatiable speculator or the manager and made the allegedly evil responsible capitalism. The Chancellor, for example, speaks of the need for a new "market failure" with the new internationally accepted regulations to prevent. He who believes in "market failure" as the cause of economic crisis would, strictly speaking also of the "failure of gravity" speak in a plane crash and no longer by pilot error or equipment failure.
true that is, the assumption that if all the ups and downs are inevitable? Even on this issue provides Ludwig von Mises, the economically correct explanation:
"The repeated occurrence of boom periods with subsequent periods of depression is the inevitable result of the constantly repeated attempts to lower the market interest rate through credit expansion. There is a way to prevent the final context of a boom that has been generated by credit expansion. The only alternative is: either the crisis created by the voluntary early termination of credit expansion - or it occurs later as a final and total catastrophe of the currency in question system "
The international financial crisis is a problem for the market economy but not a problem of market economy.
another way, the boom was the problem, the recession is the solution .
What are the causes but the boom and ultimately led to the crisis?
Consider first the current banking system and in particular the role of government central banks.
second The system of fractional reserve (fractional reserve banking)
Our current banking system can be characterized as a system of fractional reserve and the term "bank and central bank technology with minimum reserve requirements known.
This world-dominant system is indeed celebrated as a cyclical engine and an indispensable guarantee for investment, in fact with the fractional reserve banking system but to a dangerous inflation of the economy, so the money supply expanding at:
The still-international in similar form existing world monetary system known, created in 1944 at the conference at Bretton Woods and the introduction of the International Monetary Fund (IWS) and the World Bank institutionalized with the dollar as global reserve currency. At the international Credit and currency markets may participate only nations that meet the criteria of the World Bank. The IWS system and the banking laws of the affected countries (eg the so-called Basel II agreement) stipulate that the lending banks have to make very little reserve capacity, so that will be held for the issued credit volume less than 10% of equity must . Until the abolition of the gold backing in 1913 in the U.S. and at the outbreak of World War II in all European states, a capital charge was part of a legal requirement from 50 to 100%.
How inflation can arise under this system shows a simple example: A cash amount
in the amount of 10,000.00 €, which is deposited with the bank, may, after this system for about 90% continue to be so awarded in the amount of € 9000.00 to the borrower X. This uses the borrower X loan of € 9000.00 to settle an account of the artisan Y, which pays the money at Raiffeisen Bank. At Raiffeisen Bank therefore a cash arises from € 9000.00, which is treated as the initial cash balance in the savings bank in the amount of 10,000.00 €. The Raiffeisen Bank to about 90% of the 9000.00-€ amount loaned out, so that shows how the reserve system to an uncontrolled inflationary, so money supply increase out without the funds generated by real assets, or adequate security would be covered. The collapse of this system is especially inevitable when the so-called cash storm comes, so to recover the very large number of savers in their savings accounts to pay. All government-enforced protection mechanisms such as deposit insurance fund flutter, state guarantees and obligations of mutual support banks unfortunately have a false sense of security before too. But goes even a single major bank bankrupt, it can all other banks carried away, as in a chain reaction. Lehman Brothers provided the proof.
political sorcerer's apprentices at work:
The biggest problem of the fractional reserve system, however, is that the state permission to give loans that do not have adequate capital cover face - and securing funds coupled with government guarantees to frivolous actions and to enter into incalculable risks (including moral hazard shown = irresponsible audacity) tempt. Finally, no one is personally liable and end jumps in the state.
This also fits in the last and second last term of the Finance Ministers Steinbrück and acorn put through innovations in the German financial market policy. In January 2006, this Peer Steinbrück in one of the public barely noticed article in the journal for the entire credit system under the heading entitled to expect what the German banking industry by the new federal government? "Now it turns out that the subject of new groundbreaking future projects that would push the government to just those transactions are in accordance with today's statement by the same politicians financial crisis have triggered ". to benefit capital reductions," the banks are offered the prospect of eliminating trade Further fiscal barriers to true sale securitisations is announced. Steinbrueck was also announced at that time, the limits on the acquisition of asset backed securities ", which is later than so-called junk bonds proved "in the investment provisions of insurance companies, pension funds and mutual funds check." If these goals have been fully implemented, millions of Germans had even lost their private pensions. Back in 2003, appointed Hans Eichel at the Boston Consulting Group, Frankfurt a report with the theme: "Optimal state conditions of a credit risk market / securitization market for credit exposures and risks in Germany." This report was in the time of the grand coalition basis of the will of the federal government to actively promote transactions and securities that triggered the crisis technically (keyword: Subprime crisis, see below).
third The central banking system with
addition to the fractional reserve banking and the non-market, but artificially fixed interest rate on central bank to increase money supply. If the central bank interest rate below the actual market rate, it has an excess supply of credit to the episode, which inevitably lead to finance risky and ultimately unprofitable investments. The loans can not be repaid and, ultimately, lead to the collapse of the banks and companies. The central bank controls the rate of the respective banks for the volume of credit available and therefore contributes to the inflationary of the economies.
4th Keywords Inflation: The paper money system
arises Moreover, as inflation and what is inflation?
this again Ludwig von Mises:
out "An increase in the money supply to ensure that the purchasing power of money falls and prices rise. That is inflation. "
As mentioned earlier, were later than the beginning of the First World War, the monetary regime of gold covered almost abolished worldwide. The enormous burdens of war would not otherwise have been financed. Prior to the abolition of the gold currencies until then outstanding paper money is only a substitute for commodity money in the form of Gold or silver. A bill was then the meaning of a deposit slip. For example, the German Reichsbank until 1914 was always obliged to pay out to the bearer of a note from the corresponding value in paper gold. This system led to a strong price stability, because money (= gold) was not in endless supply. The revenue from gold and silver mines could not be easily increased.
What happened to the gold standard?
1971 abolished the United States, the last link to gold from the dollar. President Nixon lifted the Einlösegarantie of the dollar against gold to foreign central banks. Then the U.S. dollar lost within 30 years about 80% of its Purchasing power.
Ludwig von Mises:
"Under the current technical conditions, nothing is easier to manufacture than paper notes, to which certain amounts of money are printed. In the U.S., where all bills are equal, it costs the government the same amount, whether they are printed a thousand-dollar bill or a Eindollarschein. "
Why are not gold-backed paper currencies for the respective governments so attractive?
They enable a massive increase in government spending without making unpopular tax increases must be.
correction will argue that it nevertheless independent central banks as monetary authorities' There. Central banks are, however, no monetary authority, but institutions that accept the reality with the elimination of loan interest rate is not a market price, but central planning. The amount of that rate in the past was always too low, that inflation was always the result. Even the stability-oriented former German Bundesbank had to bow to the actual pressure of politics and governments of other industrialized nations and could not prevent the German mark was 50 years after its introduction, only 5% in purchasing power.
The Evil is the inflation of the unfair and unequal distribution. This re-Ludwig von Mises:
"If the government instead of tax money used newly printed money for their spending needs, this means that some people have more money now, while everyone else still have the same amount of money as before. ... There are no more goods than before, but more money. And since it now are people who can now buy more than yesterday, will create additional demand for certain goods, thereby increasing the prices. This tendency to inflation - and that is the most important - is developing step by step. There is no such thing as a general, similar upward movement of the so-called price level.
... If the government causes inflation, because it contains a War or war material must therefore buy, then the arms factories and the workers of these industries are the first to receive the extra money. These people are now in a very convenient location. They have higher profits and higher wages. Your business is good. Why? They were the first to receive the extra money. And since they now have more money at their disposal, they buy more. And while they buy from other people, namely those that produce the goods for sale, they want. These people form a second group ... The owner, for example, has its plant in the vicinity of a weapons factory, says: It is really wonderful. The defense workers have more money .... The situation is thus as follows: Those who received the first of the new money have a higher income and therefore can buy many goods and services even to the old, lower prices, which were on the eve of inflation. ... But there are other population groups to which this extra money come until much later. These people are in an awkward position ... The biggest disadvantages of inflation were the pastors and teachers "So today the pensioners, civil servants etc.
inflation is a monetary phenomenon that is (money creation), while deflation. (Keyword: credit crunch) a structural phenomenon that is why deflation (or, more generally: economic crises) can not be addressed in monetary terms. That is, deflation is the cleanup of previous monetary sins - and the means of deflation for the purpose of cleanup are decreasing prices.
Let us consider the error in detail, which led to the emergence of the crisis. As already mentioned, it is generally speaking to inflation and inflation phenomena:
5th The U.S. housing bubble (subprime crisis)
was founded in 1938 by President Roosevelt, the Federal National Mortgage Association (Fannie Mae). The purpose of this state Bank, which could be comparable with the German Kreditanstalt für Wiederaufbau, it was awarded a state-run and low-interest mortgage loans based Institute for vulnerable groups of people with virtually no credit check in order to encourage the private real estate acquisition. The scope of Fannie Mae in 1974 (abbreviated Federal Home Loan Mortgage Corporation, Freddie Mac) through the establishment of a second National Bank with the same responsibilities added (market value a year ago, in the rest: - 5.6 billion U.S. dollars). 1995, the U.S. Congress adopts the so-called Community Reinvestment Act (CRA). This law and the private commercial banks prior to relax the credit criteria for lending to a "socially weak" highly selected group of people to facilitate the purchase of real estate for these people. There is talk of actually very risky loans to so-called NINJA customers ("No Income No Asset No Jobs"). Therefore, the market for mortgage loans as subprime market, so as second class (suboptimal) refers. These sub-prime mortgage loans were to do it all, even as securitized securities on the global financial markets.
order after the collapse of the so-called new economy, triggered by the so-called dot-com bubble (Internet boom in the late nineties) to prevent a recession began, the U.S. Federal Reserve after 11 September 2001 with a series of 13 massive interest rate cuts and increased in this way, the credit volume and thus inflation, because the same was also favored by the national debt.
The measures described above led initially to a dramatic increase in lending to weak private cash investors who purchased in part, without any equity share in increasingly real estate, which real estate prices allowed to rise rapidly in the United States. To keep credit market share, eventually expanded the private commercial banks in their lending.
The German Industrial Bank AG (IKB) is founded in 2002, the special purpose vehicle "Rhineland Funding Capital Corporation to enter out of their budgets in the U.S. mortgage market may be, the promises seem ever-rising house prices.
The actual financial crisis begins in the summer of 2007. In August 2007, breaking with Deutsche Industrie Bank AG (IKB), the first (state) German bank, with an annual loss of about € 700 million. The Saxon state bank must, because of similar massive losses of its special purpose vehicle in the U.S. mortgage market are forcing sold to LBBW. In October 2007, reports the American Citigroup write-downs of 55 billion U.S. dollars. In January 2008, WestLB announced an annual loss amounting to 1 billion EUR. In March 2008, reports the Bayerische Landesbank losses of up to EUR 3.8 billion on failed speculation in the U.S. housing market. IKB is finally sold in August 2008, the American investment bank Lone Star. The total loss to the taxpayers at this time is estimated at about 10 billion EUR.
The culmination of the banking crisis is reached in September 2008 with the collapse of Lehman Brothers in New York. A worldwide slump in stock prices is the result.
Consider the U.S. housing bubble once more precisely: It was just not a market failure, which led to the crisis but the mechanisms underlying the natural market bubble fed by inflation: the U.S. policy had always meant only as good: cheap state loans should also help poorer classes for home purchase. This policy of rampant credit expansion led to an artificially-fed demand for U.S. real estate without real capital formation had taken place. Property prices in the U.S. seemed to rise just yet. The bubble had to burst
when the Federal Reserve's inflation diagnosed with a more restrictive monetary policy, interest rate hikes so opposed. Actually, we would have all still to price records in the summer 2008 recall (gas, petrol and general commodity price explosions). Even then, we wanted to persuade certain politicians, evil and sinister speculators Group cartels would screw the price spiral for the exploitation of the masses to be gaining momentum. Price increases, however, were exclusively the result of the above-described increase money supply (inflation). The currencies had depreciated by massive purchasing power losses.
not the consumption and raw material prices rose, but dollar and euro lost their purchasing power. In this period of high prices invested unsuspecting German state banks such as BayernLB, WestLB, LBBW and IKB blithely German taxpayers' money on the U.S. housing market. This market went through which started in 2006 rate hikes by the Federal Reserve ultimately collapse because the price increases triggered by the mortgage loans led to the bankruptcy of the first loan borrowers. Like a snowball was a chain reaction: Low-income home buyers could no longer use interest and principal. The house was foreclosed. The many non-performing mortgage loans fell but now the value of pledged as collateral, but with a "bubble prices" rated, homes. The banks had to correct the loan value and thus fell into bankruptcy soon. The financial crisis was there. The market was no longer with cheap credit, inflation, bubbles and political programs To fool everyone but threw very rudely and quickly back to earth.
6th What to do?
Let us remember the main point is that the recession is not the problem, but the boom!
In the real world (market economy) make the interest thereon, that the timing of production and consumer aspirations match. The "natural rate" (Eugen von Böhm-Bawerk) expresses a match of resource allocation in the various stages of production on the one hand and the desired consumption patterns over time from the other. The interest is the expression of different time preference. Decreases the rate of time preference, would profit from the savings. The trend is away from consumption and towards longer-term action. Increases the rate of time preference (impatience), this is equivalent to increasing consumption. The interest rate is thus determined by supply and demand of the saved capital. Insufficient liquidity (credit crunch), there may be impossible in a free economy.
control Currently we heading for a new crash. The crisis was not overcome, but with new liquidity created from nothing (circulation loans since lending rates by central banks tend to zero) were created. The release of a new collapse can all actually unprofitable, so subsidized industries, such in the field of renewable energies in the range of CO2 pollution control certificates trading experience (literally a trade with hot air) or in U.S. government bonds. The value of the U.S. dollar declined since January 2001 in exchange for gold by 73%: At that time, an ounce of gold cost about 270 U.S. dollars, now well over 1000.00 U.S. dollars. The most likely is a significant dollar depreciation, so that the United States with their current record debts (state: about 15 trillion U.S. dollars: 9.1 trillion U.S. dollars, private households) debt.
to a currency reform in the U.S., a rate increase and a reduction of liquidity that is no way around.
But Europe has a even more serious crisis contrary: In just nine years has doubled the money supply in Europe, 2000, it amounted to about 4.9 trillion € € room, end of 2009 for € 9.7 trillion. We also need both in Europe (particularly affected Germany and France) observed in Japan as well as the continuation of the phenomenon of stagflation (high unemployment with high inflation and low growth).
The most important to overcome the crisis and to eliminate unnatural economic cycles is the stabilization of currencies and the reduction of debt in the government. Long term, the access of States to abolish the central banks and currencies stable fixed Bonds to the gold standard or other real values are restored.
Henry Hazlitt, longtime companion Ludwig von Mises said in his book "Economics in One Lesson": "The art of doing business is not only direct but also the long-term impact of each measure to see, it is also to the to consider consequences of any action not just one, but for all groups. "
, logically, would be long-term orientation and measures to be applied uniformly for all, instead of scrapping and recovery plans, only certain industries prefer. Debt reduction, reduction in government spending, Removal of subsidies and reduction of total government spending and tax cuts are a step in the right direction: The government needs to do much the same thing, they can have something
conclusion.
Dr. Thomas Jahn, November 2009.
Literature:
- Ludwig von Mises: Theory of money and fiduciary media, Vienna 1912
- Ludwig von Mises: the social economy. Analyses of socialism, Jena 1922
- Ludwig von Mises: the bureaucracy (Bureaucracy), New Haven, 1944 (available online at: http://docs.mises.de/Mises/Mises_Buerokratie.pdf)
- Ludwig von Mises: Human Action, Treaties on Economics, Chicago
1966 - Ludwig Erhard, Prosperity for all, first edition 1957, new edition Dusseldorf 2000
- Ludwig von Mises: "The Value of the better ideas - six lectures on economics and politics", Munich 2008 (new edition of the German first edition of 1983)
- Friedrich August von Hayek: The Road to servitude, new edition
Munich 2003 - Friedrich August von Hayek: The pretense of knowledge, Tübingen 1996th
- Franz Josef Strauss: Bids of freedom, Munich 1980
- Roland Baader: money, gold and God player, 2 Edition, 2005 Gräfelfing
- Guido Hülsmann: The Ethics of Money Production, Leipzig 2007
- Michael von Prollius: The perversion of the market economy, Munich 2009.
What next with our economy? How safe are our savings? How stable is our currency and our banking system?
Why has none of the so-called "mainstream Ökomomen," the pundits say the representatives of today's prevailing economic school (macroeconomics, Neoclassic) can predict this crisis?
first have the Austrian school
The only the current world economic crisis predicted, were the economists of the so-called Austrian School of economics, which in 1928 the collapse of the stock exchanges on "Black Friday" in October 1929 and the bursting of the U.S. housing bubble in 2007 have predicted as a prelude to the stock market crash of 2008 as only one. Much like today was the real cause of the global economic crisis from 1929, the inflationary monetary policies of the U.S. central bank increased the money supply between July 1922 and July 1929 by a total of 61.8%, resulting in a boom in the capital goods industry was triggered by soaring stock prices. Technically, the price drops on "Black Friday" was triggered by panic selling of many private investors due to a new financial product, that is debt-financed private equity purchases. When the "Fed" interest rates increased and the loans could not be served, had the investors sell their shares at any price, creating a chain reaction was created.
Back to the Austrian school. Who or what is the Austrian school of economics?
Let me put this in a few words to go beyond the scope of this event is not:
Perhaps we should first of the now conventional wisdom in economics called to show the differences:
The so-called macro-economics tries to aggregate, so theoretical entities such as national income, consumption, savings, investments, etc., to explain macroeconomic relationships in models. In uncritical use of these units, which are only abstract art greats, but it can be a significant reality of loss and the loss of the ability of the economy to provide useful services practice. I say that human action - and nothing else is economy - can not be explained in fixed formulas or computational statistics. The real understanding of economic processes can take place only from the analysis of action of individuals, as the micro economy, especially the Austrian school has been doing for a long time. The most important representatives of the Austrian School are:
Carl Menger (1840 - 1921)
Eugen von Böhm-Bawerk (1851 - 1914)
Friedrich von Wieser (1851 - 1926)
Ludwig von Mises (1881 - 1973) Friedrich August von
Hayek (1898 - 1992)
Fritz Machlup (1902 - 1983)
Hans F. Sennholz (1922 - 2007)
Murray N. Rothbard (1926 - 1995)
Israel M. Kirzner (b. 1930)
George Reisman (b. 1935)
Pascal Salin (b. 1939) Hans-Hermann Hoppe
(b. 1949) Jesús Huerta de Soto
(b. 1956)
Guido Hülsmann (b. 1966)
Ludwig von Mises is certainly the most famous and most important representative of the Austrian school, some say, the greatest economist ever.
Mises was born in 1881 in Vienna and was a student of Prof. Eugen von Böhm-Bawerk, Austrian Finance Minister at that time.
His works, as has been his early thesis: "Theory of Money and resources" of 1912 are milestones in the national economy. In his early work provides von Mises is the first time determines a real analysis of the phenomenon of money as commodity money, the demand (ie value) by its (yesterday) purchasing power.
Von Mises said in his book "The social economy" in 1922 the collapse of real existing socialism (then Soviet-style only) operating systems.
founded in 1927 by Mises, the Austrian economic research institute, together with his student, Friedrich August von Hayek, who receives the 1974 Nobel Prize in Economics.
The Great Depression of 1929 was von Mises therefore predict so well because he was the only realistic theory of the artificial inflation caused by Business cycles had developed, which explains the current crisis precisely. I come back later and I will quote from a lecture by Professor von Mises, because his comments very clear and understandable for everyone.
In his main work: "The political economy" (1940) (extended English version: Human Action (1949)) developed deductively from Mises economics. So he headed from knowledge of the case based on general laws. Von Mises major economic problems encountered by purely theoretical (not empirical) analysis. This micro-economic theory approach (also methodological individualism) throughout his Work. Mises calls this praxeology or theory of human action.
The Austrian school relies on statistical surveys, but not so in a logical, as it were mathematical conclusions. Logic stings so observing what is known also to many a-priori principles from mathematics:
. "The shortest distance between two points on a plane is a straight line"
The examples of the Austrian school recognized by the rebuttable not economic laws are as follows:
It can only be part of the loaned or invested, which corresponds to the same proportion of previously angespartem capital.
production must precede consumption. = What is now being consumed, it can not be consumed again in the future ("You can not have a cake and eat it").
fixing prices below the market clearing price lead to lasting shortages.
Without private ownership of productive resources, there can be no factor prices, and without factor prices is a cost accounting impossible.
taxes are a burden on producers and reduce production below the level reached otherwise.
Why do I mention today the findings of the Austrian School. The answer is: Who
the right recipes for overcoming wants to know the crisis that has to deal first with the real causes of the crisis:
present Unfortunately almost all of the electronic media commentators and politicians of all parties incorrect explanations, partly out of ignorance, some calculating. It is spoken by a collective greed insatiable speculator or the manager and made the allegedly evil responsible capitalism. The Chancellor, for example, speaks of the need for a new "market failure" with the new internationally accepted regulations to prevent. He who believes in "market failure" as the cause of economic crisis would, strictly speaking also of the "failure of gravity" speak in a plane crash and no longer by pilot error or equipment failure.
true that is, the assumption that if all the ups and downs are inevitable? Even on this issue provides Ludwig von Mises, the economically correct explanation:
"The repeated occurrence of boom periods with subsequent periods of depression is the inevitable result of the constantly repeated attempts to lower the market interest rate through credit expansion. There is a way to prevent the final context of a boom that has been generated by credit expansion. The only alternative is: either the crisis created by the voluntary early termination of credit expansion - or it occurs later as a final and total catastrophe of the currency in question system "
The international financial crisis is a problem for the market economy but not a problem of market economy.
another way, the boom was the problem, the recession is the solution .
What are the causes but the boom and ultimately led to the crisis?
Consider first the current banking system and in particular the role of government central banks.
second The system of fractional reserve (fractional reserve banking)
Our current banking system can be characterized as a system of fractional reserve and the term "bank and central bank technology with minimum reserve requirements known.
This world-dominant system is indeed celebrated as a cyclical engine and an indispensable guarantee for investment, in fact with the fractional reserve banking system but to a dangerous inflation of the economy, so the money supply expanding at:
The still-international in similar form existing world monetary system known, created in 1944 at the conference at Bretton Woods and the introduction of the International Monetary Fund (IWS) and the World Bank institutionalized with the dollar as global reserve currency. At the international Credit and currency markets may participate only nations that meet the criteria of the World Bank. The IWS system and the banking laws of the affected countries (eg the so-called Basel II agreement) stipulate that the lending banks have to make very little reserve capacity, so that will be held for the issued credit volume less than 10% of equity must . Until the abolition of the gold backing in 1913 in the U.S. and at the outbreak of World War II in all European states, a capital charge was part of a legal requirement from 50 to 100%.
How inflation can arise under this system shows a simple example: A cash amount
in the amount of 10,000.00 €, which is deposited with the bank, may, after this system for about 90% continue to be so awarded in the amount of € 9000.00 to the borrower X. This uses the borrower X loan of € 9000.00 to settle an account of the artisan Y, which pays the money at Raiffeisen Bank. At Raiffeisen Bank therefore a cash arises from € 9000.00, which is treated as the initial cash balance in the savings bank in the amount of 10,000.00 €. The Raiffeisen Bank to about 90% of the 9000.00-€ amount loaned out, so that shows how the reserve system to an uncontrolled inflationary, so money supply increase out without the funds generated by real assets, or adequate security would be covered. The collapse of this system is especially inevitable when the so-called cash storm comes, so to recover the very large number of savers in their savings accounts to pay. All government-enforced protection mechanisms such as deposit insurance fund flutter, state guarantees and obligations of mutual support banks unfortunately have a false sense of security before too. But goes even a single major bank bankrupt, it can all other banks carried away, as in a chain reaction. Lehman Brothers provided the proof.
political sorcerer's apprentices at work:
The biggest problem of the fractional reserve system, however, is that the state permission to give loans that do not have adequate capital cover face - and securing funds coupled with government guarantees to frivolous actions and to enter into incalculable risks (including moral hazard shown = irresponsible audacity) tempt. Finally, no one is personally liable and end jumps in the state.
This also fits in the last and second last term of the Finance Ministers Steinbrück and acorn put through innovations in the German financial market policy. In January 2006, this Peer Steinbrück in one of the public barely noticed article in the journal for the entire credit system under the heading entitled to expect what the German banking industry by the new federal government? "Now it turns out that the subject of new groundbreaking future projects that would push the government to just those transactions are in accordance with today's statement by the same politicians financial crisis have triggered ". to benefit capital reductions," the banks are offered the prospect of eliminating trade Further fiscal barriers to true sale securitisations is announced. Steinbrueck was also announced at that time, the limits on the acquisition of asset backed securities ", which is later than so-called junk bonds proved "in the investment provisions of insurance companies, pension funds and mutual funds check." If these goals have been fully implemented, millions of Germans had even lost their private pensions. Back in 2003, appointed Hans Eichel at the Boston Consulting Group, Frankfurt a report with the theme: "Optimal state conditions of a credit risk market / securitization market for credit exposures and risks in Germany." This report was in the time of the grand coalition basis of the will of the federal government to actively promote transactions and securities that triggered the crisis technically (keyword: Subprime crisis, see below).
third The central banking system with
addition to the fractional reserve banking and the non-market, but artificially fixed interest rate on central bank to increase money supply. If the central bank interest rate below the actual market rate, it has an excess supply of credit to the episode, which inevitably lead to finance risky and ultimately unprofitable investments. The loans can not be repaid and, ultimately, lead to the collapse of the banks and companies. The central bank controls the rate of the respective banks for the volume of credit available and therefore contributes to the inflationary of the economies.
4th Keywords Inflation: The paper money system
arises Moreover, as inflation and what is inflation?
this again Ludwig von Mises:
out "An increase in the money supply to ensure that the purchasing power of money falls and prices rise. That is inflation. "
As mentioned earlier, were later than the beginning of the First World War, the monetary regime of gold covered almost abolished worldwide. The enormous burdens of war would not otherwise have been financed. Prior to the abolition of the gold currencies until then outstanding paper money is only a substitute for commodity money in the form of Gold or silver. A bill was then the meaning of a deposit slip. For example, the German Reichsbank until 1914 was always obliged to pay out to the bearer of a note from the corresponding value in paper gold. This system led to a strong price stability, because money (= gold) was not in endless supply. The revenue from gold and silver mines could not be easily increased.
What happened to the gold standard?
1971 abolished the United States, the last link to gold from the dollar. President Nixon lifted the Einlösegarantie of the dollar against gold to foreign central banks. Then the U.S. dollar lost within 30 years about 80% of its Purchasing power.
Ludwig von Mises:
"Under the current technical conditions, nothing is easier to manufacture than paper notes, to which certain amounts of money are printed. In the U.S., where all bills are equal, it costs the government the same amount, whether they are printed a thousand-dollar bill or a Eindollarschein. "
Why are not gold-backed paper currencies for the respective governments so attractive?
They enable a massive increase in government spending without making unpopular tax increases must be.
correction will argue that it nevertheless independent central banks as monetary authorities' There. Central banks are, however, no monetary authority, but institutions that accept the reality with the elimination of loan interest rate is not a market price, but central planning. The amount of that rate in the past was always too low, that inflation was always the result. Even the stability-oriented former German Bundesbank had to bow to the actual pressure of politics and governments of other industrialized nations and could not prevent the German mark was 50 years after its introduction, only 5% in purchasing power.
The Evil is the inflation of the unfair and unequal distribution. This re-Ludwig von Mises:
"If the government instead of tax money used newly printed money for their spending needs, this means that some people have more money now, while everyone else still have the same amount of money as before. ... There are no more goods than before, but more money. And since it now are people who can now buy more than yesterday, will create additional demand for certain goods, thereby increasing the prices. This tendency to inflation - and that is the most important - is developing step by step. There is no such thing as a general, similar upward movement of the so-called price level.
... If the government causes inflation, because it contains a War or war material must therefore buy, then the arms factories and the workers of these industries are the first to receive the extra money. These people are now in a very convenient location. They have higher profits and higher wages. Your business is good. Why? They were the first to receive the extra money. And since they now have more money at their disposal, they buy more. And while they buy from other people, namely those that produce the goods for sale, they want. These people form a second group ... The owner, for example, has its plant in the vicinity of a weapons factory, says: It is really wonderful. The defense workers have more money .... The situation is thus as follows: Those who received the first of the new money have a higher income and therefore can buy many goods and services even to the old, lower prices, which were on the eve of inflation. ... But there are other population groups to which this extra money come until much later. These people are in an awkward position ... The biggest disadvantages of inflation were the pastors and teachers "So today the pensioners, civil servants etc.
inflation is a monetary phenomenon that is (money creation), while deflation. (Keyword: credit crunch) a structural phenomenon that is why deflation (or, more generally: economic crises) can not be addressed in monetary terms. That is, deflation is the cleanup of previous monetary sins - and the means of deflation for the purpose of cleanup are decreasing prices.
Let us consider the error in detail, which led to the emergence of the crisis. As already mentioned, it is generally speaking to inflation and inflation phenomena:
5th The U.S. housing bubble (subprime crisis)
was founded in 1938 by President Roosevelt, the Federal National Mortgage Association (Fannie Mae). The purpose of this state Bank, which could be comparable with the German Kreditanstalt für Wiederaufbau, it was awarded a state-run and low-interest mortgage loans based Institute for vulnerable groups of people with virtually no credit check in order to encourage the private real estate acquisition. The scope of Fannie Mae in 1974 (abbreviated Federal Home Loan Mortgage Corporation, Freddie Mac) through the establishment of a second National Bank with the same responsibilities added (market value a year ago, in the rest: - 5.6 billion U.S. dollars). 1995, the U.S. Congress adopts the so-called Community Reinvestment Act (CRA). This law and the private commercial banks prior to relax the credit criteria for lending to a "socially weak" highly selected group of people to facilitate the purchase of real estate for these people. There is talk of actually very risky loans to so-called NINJA customers ("No Income No Asset No Jobs"). Therefore, the market for mortgage loans as subprime market, so as second class (suboptimal) refers. These sub-prime mortgage loans were to do it all, even as securitized securities on the global financial markets.
order after the collapse of the so-called new economy, triggered by the so-called dot-com bubble (Internet boom in the late nineties) to prevent a recession began, the U.S. Federal Reserve after 11 September 2001 with a series of 13 massive interest rate cuts and increased in this way, the credit volume and thus inflation, because the same was also favored by the national debt.
The measures described above led initially to a dramatic increase in lending to weak private cash investors who purchased in part, without any equity share in increasingly real estate, which real estate prices allowed to rise rapidly in the United States. To keep credit market share, eventually expanded the private commercial banks in their lending.
The German Industrial Bank AG (IKB) is founded in 2002, the special purpose vehicle "Rhineland Funding Capital Corporation to enter out of their budgets in the U.S. mortgage market may be, the promises seem ever-rising house prices.
The actual financial crisis begins in the summer of 2007. In August 2007, breaking with Deutsche Industrie Bank AG (IKB), the first (state) German bank, with an annual loss of about € 700 million. The Saxon state bank must, because of similar massive losses of its special purpose vehicle in the U.S. mortgage market are forcing sold to LBBW. In October 2007, reports the American Citigroup write-downs of 55 billion U.S. dollars. In January 2008, WestLB announced an annual loss amounting to 1 billion EUR. In March 2008, reports the Bayerische Landesbank losses of up to EUR 3.8 billion on failed speculation in the U.S. housing market. IKB is finally sold in August 2008, the American investment bank Lone Star. The total loss to the taxpayers at this time is estimated at about 10 billion EUR.
The culmination of the banking crisis is reached in September 2008 with the collapse of Lehman Brothers in New York. A worldwide slump in stock prices is the result.
Consider the U.S. housing bubble once more precisely: It was just not a market failure, which led to the crisis but the mechanisms underlying the natural market bubble fed by inflation: the U.S. policy had always meant only as good: cheap state loans should also help poorer classes for home purchase. This policy of rampant credit expansion led to an artificially-fed demand for U.S. real estate without real capital formation had taken place. Property prices in the U.S. seemed to rise just yet. The bubble had to burst
when the Federal Reserve's inflation diagnosed with a more restrictive monetary policy, interest rate hikes so opposed. Actually, we would have all still to price records in the summer 2008 recall (gas, petrol and general commodity price explosions). Even then, we wanted to persuade certain politicians, evil and sinister speculators Group cartels would screw the price spiral for the exploitation of the masses to be gaining momentum. Price increases, however, were exclusively the result of the above-described increase money supply (inflation). The currencies had depreciated by massive purchasing power losses.
not the consumption and raw material prices rose, but dollar and euro lost their purchasing power. In this period of high prices invested unsuspecting German state banks such as BayernLB, WestLB, LBBW and IKB blithely German taxpayers' money on the U.S. housing market. This market went through which started in 2006 rate hikes by the Federal Reserve ultimately collapse because the price increases triggered by the mortgage loans led to the bankruptcy of the first loan borrowers. Like a snowball was a chain reaction: Low-income home buyers could no longer use interest and principal. The house was foreclosed. The many non-performing mortgage loans fell but now the value of pledged as collateral, but with a "bubble prices" rated, homes. The banks had to correct the loan value and thus fell into bankruptcy soon. The financial crisis was there. The market was no longer with cheap credit, inflation, bubbles and political programs To fool everyone but threw very rudely and quickly back to earth.
6th What to do?
Let us remember the main point is that the recession is not the problem, but the boom!
In the real world (market economy) make the interest thereon, that the timing of production and consumer aspirations match. The "natural rate" (Eugen von Böhm-Bawerk) expresses a match of resource allocation in the various stages of production on the one hand and the desired consumption patterns over time from the other. The interest is the expression of different time preference. Decreases the rate of time preference, would profit from the savings. The trend is away from consumption and towards longer-term action. Increases the rate of time preference (impatience), this is equivalent to increasing consumption. The interest rate is thus determined by supply and demand of the saved capital. Insufficient liquidity (credit crunch), there may be impossible in a free economy.
control Currently we heading for a new crash. The crisis was not overcome, but with new liquidity created from nothing (circulation loans since lending rates by central banks tend to zero) were created. The release of a new collapse can all actually unprofitable, so subsidized industries, such in the field of renewable energies in the range of CO2 pollution control certificates trading experience (literally a trade with hot air) or in U.S. government bonds. The value of the U.S. dollar declined since January 2001 in exchange for gold by 73%: At that time, an ounce of gold cost about 270 U.S. dollars, now well over 1000.00 U.S. dollars. The most likely is a significant dollar depreciation, so that the United States with their current record debts (state: about 15 trillion U.S. dollars: 9.1 trillion U.S. dollars, private households) debt.
to a currency reform in the U.S., a rate increase and a reduction of liquidity that is no way around.
But Europe has a even more serious crisis contrary: In just nine years has doubled the money supply in Europe, 2000, it amounted to about 4.9 trillion € € room, end of 2009 for € 9.7 trillion. We also need both in Europe (particularly affected Germany and France) observed in Japan as well as the continuation of the phenomenon of stagflation (high unemployment with high inflation and low growth).
The most important to overcome the crisis and to eliminate unnatural economic cycles is the stabilization of currencies and the reduction of debt in the government. Long term, the access of States to abolish the central banks and currencies stable fixed Bonds to the gold standard or other real values are restored.
Henry Hazlitt, longtime companion Ludwig von Mises said in his book "Economics in One Lesson": "The art of doing business is not only direct but also the long-term impact of each measure to see, it is also to the to consider consequences of any action not just one, but for all groups. "
, logically, would be long-term orientation and measures to be applied uniformly for all, instead of scrapping and recovery plans, only certain industries prefer. Debt reduction, reduction in government spending, Removal of subsidies and reduction of total government spending and tax cuts are a step in the right direction: The government needs to do much the same thing, they can have something
conclusion.
Dr. Thomas Jahn, November 2009.
Literature:
- Ludwig von Mises: Theory of money and fiduciary media, Vienna 1912
- Ludwig von Mises: the social economy. Analyses of socialism, Jena 1922
- Ludwig von Mises: the bureaucracy (Bureaucracy), New Haven, 1944 (available online at: http://docs.mises.de/Mises/Mises_Buerokratie.pdf)
- Ludwig von Mises: Human Action, Treaties on Economics, Chicago
1966 - Ludwig Erhard, Prosperity for all, first edition 1957, new edition Dusseldorf 2000
- Ludwig von Mises: "The Value of the better ideas - six lectures on economics and politics", Munich 2008 (new edition of the German first edition of 1983)
- Friedrich August von Hayek: The Road to servitude, new edition
Munich 2003 - Friedrich August von Hayek: The pretense of knowledge, Tübingen 1996th
- Franz Josef Strauss: Bids of freedom, Munich 1980
- Roland Baader: money, gold and God player, 2 Edition, 2005 Gräfelfing
- Guido Hülsmann: The Ethics of Money Production, Leipzig 2007
- Michael von Prollius: The perversion of the market economy, Munich 2009.
Author's note: This session (held on 18.11.2009) provides for time reasons and for reasons of better understanding complex, some simplifications of the otherwise very economic, especially monetary phenomena.
