Thursday, May 25, 2017

Austrians Advocate Savings

The going assumption of the mainstream economists is that all schools of economic thought require the usage of the IS-LM curve abstraction. Some call this the Keynesian cross. To set the record straight, Monetarists fall into this paradigm, they are considered New Keynesians.

Carl Menger, the founding economist of the Austrian School, arose during the Marginal Revolution as the creator of the Subjective Theory of Value. This unique and solely applicable approach of using ordinal value scales to elucidate the subjective valuation of individual actors, is strictly and only of the Austrian School of Economics.

Some supposed Austrians (GMU and other conventional academic institutions) attempt to amalgamate schools of thought or even distinct theories, with what is the pure Mises-Rothbard method. Certain economists lacking in the knowledge of free-market economics may, through misapprehension, label this as completely purist. Rothbardians take this as a necessary compliment.

As is commonly the case, schools of economics are associated with political parties. This is an entire misunderstanding of the purpose of economics in general. Because of this, Austrians are not politically affiliated. Economics is a theoretical system that assists people in better comprehending the world, as is the case with any other theory (Math theory, Physics theory, Science theory and so forth).

The world exists, and later theoreticians elucidate what they may perceive as having occurred (a priori) so that others can then garner the confidence necessary so as to make better choices. The positivists use historical data and observations (a posteriori) to attempt to contrive future predictions.

The latter method is constructed many times on mere presumption, and becomes deceptive as the supposed predictions believe historical scenarios will occur once again given certain factors. Statistics are then found through sortition and sample sizes, and the prediction is erected within a certain confidence interval.

As I reiterate the aforesaid from previous posts, it is important for us to decipher the nebulous aspects of mathematics, most specifically, in economics. Indeed math tools become the means by which we can gauge more precise ends, yet we must remember it is not always what many innumerates may consider it to be. Math, and other theories, are not absolutes, they are ideologies which synoptically conjecture what life's mysteries may contain. These mysteries are observed and thence axiomatic.

As these axioms became embraced by the erudites of the learned theories, people then moved away from the more traditional thoroughgoing value system. Some may hearken to natural law and natural rights--the Golden Rule and for others the Non-Aggression Principle. This transgression had dire consequences.

All other schools of thought, disregarding the Austrian School, most commonly revert to utilizing Keynesian models. Only the Austrian School adheres to the descriptive method of economics, while evading the desire to calculate an abstract equilibrium. Keynesianism is in essence, not a priori, but a posteriori.

Subjective Value Theory states that value derives from the individual mind, where one's actions evince their choice on their ordinal value scale, and thus the commencement of the structure of production is understood. Land then has value derived subjectively, as do all other goods and choices in the economy.

The Labor Theory of Value is negligent to this concept. They do not believe value is subjective, yet inherent. Value for them, is stated in the prices of which aggregates concoct through a supposed calculable equilibrium. Furthermore, the labor theory of value adherent believes labor diffuses value. The laborer cannot negotiate his price, only the fixed cost that the company sets is then the value inherent in the good.

The main difference between the schools of thought is the misapprehension, or one could even state, the complete lack of understanding on the rate of interest itself. Within the Austrian School, Bohm Bawerk's Capital Theory lays the foundation for the true nature of this mark-up, and consequently the importance of money and what inflation really is. Accordingly, the Real Business Cycle Theory is in no way a descriptor of how the business cycle occurs. Only the Austrian Business Cycle Theory can lay claim to this elucidation.

If one is to falsely suppose that inflation is found at the lowest order good stage of the structure of production, based upon an assumed average of a basket of randomly chosen goods, then indeed the failure lies there. Money through historical regression is a product of subjective value, and time preference (the mark-up or rate of interest), becomes ever the more enhanced with real savings.

Government, as the IS-LM curves attempt to justify, reduces real savings. The Keynesian rate of interest is unknown and as abstract as their theory of value is. For this reason they are a posteriori, as they desire quelling a supposedly disequilibrating animal spirits that if left untamed would result in massively tumultuous business cycles.

Austrians understand the quelling of the business cycle (booms and busts) is found within roundaboutness, by which factors are advanced voluntarily to each stage of the structure of production constantly and without end. Equilibrium is nonexistent, and without false price signals (with the existence of private money) then inflation is mitigated. Money is key, and as a consequence government created moral hazards should be nixed. Government should not exist.

Governments have no savings, and hence they pilfer once their money is introduced. They, ergo, expand credit to fund their wages and public goods. The overconsumption of savings arises, and in order to boost aggregate demand, call for the rapid abridging of real value. At this point in time the absence of real value (purchasing power) causes this to occur perpetually, as gold is money (of real value).

This rate of interest found within the preference of time of the individual is then distorted due to their desire for monopolization--savings (capital stock) and purchasing power are extorted. Austrians desire building an economy on savings, as one's choices would be much more wary and better calculated in absence of inflation.

Social Security tends to reduce the desire of individuals to save for the future. Inflation as well, by deceptively lowering the rate of interest (cheap credit money), then increments the quantity of jobs which are contingent upon a balance sheet engorged with overinflated assets and elevated equity prices, among other things.

If money were understood to the Keynesian, government would not exist. As the individual purveys to the market their preference for time (desire to withhold), then indeed it may seem quite obvious that money must also arise naturally on the free market from the preference of the individual. Fiat is now en vogue, as we have forgotten the true nature of money and have thus substituted it for the servility to nationhood.

Wednesday, April 26, 2017

The Journey of a Christian

The journey of a Christian is indeed a subjective experience or relationship with Jesus Christ that consists of one where constant perseverance, endurance through struggle, penance and revival constantly occur. This I surmise is the walk with Christ many experience daily. As an Austrian economist one may revert quickly to the description of the business cycle.

Ascension and Parousia are two common truths we extrapolate from the importance of the crucifix. When God sent his son to fulfill his destiny of dying for our sins he did so in revealing to those whom he professed his father's grace to that he was the prophet spoken of in the Old Testament.

He was sent to fulfill his father's promise and thus the third temple all should worship. This third temple is prophesied in the Tanakh and is foretold to be erected by the prophet. Jesus Christ is this erected temple whom arrives at Parousia, meaning that you erect the temple in your heart when you accept him as your savior.

Jesus Christ came to lead all of Yahweh's followers back to God's Law, essentially reaffirming Mosaic Law. Jesus Christ was able to express the meanings of Jewish culture by evincing Mosaic Law in the fruits of the spirit. His evangelizing as well as his miracles enacted God's grace.

By accepting Jesus Christ as one's savior we then Hope to one day arrive to Zion, which is Heaven. All the while a Christian must continue his journey along the narrow path, which requires them to repent once one has transgressed from what is the eternal Love of God.

As one disobeys what is evident in scripture, that of the Golden Rule, one ultimately feels a sense of remorse. This is so because a Christian has voluntarily accepted Jesus Christ as his savior. It is the guiding principle of Love which impels us to espouse peace in every action. Retrospectively, the crucifix symbolizes our sinful selves hung up and dying on the cross, then allowing us to be reborn again as we cleanse and purify the soul, that being repentance.

The constant reiteration of forbearance or withholding, measuring every step carefully so as not to give into sin, which leads to remembering that one must turn the other cheek when a desire to hate arises. In Semitic language, hate means to Love less. Turning the other cheek is forbearing, holding back emotion or initiated coercion.

This overwhelming amount of God's Love only causes then a process of transference to arise. Others reciprocate when you Love excessively. Within scripture when it is transcribed that the wrath of God will be undertaken, or punishment of any sort is delineated, what is meant is the profuse amount of Love emanating from a simple action of withholding negative emotion. A common adage of "killing someone with kindness" comes to mind.

As one continues to live by these guiding principles within the pious compendium, the Bible, the deviations from God's Law are enhanced within us. As we sin further, or fail as Christians ever the more, then God's innocence is enhanced. For a Christian the humility of which they measure their lives, aids in their ability to repent. Regret for an iniquitous action transpires, then a Christian responds with a conciliatory remark. This alludes to the maturity of an adult, to utter "I'm Sorry." Repentance, or penance, then becomes a common practice.

The life of the Christian is a daily journey, as well as struggle, where the uneasiness felt by these various transgressions then is subdued with repentance. Ultimately one struggles less by humbling one's self. We struggle when we desire more than what we presently have. For this reason we iterate to ourselves to be thankful for what we own.

The consistency of the Christian to remain productive reminds us that forbearance is as well the benevolence we are taught in the Bible. Reaping what one sows allows the fruits of labor to be ever the more abundant. As well, forbearance helps us save these ever returning fruits to be plentiful in the future as we constantly sow further and further Love over time. Benevolence is therefore God's eternal Love.

Thursday, April 20, 2017

Government Money is Unwarranted

Government money has been a complete deception from the time governments have attempted to convince societies that prosperity derives from the coffers of stolen wherewithal from the private sector.

Murray Newton Rothbard once concocted a small book called, "What Has Government Done to Our Money?" which inter alia summarized the unnecessary existence of government money. Essentially what Rothbard did in this recapitulation was vanquish any ideas which exist among scholars as well as the intelligentsia espousing government existence in general.

As Austrians, cogently we notice that individual decisions arise from time preference, which is subjective. Value is indeed subjective. The preference of undertaking a particular choice and what portion of time will be allocated toward this endeavor are enumerated concepts of human action and praxeology delineated by Von Mises. Money is what organizes a society, as transactions elucidate the indicative natures of man. Prices are of the essence, as they are the guiding tool toward professing ones actions of exchange.

Based on the aforementioned theories, we then realize the harmful nature of inflation. Inflation is a rise in the money stock, yet at what point in time one measures this specific rate or increase is very important when setting the corresponding rate of return or mark up. This is best left for private entities borrowing money (debt instruments) or lending money (loans).

Banks would be the reference point corporations would most certainly revert to in order to gauge the price at which they borrow funds from investors at as they hold the capital of others. This would be their agio of enticing, which would also include the specifics of their savings, or solvency. Surely at this point one may notice how important the equity price of a corporation is.

Market capitalization is of course the price spread for the speculator which suggests the possibility of generating a certain rate of return. A low equity price with substantial debt would mean higher risk (low savings), moreover a high equity price with less debt would engender less risk (more savings). Again, this is subjective as a higher equity price may allude to a lower rate of return (shrinking price spreads). Certainly one would also use other particulars of noted company savings to render a choice of capital allocation such as the price spreads of Sales or Net Income.

Government money is so parlous to these price signals, which create these price spreads, because the overabundance of money reduces the purchasing power. As previously mentioned, the rapid increase in the denominator results in an abridging of the price spread of purchasing power. All to stimulate the economy governments then cause a scenario of the then rapid increase of the numerator, all the while the denominator continues to increase yet at a slower pace. This causes an overconsumption of savings (the unseen), or what Austrians refer to as Capital Consumption.

The Treasury should not exist, it's truculence is that of a coercive central monopoly desiring to gauge it's costs and ultimately does not comprehend the natures of money. Their intention is to fund all of their public goods and in order to do so, they issue debt instruments. The business cycle is a natural occurrence, and governments simply amplify the booms and busts which arise during these cycles. A monopolized money therefore wreaks havoc on all whom hold the inflated instruments.

In order for a government to have money, they must extort it from the private sector. By issuing debt instruments they require then implementing taxes so as to pay back these debt instruments. Thus capital stock pilfering arises. Managing the cash flows is what all whom issue obligations must undertake, and in paying these cash flows government creates more money due to delusive estimates. At maturity the face must be imparted.

In order to pay par value (the principal of this loan from the issuer), corporations create sinking funds which is debt issued in advance to pay for debt maturing at a much closer time. Their other option is to manage their Sales (top line) in order to withhold enough funds to remunerate the debt that will quickly mature. Those that fail at this process, go bust or bankrupt.

Governments do not ever go bankrupt, and if so ever they did, the economy using their money would collapse. An Austrian would not hesitate to assert the necessity of this position for the very reasons that weeding out bad practices and readjusting the market toward unfettered Capitalism is required in order to attain the level of a truly free society. The statist is fearful of this and thus enjoys intervening by setting lower rates through their central banks. They presume asset purchases quickly provide funds to those feeble banks on the brink of collapse. Both processes are often performed simultaneously. This inflates the money stock, and reamplifies the business cycle as the clearing out process never truly occurred.

Debt instruments issued by a government are instruments of consumption. Government debt instruments steal money from the productive sector, which is the non-governmental private sector, and thus reduce the real value of it by expanding credit overall.

As the same process of creating a sinking fund aforesaid is partaken in by governments, the estimates their bureaus generate never signal revenues (stolen capital from the private sector) to the level of solvency. In order to avoid constantly issuing further government debt instruments to remunerate those whose securities are maturing, they would need surpluses large enough to pay off those outstanding instruments soon to mature.

As time has passed, no new president, cabinet or those other lawyers arguing in DC, have been able to confect such a scenario. Debt has mounted up for so long whilst the government officials promote the preservation of their union. We have been deceived, and now our money is valueless (fiat inconvertible). We are at the precipice of the empire, and secession is on the way. The debt has never been reduced, and will never disappear. Let us not forget that the desire to keep the Union together, led to the creation of the Federal Reserve Bank in the first place.

Wednesday, April 19, 2017

Standardized Tests Delude

The practicality of time is of the essence in imparting to us the success of an individual. Whether one allocates more or less time to an activity, will ultimately describe how well that person was able to ingurgitate fully the information studied or gleaned over. 

IQ tests do not measure anything but how well a person was able to regurgitate information on a standardized test.

After noticing the array of IQ scores, one tends to vet those which confer to us their position to the left hand side of the bell curve (or below average), confounding us on why those scores fell in that position. When attempting to correlate the IQ score with later success in life, there is a discrepancy which leaves many individuals befuddled. Indeed it is true that standardized test scores serve as a descriptor of taking only one test. They describe only but a small parcel of life's challenges.

The Intelligence Quotient is an average, which is based upon a certain sample size--the data available which includes those whom solely took that test. Averages do not reflect the proficiency of an individual to absorb information taught to them, which could include the protocol a new employee learns in order to perform the repeated processes of a certain job. Most importantly it does not evince the innovative capacity of one particular individual, as ideas burgeon spontaneously and due to experiential circumstances.

Placing people into certain groupings is deletarious to both the confidence of that group or those whom associate with them, even if those people score in the upper echelons. The array of outliers, if one can attribute this label to those not falling within the average, will then also have trouble living up to the stereotypes society has formulated about those which score highest.

All one can respectfully claim is that each unique individual appropriates the necessary amount of time to recursively imbibe the information they understand will be communicated on the test. It is therefore only the individual whom finally comprehends his own capacity, as studying for the test is confirmed within the guidelines given prior to the test.

For example, all people have a designated quantity of time to study, and a specific amount of time to complete the exam. This is not a conclusive affirmation of an individual's capacity to learn as some may require more time than others to eventually imbue the information toward full aptitude. Subjectively, an adept person does not necessarily exist, as one tends to continue to build knowledge and learn things over time during which they undertake these same tasks daily.

Additionally, a person who is diligent in their study habits tends to solidify the concepts in their mind for a longer period of time than a person which has a lack of desire to learn the information does. The theories of psychology tend to denote to both of these ideas, long-term and short-term memory, respectively. This is all theoretical.

From this what can be proclaimed is that tests should be used as a marker for those whom desire receiving a certificate or permission slip of some sort. This certificate would be used to enhance a resume, build renown, or to be permitted by law to undertake certain tasks. All other purposes of using standardized tests are impractical. The intelligence quotient is thus unnecessary and as abstract as any other average resulting factor.

Every job predominantly requires recursion often and constantly. Those employers looking to hire individuals desiring to perform these repeated processes, must find a reference point of proficiency and this is where the experience becomes so vital. Experience assists those whom are hired to select employees that will learn the protocol, and essentially the duties of the job, much quicker. The employer therefore needs to allocate less time toward training this new employee to perform those specific details.

Education is different than schooling, as experience is of the greatest educator in our lives.

Saturday, April 15, 2017

What Is The Market Peak?

When considering the most effective way to refine the process of component valuation as well as market valuation, an investor can easily manage this by theoretically understanding what these valuations entail.

Firstly, there is the market price. This market price is set through contractual terms, either verbal or written, where two parties exchange; once they decide to act on their desired value subjectively itemized on their value scale.

Secondly, there is the process of gauging this rate of return, the difference between buying and selling prices which occurs over time. As well, this is a subjective decision. You purchase something at one point in time, and sell this good or set of goods at a later point in time.

The process of price discovery is using the available information to then purchase goods based upon their price, whilst also measuring the mark up you will offer to generate the proper amount of sales. This difference, or net amount, is a rate of return.

The best examples of rates of return are the Sales (Top Line) of the Income Statement, and all of the costs which are then subtracted in a descending fashion until one arrives at what is Net Income (Bottom Line). Net Income can be considered a Rate of Return.

Another Rate of Return would be more abstract, that which is the asset price. Assets include Securities (Stocks and Bonds) as well as Real Assets (Land, Edifices or Machines). Each of these has future value, or better stated, can generate a rate of return. This means that the price will be different in the future as compared to it's current price. Indeed this is subjective.

Liabilities are obligations, simply put, anything that is owed. Moreover, anything that does not belong to you and which you are obliged to pay back in installments over time. The net amount, Assets minus Liabilities, is the value of the company or market capitalization. It is in other words the Net Worth; that which is what the claimants own.

Solvency is arrived at subjectively for a company. Corporate owners must manage their obligations, and allocate their funds to the proper returning assets. If Stockholder's Equity is elevated far above real value (overvalued), corporate owners presume the value of their company places them in a position of solvency. They therefore mismanage expenses.

The rate of interest (when this reference point is monopolized) creates a large amount of debt issuance due to their supposed ability to borrow cheaply. This is how entrepreneurs are deceived. Furthermore, lots of Credit Money (obligations) bid up prices during this speculative process. As it is an obligation for one, it becomes an asset for another.

Rates of return, as constantly mentioned, are everywhere. Thus, purchasing power itself is a rate of return. As more money enters the system (by issuing more Credit Money as well as Fed asset purchases), the rate of return shrinks.

The market sell-off occurs once investors realize their rates of return dwindling near zero. This is in actuality a shifting of money to a different sector. Systematic risk is this apogee in the market, a herd movement out of one group of securities into another. Many times it is a desperation by investors to preserve rates of return from diminishing during this process (shrinkage in value).

Conclusively, withholding consumption is this notion of which the mainstream economists over explicate as demand to hold. A ceasing of consumption, or consumption at a lesser rate, is the holding of money. It is, to chiefly reiterate, subjective.

Sunday, April 2, 2017

The Gold Standard

The Gold Standard is a very complex issue for some to fathom. Many mainstream economists believe that reinstating this method of banking will revert us back to an outdated system that is no longer viable with the models given or the desires of the government thereof.

After contemplating the likelihood of a return to the Gold Standard, what gives me optimism is the deflationary period which would be required prior to it's arrival. This would culminate in the end of the monopoly of money (the Treasury), as well as the inessential functions of the great inflator, the central bank. Not even a public clearinghouse is needed these days with the remarkable advances in technology we lay witness to. Allow me to further elaborate.

The Fiat Dollar, which is an inconvertible money by decree, was instituted to allow for unlimited government credit expansion. This removal of the Gold reserve essentially begot what was an elastic currency and the continuous deterioration of our purchasing power. Ubiquitously evinced are the calamitous booms and busts since the introduction of government money, as well as the enhanced erosion to real wealth since the inception of the Federal Reserve Bank in 1913. There were also other forgoeing central banks along the way.

As I reviewed the common visuals provided to us on the world wide web, which to me are quite accurate in concordance with the historical data available, I found that the presumption of the manipulation of the Gold Spot Price as being very true.

A consistent announcement by the London Gold Market Fixing Ltd, of the spot price of Gold during the burgeoning years of the Fed, aided the US government in their desire to manage the world's money supply. As the above chart demonstrates, the manipulated price was fixed (constantly announced at or around a certain price) up until the peg was removed in 1971.

A Gold Peg is intended to aid a banking institution in preserving the value of it's medium. This means that with a precious metal, as aforesaid in the explanation of a medium of exchange arising on the free market, the price of the most commonly accepted unit (that of objective-use value) will tend to greatly affect the management of revenues and expenses for banks.

If one were to consider a simple example constituting ratios, the reason for the depegging of the dollar to Gold becomes more lucid. Allow me to simplify:

If the US were to peg the dollar to Gold at $1000/1oz., then issuing a Treasury would permit a person to purchase 1oz of Gold at the current spot price. If another Treasury were issued, then there would be more dollars in the system, now $2000 which would bid up the price of Gold in the open market.

For the purpose of codification in layman's terms, we can see that the issuance of more Treasuries would increase the number of dollars and reduce the purchasing power of the currency. This would in essence force up the Spot Price of Gold in the open market.

The $1000/oz Treasury needs to be paid back, but Gold is at a higher price. The further issuance of Treasuries is now needed. To pay the holder of the second Treasury that was issued, 2 must now be issued in the third round of debt issuance, since the price would be at $2000/oz. Indeed this process is much more complex.

Without a doubt it was the Bretton Woods Agreement in 1944 (which exacerbated globalism with the creation of the IMF and later the World Bank Group) that changed the monetary system the world was using. Prior to it, each country typically had a reserved currency (representing a certain weight of a commodity). Once the mainstream economists, lead by John Maynard Keynes, had their way, they finally believed that in order to control inflation (due to an ignorant perspective on money), the dollar should be the reserve currency. Every country would need to purchase Treasuries.

World currencies would then peg to the dollar, whilst the dollar continued to maintain it's conversion to Gold (Bretton Woods Gold Peg). Let us not forget that all central banks intervene in the Forex markets as well as purchase debt instruments in the same manner that the Fed does, this is global central bank manipulation. Currency pegs basically advocate this central bank manipulation.

During the years of the $35/oz Gold peg, the amount of debt issuance was excessive and therefore the denominator was much higher than the numerator. The Spot Price of Gold needed to have risen, but never did, so the central banks found themselves selling Gold and decreasing their Gold stock. The banks were attempting to remunerate the holders of claims to Gold (the dollar pegged to Gold and it's corresponding exchange). The London Gold Pool collapsed in 1968.

Due to the profound necessity of raising rates in 1961, resulting from a larger money stock, cash flows became more difficult to manage. When governments, and as well private companies, issue a frenzy of debt, it becomes difficult for them to manage the cash flows of debt instruments if there is not a sufficient Surplus (or high enough Net Income in the case of a private corporation).

In lowering the Fed Funds Rate, this debt frenzy abounds. For the government, debt issuance is already scheduled monthly. And with a lower rate the amount of debt issuance is exacerbated. Once it becomes clear that the enshrouded decrement of real profit margins (they would basically go negative) is elucidated in nominal terms, investors would pull their money out of the shrinking price spreads and move them into higher earning sectors. The need to entice investors with higher yields becomes clear for the Fed.

As the business failures amount and the dollar turnover effect manifests the rise in the money stock in market prices (by causing a shrinking of the price spreads), it becomes clear that the rate of interest must rise as Savings decreases. Indeed this process should be left to the private sector.

The Federal Reserve Bank is incapable of managing this system, and relies on its models to guide the economy. This perspective is utopian, and not at all in line with the Free Market approach of competing rates of return set contractually by private free-banks. As is noticed, the debt never disappears and the money stock grows. Lowering the rate of interest, as Socialists enjoy, is to restimulate the economy. The key question here is "How high is high, and how low is low?" Only the free market can decide.

It is essential to a Capitalist system that market prices fall to their required market level. For this to occur all government regulations must be removed, most specifically the minimum wage. Government needs to get out of the way completely.

When Corporations go bankrupt or fail, processes such as restructurings or flat out debt cancellation occurs. When a government desires perpetuating the existence of it's union or monopoly on money, the compromises end up being the iniquitous measures that constantly occur time and time again. One may now see why a Treasury is dangerous, as they are the entity that creates the government money. Extortion and currency devaluation are the confections of an economy reliant on public goods. All things should be privatized.

Friday, March 24, 2017


When studying monetary theory what we are aware of is that money instituted by force has been an utter failure. Fiat money, as it is called, is an inconvertible medium of exchange that is worth only what the government professes it to be worth.

Allow me to elaborate, according to Mises' Regression Theorem the objective value of money is arrived at through human interchange stated in market prices. The subjective values of individuals, which are scaled within individual ordinal scales of value, will allow the individual to make his choice through his action.

As mentioned in a previous blog post, higher time preference denotes a higher ordinal ranking, while a lower time preference denotes a lower ordinal ranking.

Humans will exchange a good, when both parties within the trade benefit. This idea applies to all human exchanges. Indeed every transaction is subjective. The moment in time when a trade occurs is when contractually both parties arrive at concilliation. This is how a price is set, oftentimes the spot price. A proprietary protocol, or any system adhered to with a signature of some sort, would fortify the terms of the contract.

Preferably those partaking in the contractual agreements favor a third party to enforce the contract. In many cases, this is a person or entity reputable and knowledgeable in adjudicating (they render an opinion). No government need exist, as a contractual agreement is always voluntary.

Due to humans constantly desiring to act, and because of the processes undertaken by people to facilitate life's interactions, new technologies are created. A medium of exchange aids in facilitating the process of exchanging goods.

Ludwig von Mises (and earlier Menger historically alluded to it) deftly simplified the preferences of human actors, claiming and demonstrating theoretically that humans tend to always prefer precious metals as that very medium for it's scarcity and because it is portable, durable and divisible. Other factors were it's uniqueness and because it was ornate. Let us reiterate, choices are subjective yet they coalesce.

Gold or Silver have been the common choices of individuals desiring to accumulate value, whether it be when it became known as a highly desired good at the primitive stages of civilization, or now when investors use it as a hedge (strategically implied to move opposite the market), and some of us describing it as money itself.

The monetary definition ascribed to precious metals is evinced in the actions of investors. As price spreads open, meaning that as prices fall and the possibility of generating a higher rate of return or agio becomes more likely, investors look to move their money into what will aid them to increase their effective cash balances. Hence, Gold prices rise and money is worth more.

Another way of explaining this is that the money stock falls, purchasing power of the monetary unit you hold increases (less bank notes or electronic digits denoting the number of bank notes), and recrudescence is arrived at after time preference schedules readjust. Let us remember, that pulling one's money out of a low returning stage (detracted price spread) would insinuate hoarding or savings (lower time preference for the human actor).

At the individual level, time preference corresponds with the rate of interest, therefore withholding consumption may be higher on one's time preference schedule whilst they continue to consume. This may continue to suggest that the rate of interest is high, yet it will fall over time as quantity of savings increases.

Money is key in aiding individuals to make proper choices in the free market. Of course less resources being allocated improperly would occur more commonly if the price mechanism were properly accorded with a money stock of stable value (precious metal reserves).

Tuesday, March 21, 2017


Reverting back to an old post, we can summarize the Austrian position of inflation as being a rise in the money stock.

Without a doubt, people do not have complete information. Positivists or those attempting to statistically predict the future, using events rendered in the past, which are each designated a numerical value. These symbols are cobbled together as an archive of numbers, this is known as historical data.

Surely one can try to assume that mathematics or the philosophical descriptions stacked on top of the fundamental principles of math theory are methods by which one can predict the future, but realistically this procedure is foundationally relativist.

Everything goes back to the basics. Further theory serves to aid the theoretician in building confidence when acting within the real world. Creativity is experimentation, which is discovering the world with physical application. Indeed math is necessary, but it is theory, and only helps us enhance our world acumen.

Due to the luring powers of mathematics, economics has suddenly become daunting for those who require more allocation of time when arriving at complete comprehension. This is unknown, and completely subjective. Standardized tests will not measure this human phenomenon.

The mechanics of economies to the mainstream economist presumptuously embraces hypostatization, and they therefore posit that inflation and other incidents can be measured without any doubts. Their measurements are arrived at with events from the past, the historical data previously mentioned. To their dismay, these measurements are not absolutes and only describe what occurred.

A rise in the money stock should and would filter through the structure of production at later points in time. In an economy absent of government intervention, real wealth would be built upon Savings.

No palliatives would be needed from a central authority. The individual would act, and the entrepreneur would evince to the market the necessity for demand toward his innovation. Indeed capitalist-entrepreneurs seize price spreads. Therefore the process of supplying savings, and the corresponding advancing of these factors to the various stages is heuristic.

Entrepreneurs in essence fill niches. They believe there is a demand for a product, or create a supply in hopes of a demand arising. This is all time preference.

In this aforesaid scenario, inflation would be quelled. Competing banking enterprises would bring forth their method based upon the central component of an economy, the commonly accepted medium by human actors.

In our present system, the central bank as well as other government institutions, monopolize a benchmark, whimsically expand credit, and therefore rapidly increase the money stock. This increase in the money stock is not market driven, it is government (coercively) induced.

An Austrian would measure the agio or mark-up in various ways if so needed when issuing debt instruments on the free market. The most obvious would be to watch, with the limited data given, the rise in the money stock from it's starting point, marking up the rate of interest accordingly.

A stock of Gold of 100 oz, could be parceled out and issued as loans. 10oz issued would leave 90oz. These 10oz would be apportioned to employees and other costs, if the loan were a business loan. Each of these smaller fragments would represent less quantities of Gold, even if the analogous Note (or numerical value in a digitized system) represents a fixed quantity of Gold.

This process continues whilst businesses use their best judgment to calculate other mark-ups and measure other costs to eventually pay back these loans. This would also be consistent with other types of loans or debt instruments as well.

On the free market, the rate of return is obvious. The rise in the bank money stock could be used to measure the agio, pertaining to the point in time used to measure it's increase. Clearly the Austrian understands the credo of subjectivity, and with this in mind, using theoretical measurements a bank could mark up the loan agio with the statistics at their disposal.

This attempt at discerning the rate of interest would be stated within their contractual covenant, and would assist the business in measuring their expenses. This competitive process would weed out bad practices, as well as vastly reduce moral hazards.

Indeed the rate of interest is the inverse of the rate of Savings, so within the free market, another approach could be to simply measure the available Gold stock and apply the inverse of this concept. My previous blog post explains the rate of return, using this process, whence one is given a certain amount of income.

Monday, March 20, 2017


The question of charity is not one that need be deliberated extensively. For an Austrian, charity is defined very simply.

Within the Savings=Investment ambit, by a Saver withholding consumption he is both attempting to seize the price spreads (receive a rate of return) as well as assisting in advancing factors (providing needed capital for a company to Invest with).

When a person withholds consumption, he is Saving. Savings is represented either as money within a demand deposit (both Checking and Savings accounts), which then provide capital for the bank to issue loans, Loans=Deposits. In your contemporary Banking system, this accounting tautology holds.

A loan provides needed funds (capital) for a business owner or any consumer to borrow with the terms requiring repayment in installments over time, plus an additional mark-up. Loan, Debt and Credit are all commensurate, as each vocable describes a form of borrowing.

Everything is contractual as well. An equity, or company stock, through indenture allows an Investor to allocate Savings (withheld consumption) into a liquid asset. This contractual claim to ownership of a parcel of a company, can be bought or sold quickly on an exchange. Equities can be converted to cash forthwith.

The equity or stock is a standard Savings instrument, as is the Debt instrument or Bond. Various euphemisms are given to the contractual form of borrowing, such as Bills (short-term), Notes (intermediate-term) as well as Bonds (long-term). Moreover, any label can be given to this Debt instrument which allows an issuer, typically a corporation, to borrow funds.

In these respects, a Debt instrument is Credit money (as is comporting to the aforementioned). One entity borrows--buys money, the other lends--sells money. Debt instruments are less liquid, meaning that the amount of time at which they can be converted into Cash is longer than an equity.

Everything is subjective, therefore the interlude at which someone waits in order to reap a larger profit is dependent upon time preference. Risk is indeed a subjective factor more easily reduced with more certain terms to the contract entered into, one example, collateral.

Some equities are riskier than others, while some bonds are more riskier than others as well. Subjectivity also is an important facet in describing the array of risks involved in Savings-Investing, as inflation causes malinvestments.

Charity, therefore, is tantamount to withholding consumption, because as Savings increases, more factors are advanced and new jobs appear in the market. Less government intervention, less inflation that is, will allow for more accurate price gauging. The price mechanism is less deceptive as the enshrouded decrement of wealth, due to a higher money stock, becomes less efficacious and thereupon less harmful to an economy as a whole.

A robust economy is built on real wealth, not on palliatives or vast reductions in purchasing power. Moreover, the rate of interest is key in the process of assistance to those most in need of building up a capital stock, or growing their wealth. It is profits, or the agio, that every human actor desires to grow their wealth, as those with more Savings become the greater benefactors.

Inflation would be the great deceiver which harms all decisions and causes vast misallocation of resources for all actors. Time preference is misgauged, and therefore more heedless decisions are rendered.

Charity is, ergo, the lack of government intervention, as government is the monopoly on coercion. Monopolizing money and law (a result of the existence of government), force out the needed competition in finding the stabilized market value of each. It is these dynamics which also complicate the natural confection of the agio, that being price discovery.

Wednesday, March 8, 2017

Market Fluctuations

In order to understand the process that takes place when market prices fluctuate, we must reconsider the existence of the various price spreads of the factors of the production process.

As Rothbard so deftly pointed out, Keynes had no idea what the rate of interest was. He believed it derived from the producer's loan market, and that a central authority needed to guide this supposed abstract concept. Rothbard laid to rest Keynes, as he incited the Austrians to the very fact of the mark up, the difference between buying and selling prices.

Keynes was so oblivious to this fact that his broad conjecture wound up contributing a convoluted method of mathematics which subscribed to the common present value formula. This formula is exponential, a fraction of a whole number (a percentage), multiplied by itself.

PV= Present Value (current market price)
FV= Future Value (or price at maturity-$1000)
R or i = Risk Free Rate (10 year Treasury)
N= Time or Number of Periods

Indeed these is your standard calculation when attempting to attribute value or a price to an obvious subjective factor. Evidently the most influential variable is the interest rate. The majority of financial theory requires the inclusion of the rate of interest, especially within the formulas concocted.

In the descriptions above, R or i is qualified as the commonly used instrument in all of finance, which is the instrument universally adopted by all financial theoreticians, that being the 10-year Treasury.

Applying the general moniker of "Risk-Free" to this instrument is solely due to the cajolery of governments, which resulted from that moment by which the US Dollar became the reserve currency for all central banks in the world. The Bretton Woods Conference led to the virulent Keynesian victory, which was to the world's detriment.

The elastic currency was able to thrive, all the while every other country in the world adopted the US dollar as it's reserve currency. A Gold-peg would be the aim of the US government in an attempt to make others believe they manage their expenses, or as some economists wangle, to stabilize the currency with the assistance of the central bank.

Time preference is so important to conceptualize because it tabulates the legerdemain of valuation theory. The theory of mathematics to the innumerate can seem daunting, and thus results in credulity. To those who believe they have mastered it, their persuasion is a result of embracing their theory as an absolute. One does not have perfect information.

Thus, Keynes' neophyte conclusions on the rate of interest, most specifically the Marginal Efficiency of Capital (MEC), led him to include a mark up within a mark up. Both mark ups, as aforementioned, are the subjective time preference us Austrians refer to as the rate of return or agio, time preference thereof. As Rothbard highlighted in an important footnote in his treatise on economics, the MEC is the rate of return itself.

To calculate the market, investors need to become numerates. What I refer to is that investors must understand that the lack of clear foresight (we are not God and cannot predict the future), leaves us with purview or experiences. Data is historical, they are numbers associated with occurrences that have already occurred in the past.

The more experience or information one gathers, perchance the enhanced the success of the wager.

Friday, February 24, 2017

The Fed is Filching

The main problem for the novice investor to solve is how to gauge market rallies. The trick to this, for the Austrian, is to build a strong foundation in theory. The rest is wagering.

When understanding the concepts of manias in prices, that is, the upthrusting of prices on the market, one must strongly consider the rise in the money stock.

The basic Austrian theory is that when the rate of interest is lowered, debt is issued which allows for more money to flow into these lower priced instruments. This is where one arrives at what is called a false boom.

Mainstream economists call this process "Boosting Aggregate Demand." The theory first assumes that every individual demands at the same rate, and at the same time, creating one large abstract demand curve. An assumed desire of investing and saving on a large scale. Completely fallacious.

Aggregate Demand has the theory of diminishing marginal utility applied to it. Par example, every following bite of ice cream I consume is desired less. A completely subjective concept.

On the other hand, the agglomerated supply shaped upward sloping. As Aggregated demand assumes satiation, the agglomerated supply assumes a constant increase.

In mainstream economics, due to the desired application of numerical symbols to constant unpredictable human occurrences, a theoretical paradigm was created. It is as follows:

As one can see, this is a very abstract creation. IS (Investment-Savings) is rooted in the subjective time preference of individuals, which derives from their subjective value scales.

The LM (Liquidity Money or Quantity of Money) curve assumes the government can gauge the inflows and outflows of money into the stock of money in an economy. The mainstream economist hypothesizes that the quantity of money derives from the producer's loan market, since ultimately the number of loans produced influences the money supply.

Therefore, they assume, the central bank is necessary to influence the supply of money, to then indirectly influence the consumption of individuals and do as was aforesaid, "Boost Aggregate Demand." Doltish abstraction.

What is most insightful is that applying this abstract concept down to the individual, one finds that it is merely relative or cerebral, and not at all realistic.

Take for instance the previous idea of the rate of return and individual investment-consumption ratios derived from our subjective value scales I described before. As a vast amount of money is injected into the economy abruptly, all prices are bid up quickly which then causes the individual to consume at higher quantities.

Everyone is hypothetically doing this in tandem. We coin this capital consumption, as purchasing power dwindles at the rate of inflation, which is ultimately subjective.

For the mainstream economist, their objective is to ignite this consumption because, to them, inflation is benign. Their false belief is that they can actually calculate the natural rate of interest, and infuse the markets with new money. They desire higher rates of inflation, all the while misunderstanding the ramifications of a deteriorating monetary unit.

By monopolizing the rate of interest, the benchmark (what the Federal Reserve Board terms the Federal Funds Rate), the central bank believes it can influence the quantity of money. A lowering of the rate of interest, makes them feel they can induce this economic boom which will lead to both higher GDP and therefore the rate of interest need only be adjusted upward to the new equilibrium.

In the abstract, this process of reification seems quite simple and easy to manage. Yet taking into account the more complex aspects of an economy, one realizes that calculating the proper moment in time at which the rate should be raised is practically impossible. Sadly, by monopolizing all agios (creating the monopolized benchmark), the central bank distorts the natural market adjustments that should be constantly occurring.

An expansion of credit, by lowering the monopolized benchmark, will then filter the new funds through the fractional reserve banking system, simultaneously creating more loans and deposits.

Banks attempt managing this process, but are woefully undergirded by the central bank--this is, simply put, further inflation. This pyramiding never ends until individuals readjust their investment-consumption ratios.

Thursday, February 2, 2017

The Debt Will Never Disappear

The debt will never disappear. Unless of course we come to the realization that the market must properly adjust, forcing a complete repudiation of the national debt itself.

During a readjustment process, as was discussed in a previous post, market prices fall to their proper free market level. In order for this readjustment process to be effectuated with ease, the free market must be free of any precluding laws that uprear market prices.

These underpins that are in place are unnecessary hindrances of the clearing out of bad practices. Some may refer to this period as the liquidation of bad assets on business balance sheets.

In order for a market to function properly, especially during these moments of falling prices (deflationary period), the government mandated impediments must be eliminated. A gracious clearing can occur when the market represents a glade in absence of government laws.

As we speak, the debt stands at around $19 trillion. This is an astronomical leviathan of false prosperity. When the monopolized benchmark is slowly adjusted anew upward, Treasury prices within this realm of affected yields, will fall.

Therefore, a raising of rates simply makes current market prices of outstanding debt instruments fall. Unless the IOU matures, the instrument has a remaining time of existence. A fall in Treasury prices does not shrink the debt.

The only debt instruments that disappear are those from failing companies in the private sector, yet even then many private equity companies and investment banks revive some of these feeble IOUs of trifling value and attempt to recreate a profit seeking venture. Capitalism has a unique way of rewarding those capitalist-entrepreneurs who gauge market prices correctly.

The reason for such a vast amount of failures during a rate hike is due to the common business strategy of managing cash flows with debt issuance. Rate hikes make new debt issuance more expensive. Hence higher amounts of cash flows must be paid out.

Government debt instruments are managed differently, their method is to issue debt whimsically. This is where the old proverb of "printing money" comes from. Debt issuance leads to new money in the system which is filtered through the fractional reserve banking system. Namely, loan agglomeration.

Debt monetization (coined "money out of thin air") is the more aggressive approach to injecting new money into the system. Both government debt issuance thereof as well as the socialist central banking method of debt monetization create new money which enters the economy spontaneously. The two aforementioned processes are anti-Free-market and lead to another false boom or simply stated, an amplification of the business cycle itself. Inter alia, transient expedients.

Hamilton's utopian perspective was to have a centralized bank manage the cash flows of a government. His Treasury serves this purpose, it is itself a central bank.

Government expenditures cannot be managed with the estimates used in the competitive private sector, as extortion must be enacted in order to pay off the obligations. The monetary unit is debased at every step of the way within this process.

The CBO attempts to manage expenses by suggesting a rate of expropriation suitable to garner the matching amount of revenues that will pay for those expenses. This is unknown until the end of the year. Many times governments decide to spend more than is estimated, requiring further expansion of credit. There is truthfully no optimal tax rate.

A surplus is ultimately paltry to the failed measurements in expenditures by the government. Extra money in one year would mean less credit expansion the following year, whilst, once again, debt is constantly being issued. Treasuries are sold twice a month for Notes, once a month for Bonds, and more frequently for Bills (typically once a week).

In order for the debt to disappear the government must cease expanding credit, that means cutting all expenditures outright. At this point, only the remaining outstanding obligations would need to be paid off, consecutively managing the cash flows then later paying off the full amount at maturity. Radical cuts to this measure are not in the plans any time soon.

Surely one can deliberate a mystical strategy as to how to rid the country of it's Tower-of-Babelesque sized debt, but this socialist planning would only be useful as pretexts for keeping the coercive monopoly in place. Without a doubt, one might see how the theories of mathematics are earnestly nothing but artifice with symbols called numbers.

Wednesday, February 1, 2017

Instrument of Consumption

The US Treasury instrument is an instrument of consumption. Those investors of the scholarly infusion from your typical university believe that government debt instruments are instruments of investment like those commonly sold on the free market.

Debt instruments are contracts sold for a certain price at present, bought by an investor, with the terms affirming the reception of a quantity of money in the future. This includes a stream of periodic cash flows parceled out over time which will ultimately equal the coupon (a percentage of the face amount).

Coupons are fixed, what fluctuates on the market is the present market price. This price is speculated upon amongst investors all across the world. A trade is reached when both actors act upon the ranking most suitable to them, which is compromised on, and where both gain from the trade. This process is fully subjective.

Corporate bonds are IOUs which will be fulfilled at some time in the future, with each person partaking in the contract receiving snippets of compensation over time until the full face amount is received. At this point, the debt instrument matures.

Corporations manage their expenses by estimating their revenue stream, usually dictated by quantity of sales, as well as the value of the other defined particulars such as shareholder's equity. Accounting is an aggregation of components, and a netting out of money owed. Assets-Liabilities=Owner's Equity. Arithmetic is the more commonly organic term used; basic mathematics.

This process rendered in the private sector creates a competitive mentality that foments a wary foresight amongst the capitalist-entrepreneurs. The agio used universally, will guide the ultimate decisions of these investors.

The monopolized agio, something I have coined the monopolized benchmark, distorts all processes within the free market buying and selling of goods. The US Treasury--including all government debt instruments--is most heavily influenced by this monopolized benchmark. As a matter of fact, all rates of interest are fully distorted by this coercive agio.

Unlike the private sector, governments can issue debt instruments heedlessly. Central Banks serve as their underpin which essentially produce moral hazards. The money stock rises withering away the consumption capabilities of the monetary unit, confecting less effectiveness: lower purchasing power.

Making certain that the appropriate amount of Net Income is generated allows for the corporation to allocate it's capital properly to where costs must be fulfilled. They economize through estimates using market prices, typically nominal. Measuring the inflation rate is another educated guess. What are real profit margins?

This type of business is coined price discovery, it is something that voluntarily arises naturally on the free market.

Governments use their Treasury department to issue debt instruments which are valued according to the monopolized accounting measurements. These measurements are phony mathematical formulas that cajole people into believing governments can manage costs in the similar fashion that the private sector does.

A Government debt instrument is paid by taxing the population, this is mere expropriation. Inflation is the other more formidable occurrence which reduces monetary purchasing power by filch. Both occur when attempting to manage an economy through a coercive monopoly.

The profit and loss mechanism works best in the private sector, prodding capitalist-entrepreneurs toward forbearance. With government, or within their ambit, the profit and loss mechanism is distorted and additionally frugality is replaced by feckless frivolity.

The Government does not own the economy, and the public goods it believes we need (which are coerced upon us) can be provided more efficiently on the free market.

A transient protuberance of the money supply by injecting liquidity will result in an obscured dwindling of one's capital structure, which will ultimately result in what is an abrupt awakening.

Saturday, January 28, 2017

Capital Consumption

Everything in our society is measured in nominal prices. Nominal prices are given prices, prices which are stated by all vendors.

Real prices are prices which take inflation into account. Austrians believe that inflation is a rise in the money stock. The rate at which the money stock rises would be a subjective measurement once the money starts being consumed within the free market.

Mainstream economists believe that inflation can be measured using a commonly accepted average which is a year over year measurement of the change in prices. Basic mathematics can be used to describe the change in the group of generally accepted goods from one year to the next.

The problem with using these types of averages to measure the abstract idea of a rise in prices from two different points in time, is that math theory's substrate assumptions leave the premise of subjective factors in the hands of those designing the formulas and cobbling the data.

Nobody has perfect information, and data is historical, thereupon the averages arrived to are best and most assuredly safest when used in the private sector. When in the hands of government, they become tools of artifice intended to seduce the voters to emphatically support the very coercive institutions which amplify and bring about poverty, crime and all other iniquities in our society.

Mainstream economists tend to use the consumer price index (CPI) or producer price index (PPI). Both of these averages are broad assumptions. The CPI measures prices at the final stage of production, the lower order goods, while the PPI combines all prices within a wide array of other stages aside from the consumer stage, higher ordered goods.

As the money stock rises, so will prices at a later point in time. This could either be gradually or more precipitously. In either case, inflation is in effect. Gauging this phenomenon is the daunting task of the market actors, particularly the captialist-entrepreneurs.

Consequently, we can conjecture that inflation is subjective at every stage of the structure of production.

As was previously described, the consumption-savings/investment ambit is gauged by all actors, individuals found in all sectors: families, corporations, et cetera. Humans are imperfect and make bad choices frequently, so as inflation is imparted on the market, the enshrouded effects of rising prices causes these human actors to delve into their consumption withheld.

This type of over consumption of savings can come as a surprise to people whom abruptly realize that due to a deceptive monopolized benchmark rendering cost wariness feeble, have also undertaken an unsustainable amount of debt.

Capital consumption is essentially a subjective over consumption of savings. As discussed in a prior post, a malinvestment is a poor decision endeavored. Generally, when describing the activities of the capitalist-entrepreneur, a malinvestment is a bad business investment. This poor decision can be realized in the form of a monetary loss, which is similar to capital consumption.

It is important to hearken the quite common Austrian pithy saying of "the seen and the unseen," as this will allow for enhanced chary decision-making. Theory gives us this elemental acumen, and indeed I am also referring to the so often misunderstood theory of mathematics.

Sunday, January 22, 2017


The economics profession is notorious for despising the idea of falling prices. Due to the quasi-paper-mache models erected from the coercive hands of government officials, those adulators of their concoctions entice them to render society asunder.

These amusing tools are the IS-LM curves and Cobb-Douglas function which aggregate quantities, assumptions respectively. The most virulent of the former two is the Cobb-Douglas function which agglomerates capital.

Previously, we discussed why this assumption of a large K (capital) cajoles the learner toward the seductive powers of numerical symbols. The superficial idea of agglomerating what the Austrians detail in a latticework of more realistic theory allows the reader to not be persuaded by the theory of math. In essence, the numerate is more wary of the tools which assist in making these assumptions. The innumerate does not understand that the weapon he wields is a plastic sword.

Rothbard goes on to describe the nature of falling prices as a moment in time by which capitalist-entrepreneurs withdraw their capital from the said stage of production and move it into a higher returning stage. Effectively, since price spreads are shrinking--as buying prices get closer to selling prices--the capitalist-entrepreneur is unsatisfied with a smaller rate of return, let alone real rate of return.

Money at all times is either consumed or saved-invested. Never is it the case that money is held outside of this ambit. Both concepts are subjective, as consumption takes place at the present moment. On the other hand, savings-investing is consumption withheld. Hoarding is subjective. Is it the cash held in pockets, or on green dot cards?

During the moment in time in which actors desire withholding consumption, they are contributing to the accumulation of capital elsewhere. For example, holding money in a demand deposit contributes to savings-investing, it is capital not being presently consumed.

Additionally, moving money from one class of securities to another, will make the price spreads of one sector expand, while the others being consumed shrink. For this reason, in being the first buyer, and conversely the last seller, one is able to garner the largest price spread or rate of return.

As prices fall in one market sector, one's purchasing power is enhanced in that same sector. Thus the old adage of buy low, sell high. Rothbard coined this "increasing effective cash balances."

Most importantly, falling prices from a fall in the money stock is associated with the readjustment process. At any point in time that defaults occur, money in the system diminishes. Whether it be at the banking level--where loans can disappear due to inability to pay, bankruptcies at the corporate level--which would lead to a vanishing of demand deposits, or the Federal Reserve Bank intervening (selling off reserves) or raising the monopolized benchmark (which essentially affects the Repo rate).

This readjustment process will only result in what is a weeding out of bad business practices whereon the recrudescence period after that ultimate free market trough is affected. This trough is completely natural on the free market, with freely moving prices--all prices. Prices must fall to their appropriate market level, in accordance with the time preference of human actors.

Allow me to formulate an addendum: a revival in the form of a palliative will not remove the cancer, but only catch the Tower of Babel as it falls, fomenting it's continued growth in it's partially dilapidated state. Hence, bazooka joe reinflates.