Technically speaking I am not running contrary to Austrian school analysis here. But there is a lot of loose talk about interest rates being too low when the Austrian school talks about the causes of depressions/recessions. With some Austrian school types it comes down to a matter of wording. But others are confused. Some matters have been played down thanks to the Jew-Usury thing. Some things have been played down due too the oligarchy fucking with the careers of genius Austrian-school theorists, then turning around and putting them on sponsorship. This may not have buggered their economic thinking. But I believe it has influenced how Mises and Hayek have phrased things.
I suppose you might think I’m trying to reconcile excellent Misean analysis with anti-Jew anti-usury prejudices. But I have noticed this troubling phraseology, that is not a technical mistake in the hands of the really intelligent older Austrians. But the thing is the younger fellows get all strident and confused and won’t be gainsayed when you try to explain matters to them.
I read a lot of pretend Miseans laying forth on why we have recessions and I’ve known they were talking bullshit but at the time I’m at a loss to come up with a concise riposte to show where indeed the bullshit lies. The key point to understand is that the Misean analysis, excellent though it was, came well before Malcolm Maclean and the widespread use of container shipping.
Check out these bullet points about Macleans innovation and see how much has changed since Ludwig put together his excellent explanation for depressions. This is important because we simply don’t have pure Misean depressions any more. They cannot really happen the way he explained them. Or at least they play out quite differently. I think the last Misean depression that I saw may have been in Thailand in 1997. Investments stopped in the middle and this was still evident to me when I visited in 2005. But this is not so much how things play out nowadays. Think about how things have changed since Mises formulated his explanation:
- The cost to ship cargo has dropped more than 90%.
- In 1956 cargo cost $5.86 per ton to load whereas now it only cost around $0.16 per ton.
- In 1966 around 1% of countries had container ports, this rose to 90% by 1983.
- Malcom McLean has been awarded ‘Man Of The Century’ by the International Maritime Hall of Fame.
- Pre-containers, cargo could be loaded at around 1.3 tonnes per hour. This increased to over 30 tonnes per hour by 1970.
- In 2011 the shipping ports of America received $1.73 trillion worth of goods.
- Around 90% of every purchased item has been shipped inside a container.
- There are more than 17 million shipping containers in the world, which make over 200 million trips per year.
- A sweater can now travel 3,000 miles for 2.5 cents by sea.
- There are more than 6,000 container vessels currently in service.
- The largest shipping in the world, MSC Oscar, has a TEU of 19224: source.
The other thing that has changed since Mises figured out how things go wrong, is that with floating currencies, screwups in monetary policy, are often more isolated. Now this is not COMPLETELY the case in practice. Because we are lorded over by a financial cartel that will often fuck things up generally for clandestine reasons. But in theory at least, the floating currency regime undermines the idea of a depression coming about in the Misean way.
To digress why did the oligarchy marginalise AND THEN SPONSOR Mises and Hayek? The answer is that they don’t want you to understand economics. But they need these geniuses publishing SO THAT THEY UNDERSTAND ECONOMICS. If Thorstein Veblen were alive today they would have taken the same approach to him. These are people that have picked outright the winners Sam Walton, Bill Gates, maybe they picked authentic genius Steve Jobs … (the only deserving one amongst them) Jeff Bezos, and the absolute runt of the family … a fellow with the cushiest job in the world … Mark Zuckerberg.
That part of the explanation that seems unique to Mises is where all manner of projects are abandoned in the middle because the materials aren’t available. Too many people start making investments to do with physical construction. They do this because more loans are available without the savings to match them. People are trying to consume more and invest more at the same time. This is because more loans have gone out, and these loans have been ponzied up out of nothing. But common parlance in Austrian terms is that the interest rates are too low. Well if they want to get specific about it and make it clear, that the central bank has given the commercial banks an interest rate subsidy, and the COMMERCIAL BANKS therefore have been able to conjure loans at very low interest cost to themselves, then they would be right.
But consider when the depression hits? All these people have half-finished projects and all this debt? At that point are we really saying that its better if their debt is at a higher interest rate then a lower one? No of course not. Interest is always a menace. If some amount of it is necessary, if this be the case then its a necessary evil. This phraseology is pernicious because it allows people to think its a good thing that banks ought to be able to reach into everyones pockets and grab so much of their income on their variable rate mortgages. The entire status quo is a scandal.
No the problem is not and has never been too low an interest rate to the end user. The interest rate subsidy to the banks is a problem since there is no free lunch and the new loans are therefore stolen from the public and re-lent. We need to change the terminology so that its very clear that the problem is a sudden creation of new money and a sudden simultaneous creation of new debt. THAT is the problem and not low interest rates and its really important that we get the wording right.