'..As we have noted there, interest rates are an important signal helping to coordinate the economy's capital structure..'<blockquote>'One thing we are always struck by when today's interventionist macro-economists (whom Dylan Grice of SocGen has recently compared to
'drunk drivers being asked to drive a car') give us their opinions as to which of their plans government should implement to 'combat recession', is that they rarely investigate what has actually brought the recession on. The way economic downturns are talked about one always comes away with the impression that a recession is a kind of natural disaster, like a flood or an earthquake. The most widely held view is apparently that boom-bust cycles are an
inherent feature of the market economy. In other words, they do not require an explanation. All that is required in the view of most mainstream macro-economists is that government stand ready to 'correct the faults of the market economy' and steer it toward smooth economic development when one of these 'bumps in the road' unexpectedly manifests itself.
Consider again our recent article on the economy's
structure of production. As we have noted there, interest rates are an important signal helping to coordinate the economy's capital structure, as they influence the relative prices of goods that are more remote from the consumer goods stage and those that are closer to it. They tell entrepreneurs essentially how big a pool of real savings is available as a result of the time preferences of actors in the market economy. The size of this pool of real savings is what ultimately determines to what extent the production processes entrepreneurs engage in can be lengthened and hence be made more productive. In this manner the time schedules of consumers and producers are properly aligned – longer processes mean that consumption will have to be postponed to a later date, and in exchange for this longer period of waiting, more consumption will be possible than was possible with the configuration of the production structure prior to the addition of new savings and investment.'
- Acting Man,
Banks Not Going Belly-Up Right Away = Rally, September 16th, 2011</blockquote>
Context<blockquote>
'..America..' - '..credit excess .. detrimental effects on the .. economy.'</blockquote>