overview

Advanced

'..to the role Credit played in economic cycles..' - Doug Noland

Posted by ProjectC 
The German/“Austrian” view of economics just has a very different perspective, and it goes way beyond some fixation on Weimar hyperinflation. The focus is on how real wealth is created and how wealth is destroyed. Monetary inflations are powerfully destructive.

'No doubt about it, the Bundesbank is increasingly isolated. They are at odds with most European politicians and they are at odds with other central bankers. They are clearly not on the same page with Mr. Draghi. And no group of government officials anywhere more clearly appreciates myriad risks associated with monetary inflations. The German/“Austrian” view of economics just has a very different perspective, and it goes way beyond some fixation on Weimar hyperinflation. The focus is on how real wealth is created and how wealth is destroyed. Monetary inflations are powerfully destructive. And as a deepening European crisis applies incredible pressure on politicians throughout the region – certainly including Germany's Merkel and Schaeuble – I suspect the Bundesbank will hold its ground. They are both right on the analysis and have the support of the German people. They understand that the German economy cannot support the massive debt of the entire eurozone.'


'Today’s monetary analysis is not good but it is shallow .. Thinkers of things economic long ago appreciated that the functioning of economies was literally transformed by the introduction of money .. Finance mattered and it mattered a lot. Keen attention was paid to the role Credit played in economic cycles .. Regrettably, incredibly important lessons learned through devastation and hardship were relegated to the dustbin of history.'

'To set the backdrop, it is worth noting that early economic thinkers were obsessed with money. These days, monetary analysis is little more than a footnote in contemporary economic doctrine. Generations ago, great minds were trying to come to grips with monetary phenomena. They came to appreciate that money and Credit had profound impacts on economies and societies, although throughout history even the most astute struggled with the complexity of it all. These days, “monetary stimulus” is seen as good for the markets and, yes, good again for GDP. Inflation, if it ever were to return, is not so good. Today’s monetary analysis is not good but it is shallow.

Thinkers of things economic long ago appreciated that the functioning of economies was literally transformed by the introduction of money. An economy dominated by barter operated altogether differently after units of exchange entered the fray. They further understood that the introduction of bank lending – where new purchasing power and bank liabilities were created by the act of borrowing – added great complexities to how economies functioned. Finance mattered and it mattered a lot. Keen attention was paid to the role Credit played in economic cycles.

For centuries, the seemingly straightforward issues of money and Credit were recognized as extraordinarily, incredibly complex. Analyses that various monetary fiascos and inevitable collapses came to similar conclusions: sound money and Credit were paramount. Credit and speculative excesses were recognized as primary culprits to financial collapse and the Great Depression. Regrettably, incredibly important lessons learned through devastation and hardship were relegated to the dustbin of history.

..

But I’ll conclude the shallowest analysis of monetary history - and jump right to the present. I’ve for years posited that we live in an extraordinary period of “global wildcat finance.” Fiat electronic Credit – much of it marketable debt instruments – has expanded unlike anything previously experienced. In the “developed” West, inflated real and financial assets were a primary inflationary consequence. In China and “developing Asia,” an unprecedented expansion of manufacturing capacity was integral to the incredible inflation of incomes and wealth. As for fundamental “nuances” of this monetary and economic Bubble, one can point to so-called “globalization,” the explosion of computer and communications technologies, enterprising financial innovation, deregulated Credit and speculation, and monetary policy activism.

..

..emboldened New Age central bankers .. unwittingly nurtured an epic monetary inflation, and as this Credit Bubble has begun to buckle they have moved with extraordinary force to sustain it. Especially after the 2008 crisis response, global policymakers lost control.'

- Doug Noland, Monetary Madness, July 27, 2012


Context

Monetary Anarchy - by Dr. Kurt Richebächer

Economics - '..acts of choice.' (‘..imagination of alternatives..’)

Banking Reform

(Electric Universe) - '..History speaks only to those people who know how to interpret it on the ground of correct theories.' - Mises

Affectivity, Action, Electricity - '..in order to preserve society itself..'