Re: IM Conversation
" Borodog: and the structure of production is generally producing what people want
[14:29] Borodog: everyone is happy."
The rest of the conversation assumes that level of production is optimal, it isn't, just because "everyone is happy"
"Businessmen see lower interest rates. Without fake money, the interest rate might be 8%.
[14:33] Borodog: Any project where you have to take out a loan to start it, and will only return 7%, will be unprofitable. A waste of resources.
[14:33] Borodog: So the credit expansion artificially lowers the interest rate to 6%."
The language here is self-serving and propagandist. There is nothing "fake" about additional money supply that fuels business, and there is nonthing "artificial" about an interest rate that encourages investment. A rigid monetary standard pegged to a commodity is just as "artificial" because it subjects all other goods and services to a (necessarily) constrained supply of money. That has the converse effect of making what would otherwise be profitable enterprises unprofitable, denying their entry into the market, which hurts the consumer.
"14:35] Borodog: He must bid all of these factors of production away from other businesses, because the factors of production are at any one time finite. That bids up the prices for the factors of production, the so-called "input prices", the prices of things used to produce other things. "
Just because inputs are "finite" doesn't mean there isnt a sufficient supply. Well run businesses can just as well have anticipated the demand and have sufficient inventories to meet it.
The rest of the conversation is the same doom and gloom about the "impending crash" that has been selling books for the last 40 years and making money for no one but the authors and publishers.
The real lesson in this OP is that by choosing assumptions and placing your own value judgement on them, you can prove that the alternatives are "bad".
Start out with an artifically constrained money supply and you will reach exactly the opposite conclusions.
If your agenda is the malevolence of the government and the Fed you obviously aren't going to show both sides.
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