Lesson #174 - The division of labor – Adam Smith’s invisible hand - Part 1
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Today we are going to take a quick look at the most revolutionary concept in the history of humanity: The Division Of Labor. This concept is so important that without it, we would not have civilization and, arguably, we would have never evolved into HomoSapiens.
Of course, the division of labor just happened“out there” in the free market, and economics came and placed a label on it. It does not…
Lesson #173 - The Austrian Business Cycle Theory - Part 3
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CRITICISMS
The ABCT is not perfect
And we are the first ones to acknowledge that. The ABCT is a very sound theory indeed, but it cannot possibly account for every single economic parameter and variation. Some business cycles will conform to it very well, and some will do so far less. However, on average, the largest (and most important) cycles do conform and confirm the ABCT very closely. We are mostly…
Lesson #172 - The Austrian Business Cycle Theory - Part 2
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ISSUES
Let’s review a few issues under the Austrian view.
Overinvestments
How about overinvestments? Although Austrians recognize that over-investments triggered by lower interest rates are indeed and issue, it would seem that mis-allocation of investments has, in general, a larger impact.
But for every general rule, there are exceptions. Over-investment becomes patently clear when we observe unusual bubbles such as the so-called “Dot-Com” or the Real Estate bubble.
Busts
What are busts and…
Lesson #171 - The Austrian Business Cycle Theory - Part 1
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Today we are going to take a look at one of the cornerstones of the Austrian School of Economics: the Austrian Business Cycle Theory (ABCT). We are going to spend some time on this topic because it is of critical importance to you. Your future, or more precisely the economic future of your country, can be forecasted using this theory. It is powerful stuff indeed! Let’s begin.
AUSTRIAN BUSINESS CYCLE…
The High Price Of Government Regulations
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Governments loveto regulate. They do so because politicians need to justify their jobs, however useless they may be. As such, they must continuously scour the world in search for new "issues" that need "regulating" for "your own good". Yet, this search is not easy. On one hand, it must be clearly visible so that politicians may benefit from the "propaganda value" of such "initiatives". On the other hand, it must…
Lesson #170 - Gold is a shiny beacon of hope - Part 5
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EFFECTS OF TRANSITIONING TO A FULL RESERVE GOLD BANKING
As you can see, there are many recommendations and/or suggestion how to switch from a fiat money system into a 100% gold money system. These are just two them. The problems created by such a tectonic shift would be gigantic, and new and creative ways to deal with them would have to be devised. But not everything is bad news; some…
Lesson #169 - Gold is a shiny beacon of hope - Part 4
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LIMITATIONS OF FULL RESERVE GOLD BANKING
100% Gold banking is limited only by the stupidity of governments. If you wish to have true full reserve gold banking, then all governments must cease to exist. However, in an imperfect world where governments may co-exist with full reserve banking, the following limitations will still remain:
- Government economic planning or directed economy. The stupidity of planning bureaucrats cannot be cured by gold.
- Tax…
Lesson #168 - Gold is a shiny beacon of hope - Part 3
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FULL RESERVE GOLD BANKING
What it is?
This one is simple to answer. It means that Banks are simply warehouses where gold is stored. They issue warehouse receipts that are fully redeemable in gold on demand. It is also called 100% Gold Backing or Banking.
Why Full Reserve?
Because we had plenty of experience with “fractional reserve” banking (this is counterfeiting, fraud and embezzlement as explained in our lesson Fake…
Lesson #167 - Gold is a shiny beacon of hope - Part 2
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PROPERTIES OF MONEY
These are the properties that money needs to have. They will come handy later in our lesson.
- It is something that has other, physical uses before it becomes money (it is a commodity) or it is acceptable by the market as money
- It is widely accepted (it is highly marketable)
- It is scarce (it maintains its value over time because it is difficult to obtain more or…
