yeah, I agree that there's too much debt in the US economy at this point. But I think that there are better sources, such as Godley and Izurieta (Keynesians of a sort, see http://www.levy.org/). I like the "Austrian" school's emphasis on dynamics (cf. Haberler's book on business cycles) the valid parts of their analysis seem to come from Marx (as Schumpeter, an "Austrian" so good that many of the school don't want him) admitted.
I just want to mention a further point:
the von Mises-type analysis that Steve posted also was very upset about the fact that banks are being replaced as financial intermediaries by GE Capital and Fannie Mae & the like. I don't like GE Capital, but this criticism contradicts another part of the "Austrian" perspective: it used to be that the "Austrians" were upset because under the fractional reserve banking system, banks could "create money" by lending some of our deposits in them -- instead of holding 100% reserves to back up deposits. They used to point to the resulting "credit inflation" (which could occur without actual inflation, as in the 1920s) that would allow the interest rate to fall below its "natural" rate, with baleful effects. Lionel Robbins, for example, blamed the Great Depression on the credit inflation of the 1920s and argued that we should just let "nature take its course" rather than doing anything about the Depression.
Anyway, neither GE Capital nor Fannie Mae can "create money" (i.e., credit) the way that banks can, since they don't take deposits. Instead, they raise money by issuing and selling bonds. So, even though these institutions have their problems, they don't have the same problem that the "Austrians" used to be so upset with banks about. If the economy turns even sourer, both of these would likely find that a lot of their assets have also become "nonperforming" -- encouraging a Federal bail-out -- but there can't be "runs" on these institutions.
Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine
> -----Original Message-----
> From: Steve Diamond [mailto:[EMAIL PROTECTED]]
> Sent: Thursday, June 20, 2002 10:34 PM
> To: [EMAIL PROTECTED]
> Subject: [PEN-L:27084] "Satanism of debt" (reply to Jim)
>
>
> Of course, the Hayekians have an obsession about fiat money,
> but I think it
> is very helpful to keep track of their analyses. I am not a
> gold bug but I
> think it is interesting that they want to anchor money to
> value. Of course
> debt, and all forms of fictitious capital, is not
> intrinsically bad but
> there sure is an awful lot of it today. In the late 80's
> Salomon Bros.
> economist Henry Kaufman wrote a kind of memoir complaining
> about the massive
> amount of debt the economy was piling up - it stood at about
> 7 trillion
> then. Well, now it stands at 30 trillion. Are we 400%
> wealthier? And that
> does not include US$ obligations like T-bills. In the wake
> of, for example,
> the near trillion dollar destruction of paper claims to wealth in the
> telecom sector alone over the last eighteen months I think it
> is perfectly
> reasonable to at least pose the question that there is
> something seriously
> wrong here. I would be the first to suggest that it is
> unfortunate that we
> have to look to the Mont Pelerin society for some answers,
> but at least it
> helps highlight the issues.
>
>
> Stephen F. Diamond
> School of Law
> Santa Clara University
> [EMAIL PROTECTED]
>
