Sound Money and the Business Cycle / Artikel mises.org

verfasst von - Elli -, 24.03.2003, 16:02

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<font face="Verdana" size="1" color="#002864">http://www.mises.org/fullstory.asp?control=1186</font>
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<font size="2"><font face="Verdana" color="#002864" size="5"><strong>Sound
Money and the Business Cycle</strong></font>
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<font face="Verdana" size="4">by John P. Cochran</font>




<font face="Verdana" size="2">[Posted March 24, 2003]</font>




<font face="Verdana" size="2">[img][/img] </font><font face="Verdana">Conclusions</font>




<font face="Verdana">Government control/intervention into the money system
creates distortions in the money pricing system. These interventions lead to
money prices that are not based on individual valuations and knowledge.
Calculation errors will be in excess of entrepreneurial errors that are part
and parcel of the unavoidable uncertainty associated with planning for future
provision of consumer wants. Planning to meet consumers' most urgent demands
is hindered, and in the case of a crack up boom where no substitute money is
readily available, so shortened in time horizon as to be effectively
eliminated.</font>




<font face="Verdana">The arguments supporting a sound money policy were
originally extensions of the Austrian business cycle theory. Credit creation
systematically undermines capital-based entrepreneurial plans by increasing
the difficulty associated  "with the relationships between
resources at one point of time and outputs of subsequent points of time"
(Kirzner 1996, p. 43).  The crisis or bust following a boom is just
a calculation meltdown cut short. The intervention is stopped or slowed and
the falsified calculations are revealed. The corrective action of profit/loss
feedback begins again to assert itself.  Economic activity 'recovers',
as the market again begins a process to align business plans with consumers/producers
valuations and available resources. If the intervention is not slowed or
stopped, the inflation continues until a crack up boom sets in with the
associated complete calculation breakdown.</font>




<font face="Verdana">Sound money provides a financial environment where
economic crisis associated with misdirections of resources and malinvestments
can be avoided and where monetary calculation can be as efficient as possible.
Economists who accept the Austrian argument on the impossibility of rational
economic calculation in a socialist economy and recognize the calculation
problems inherent in highly interventionist economies, but reject Austrian
business cycle theory, should re-examine their position.</font>




<font face="Verdana">The key elements for understanding the market process
based on entrepreneurial planning, monetary calculation, and capital are the
key elements underlying both the calculation argument and Austrian business
cycle theory. Without sound money, calculation is less efficient and the
economy will be prone to business cycles. With sound money policy, no
boom-bust cycle will emerge and monetary calculation and planning will be as
efficient as possible in an uncertain world.</font>


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• Sound Money and the Business Cycle / Artikel mises.org - - Elli -, 24.03.2003, 16:02