Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

Bank Credit Expansion and Its Effects on the Economic System 2993. Fixed and circulating capital goods.A third pertinent observation about our portrayal of productivestages is that it includes not only fixed capital goods,but also circulating capital goods and durable consumergoods. From a human actor’s prospective point of view, thedistinction between fixed and circulating capital goods is irrelevant,since it is largely based on the physical characteristics ofthe goods in question and depends especially upon whetheror not these goods are considered to have been “completed.”Indeed when fixed capital goods are incorporated into a productionprocess, they are considered “completed,” while circulatingcapital goods are thought to be semi-manufactured orin an “intermediate” process of production. However accordingto the subjectivist view on production processes aimed atconsumption, both fixed and circulating capital goods constituteintermediate stages in an action process which only concludes whenthe final consumer good satisfies the desires of consumers; therefore,economically speaking, it is senseless to distinguishbetween the two.The same can be said for “inventories” or stocks of intermediategoods held on hand at each of the productive stages.These stocks, which are considered a part of circulating capital,constitute one of the most significant components of thevalue of each stage in a process of production. Furthermore ithas been demonstrated that as the economy evolves and prospers,these stocks become more important because they enabledifferent businesses to minimize the ever-latent risk of unexpectedshortages or “bottlenecks” which prolong delivery[l]and that has been irrigated by canals or altered through thechopping down of forests has become a present, permanentgiven. Because it is a present given, not worn out in theprocess of production, and not needing to be replaced, itbecomes a land factor under our definition. (Italics in original)Rothbard concludes that oncethe permanent are separated from the nonpermanent alterations,we see that the structure of production no longer stretchesback infinitely in time, but comes to a close within a relatively briefspan of time. (Man, Economy, and State, p. 414; italics added)