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

316 Money, Bank Credit, and Economic Cycles(73) Debit Credit1,000,000 Cash Loan received 1,000,000The entrepreneur who receives these present goods usesthem to acquire: (1) capital goods from prior productivestages; (2) labor services; (3) natural resources. Through thisthird procedure, savers who do not wish to involve themselvesdirectly in the activity of any of the productive stagescan save and invest through the credit market by entering intoa loan contract. Although this method is indirect, it ultimatelyproduces a result identical to that of the first two proceduresfor voluntarily increasing saving.THE ISSUE OF CONSUMER LOANSIt could be argued that sometimes loans are not granted toentrepreneurs of productive stages, to enable them tolengthen their production processes through investment, butare instead granted to consumers who purchase final goods. First,we must note that the very nature of the initial two savingprocedures described above precludes the use of the savedresources for consumption. It is only possible to conceive of aconsumer loan in the credit market, which as we know playsa subsidiary role and is secondary to the total market wherepresent goods are offered and purchased in exchange forfuture goods. Second, in most cases consumer loans aregranted to finance the purchase of durable consumer goods,which as we saw in previous sections, 42 are ultimately comparableto capital goods maintained over a number of consecutive stagesof production, while the durable consumer good’s capacity to provideservices to its owner lasts. Under these circumstances, by far themost common, the economic effects of consumer loans, withrespect to encouraging investment and lengthening productivestages, are identical to and indistinguishable from the effectsof any increase in savings directly invested in the capital42 See pages 300–01 and footnotes 32 and 33.