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

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Additional Considerations on the Theory of the Business Cycle 507(Continued from previous page)S4Real wages fall. The RicardoEffect: capital equipment isreplaced by workers.S5 The capital-goods sector sustainsheavy accounting losses.(Demand decreases, theRicardo Effect, and costs rise.The interest rate and the pricesof commodities increase.)S5 Workers are laid off in capitalgoodsindustries.Recovery DepressionS5 Entrepreneurs liquidate erroneousinvestment projects:bankruptcies and suspensionsof payments. Widespread pessimism.S5 Bank default mounts: Marginallyless solvent banks faceserious difficulties. Creditsqueeze.S5 Workers are again employed instages close to consumption.S5 Capital is consumed, and theproductive structure becomesshorter.S5 The production of consumergoods and services slows.S5 The relative prices of consumergoods rise even further(decreased supply andincreased monetary demand).S5 National income and wagesdrop in real terms.S6 Once the readjustment hasoccurred, an increase in voluntarysaving may bring recovery.See column (1). Or creditexpansion may begin again.See column (2).
508 Money, Bank Credit, and Economic CyclesNOTES ON TABLE VI-11. All references to “increases” and “decreases” in pricesrefer to relative prices, not nominal prices or absolutemagnitudes. Thus, for example, an “increase in theprices” of consumer goods indicates that such pricesrise, in relative terms, with respect to those of intermediategoods.2. It is simple to introduce the necessary modificationsin the stages of the theoretical processes summarizedin the table to include the historical peculiarities ofeach cycle. Hence if a rise in voluntary saving isaccompanied by an increase in hoarding or thedemand for money, the phases will remain the same,yet there will be a greater nominal decrease in theprice of consumer goods, and a lesser increase in thenominal price of the factors of production. Nonethelessall relationships among relative prices remain justas depicted in the table. In the case of credit expansion,if “idle capacity” exists at its initiation, the nominalprice of the factors of production and capitalgoods will not rise as significantly in the beginning,though the rest of the stages will follow as described,and foolish investments will also pile up.3. Though the number which follows the letter “S”denotes the order of the stages, in certain cases thisnumbering is relatively arbitrary, depending uponeach particular historical situation and whether or notthe stages take place more or less simultaneously.4. In real life the process could come to an indefinite haltduring any of the phases, if government interventionmakes markets highly rigid, and specifically if theprices of intermediate goods, wages or labor legislationare successfully manipulated. Furthermore a progressiveincrease in credit expansion may postponethe eruption of the crisis (and/or the liquidation ofthe malinvestments), but it will make it deeper andmore painful when it inevitably hits.
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MONEY,BANK CREDIT,ANDECONOMIC CYCLE
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CONTENTSPREFACE TO THE THIRD ENGLIS
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xiiMoney, Bank Credit, and Economic
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xivMoney, Bank Credit, and Economic
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xviMoney, Bank Credit, and Economic
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xviiiMoney, Bank Credit, and Econom
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PREFACE TO THESECOND ENGLISH EDITIO
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Preface to the Second English Editi
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PREFACE TOTHE THIRDSPANISH EDITIONI
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Preface to the Third Spanish Editio
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xliiMoney, Bank Credit, and Economi
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INTRODUCTIONThe economic analysis o
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Introductionxlviiand foreign exchan
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IntroductionxlixThis book comprises
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Introductionrecurrent phenomenon. I
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Introductionand Professors Hans-Her
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2 Money, Bank Credit, and Economic
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4THE CREDITEXPANSION PROCESSThis ch
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The Credit Expansion Process 169dif
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The Credit Expansion Process 171rec
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The Credit Expansion Process 173Eco
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The Credit Expansion Process 201d 1
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The Credit Expansion Process 209Thi
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The Credit Expansion Process 221(39
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6ADDITIONALCONSIDERATIONSON THE THE
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A Critique of Monetarist and Keynes
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8CENTRAL AND FREEBANKING THEORYThis
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Central and Free Banking Theory 603
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9A PROPOSAL FOR BANKINGREFORM: THE
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A Proposal for Banking Reform:The T
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BIBLIOGRAPHYAbrams, M.A., Money in
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Bibliography 815Bajo Fernández, M.
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Bibliography 817Borch, K.H., Econom
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Bibliography 819Coronel de Palma, L
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Bibliography 821N. Durlauf and Lawr
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Bibliography 823Galiani, F., Della
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Bibliography 825Graham, F.D., “Pa
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Bibliography 827——, Prices and
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Bibliography 829translation by N. K
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Bibliography 831——, “Keynes
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Bibliography 833Russian edition by
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Bibliography 835Keeler, J., “Empi
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Bibliography 837——, “On Crisi
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Bibliography 839——, “Professo
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Bibliography 841Miller, H.E., Banki
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Bibliography 843Neira, Alonzo, M.A.
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Bibliography 845Raguet, C., “Repo
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Bibliography 847——, “The Myth
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Bibliography 849——, “Banking
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Bibliography 851M.C. Marcuzzo (Chel
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Bibliography 853——, “A Critiq
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Bibliography 855Walker, A., The Sci
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INDEX OF SUBJECTSAccelerator princi
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Index of Subjects 859Banking reform
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Index of Subjects 861objection to t
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Index of Subjects 863Goal, concept
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Index of Subjects 865See also Fract
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Index of Subjects 867Plan, definiti
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Index of Subjects 869Tragedy of the
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