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To: t4texas who wrote (89718)	4/4/2001 9:39:57 PM
From: isopatch	Read Replies (1) \| Respond to of 95453

Thx t4. Good stuff/eom

To: t4texas who wrote (89718)	4/5/2001 9:59:10 AM
From: SliderOnTheBlack	Read Replies (2) \| Respond to of 95453

t4texas - THANKS for the Kasriel article/Austrian Econ... Interesting points: 1. [One of the basic tenets of the Austrian School is that any government interference with markets will lead to distortions and inefficiencies in an economy. ] 2. [Enter central banks. Central banks are essentially legal counterfeiters . They can figuratively create credit out of thin air. When a central bank purchases a bond or makes a loan, it is allowing someone to acquire current resources without necessitating anyone else to transfer control over resources to the borrower. ... By the creation of credit, central banks disturb the balance between voluntary saving and investment. ] 3. [...The economic downturn will then begin. The downturn can be delayed by the central bank holding down interest rates through the creation of even more credit. Eventually though, this cumulative process of credit creation will lead to higher inflation, which will induce the central bank to start eliminating credit rather than creating it. ] 4. [To the Austrian School, then, the central bank disturbs the balance of economic nature. The central bank creates investment booms ... If investment results from free market outcomes, yes. But if it results from market interference by the central bank, then, according to the Austrian School, malinvestment occurs. That is, unsustainable investment projects are undertaken. The Austrians would probably point to the Japanese experience of the 1980s as an example of malinvestment. You may recall that the Japanese investment boom was fueled by central bank credit.] 5. [ , the Fed runs the risk of ratcheting inflation higher if it creates ever more credit to prevent the economic bust] 6. [Much of this malinvestment would not have taken place had the Fed not created as much credit as it did in recent years. According to the Austrians, increased doses of created credit now will only postpone, at best, the inevitable liquidation of these malinvestments that must take place in order to set the stage for a new business expansion based on the solid foundation of saving, or transfer credit. Rather than the Fed printing more money, a policy option the Austrians would recommend to encourage saving and profitable investment is a cut in marginal income tax rates. This might not eliminate an economic downturn, but it would mitigate the severity of a downturn.] So it is written; so it shall be done...