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To: Ilaine who wrote (106863)	6/6/2001 11:29:19 AM
From: oldirtybastard	Read Replies (1) \| Respond to of 436258

I wasn't talking about buying stocks on margin. The money is coming from somewhere, right? It's not coming from earnings or revenues. That means it is either growing on trees, coming from a complex labyrinth of derivatives of itself, or being taken from some people by others. Once it is all taken, and you have no system of generating it other than taking it from someone, or growing it on trees, or creating ever more derivatives, what will happen to those pieces of paper everyone holds that cannot pay for themselves in the next 20 or whatever years and yet are the underpinning of the entire economic system? The fed is trying to hard to grow the money on trees right now, and foreigners are helping, it's not a system that seems to stable to me over the long haul, bwtfdik? Seems like a house built on sand is all

To: Ilaine who wrote (106863)	6/6/2001 12:59:07 PM
From: yard_man	Read Replies (2) \| Respond to of 436258

you misunderstand the term malinvestment as used by the Austrians. Malinvestment doesn't mean investment in securities, but deployment of economic resources to an end not good in the long term, i.e. other than that which would happen if the marketplace guided. Bankruptcies or businesses that fail: these aren't indicators of malinvestment. Entrepreneurial risk is another matter entirely (well almost, but not quite -- easy money does distort the assesment of such risks) -- it is certainly necessary for the market to allocate limited resource efficiently. The malinvestments that Austrians refer to mean resources that are deployed for a specific use -- not being driven by the market -- but by distortions of market demand brought on by easy money or rapid increases in the stock of money ... For instance -- more money might be directed to high tech infrastructure because of an initial period of rapidly growing profits. If the market for goods function efficiently -- competition heats up and prices fall, profits fall and less money is directed to producing said good. But when money is easy, and the accounting for benefits received by deploying technology are not discounted properly investment in productive capacity looks like a better proposition than it really is and capacity increases beyond levels that are good in the long term. Certainly this is what has happened in relation to the productive capacity of chips, routers, telcomm equipment. But since economic resources are finite, malinvestment also means that there must also be a corresponding underinvestment in other types of productive capacity. The 'mal' has to do with differences between economic resource allocations: what economic resources would be allocated to what uses if driven solely by the marketplace and what resources are allocated to what uses when there is untoward growth in money or credit ...