류근일
자유민주주의 대한민국 진영과 ‘민족해방 민중민주주의 변혁’ 진영이 연말 연초를 기해 누가 살고 누가 죽느냐의 결정적인 국면을 맞이할 것 같다. 자유민주주의 대한민국 진영의 적(敵) ‘민족해방 민중민주주의 변혁’ 진영은 지금 공수처 신설과 사법권 도구화를 통해 그들의 적 자유민주주의 대한민국 진영을 땅 속에 파묻으려는 흉측한 공작을 진행시키고 있다.
한 마디로, 최근의 국민적 궐기는 기독교 세력과 시민운동 세력, 그리고 십자가 세력과 태극기 세력을 국민적 레지스탕스(저항)의 새로운 지도부로 띄워 올렸다. 이는 자유한국당의 존재감 희석과 리더십 추락이라는 불가피하고도 의미 있는 결과를 초래하고 있다. 자유한국당 정도로는 더이상 오늘의 피 튕기는 내전 상황을 감당할 능력도, 자질도 없다.
이유는 간단하다. 자유한국당은 애초부터 웰빙 체질, 싸울 줄 모르는 집단, 관료화된 집단, 이념적 투철함이 없는 맹물집단, 자체의 신념 없이 좌익 눈치나 슬슬 보며 ‘좌클릭’을 해대는 기회주의 집단이기 때문이다. 득표를 늘리기 위해서는 중도좌파까지도 고개를 끄덕일 수 있는 변신을 해야 한다는 게 자유한국당 꾀쟁이들의 잔머리 굴리기다.
이래서 10월 국민 대투쟁의 주인공인 광화문-청와대 앞 레지스탕스 대열은 자유한국당을 제치고 그들 자체의 투쟁 지도부를 우뚝 세워야 할 때다.
기독교 세력의 영적 투쟁을 지도하고 있는 리더들은 이미 전면에 출현해 있다. 세속적인 시민운동의 주동자들도 이미 다 잘 알려져 있다. 이 두 계열의 지도자들이 자유한국당을 대신해 이제는 자유민주주의 대한민국 진영의 리더십을 당당히 나꿔채 거머쥐어야 한다.
그리고 그 여세를 몰아 자유한국당 등 우파 정계의 공천에도 개입해야 한다. 자유한국당은 “전면적인 공천 물갈이를 하지 않으면 너희들 죽을 줄 알라”는 경고도 받아야 한다. (발췌)
류근일 2019/10/20
류근일의 탐미주의 클럽(cafe.daum.net/aestheticismclub)
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전교조 꺼져라!” 고교생들 첫 집단행동 - 조우석 칼럼 - [뉴스타운TV]
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Gordon G. Chang
It's also time for the US to consider a "New Way" to disarm "Fatty the Third." Let's put #NorthKorea on a strict diet by sanctioning #China and #Russia into the ground if they continue supporting the regime. Let's see if the Kimster remains this defiant when he has no cash.
중국과 러시아에 제재를 가해서, 북한의 3번째 김 돼지가 혹독
한 다이어트를 하도록 해야 한다.
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Big Picture: They are also forcing young monks out of
monastery schools, banning school children & ex-
officials - even those w low level govt-related jobs -
from circumambulation of holy sites, going to
monasteries & attending religious festivals.
중국이 티벳 승려들을 사원학교에서 쫓아내고, 학생들
이 사원이나 종교 행사에 참여하지 못하게 하고 있다.
China has destroyed large areas of one of Tibet’s
biggest Buddhist sites, satellite images reveal
위성 사진에 따르면, 중국이 티벳의 최대 불교 구역을
파괴했다.
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Over two billion people still live under authoritarian rule. Moreover, authoritarian regimes around the world command enormous financial and economic resources, rivaling those controlled by advanced democracies. Yet authoritarian regimes as a whole are facing their greatest challenges in the recent two decades due to rebellions and economic stress. Extended periods of hardship have the potential of introducing instability to regimes because members of the existing ruling coalition suffer welfare losses that force them to consider alternatives, while previously quiescent masses may consider collective uprisings a worthwhile gamble in the face of declining standards of living.
Economic Shocks and Authoritarian Stability homes in on the economic challenges facing authoritarian regimes through a set of comparative case studies that include Iran, Iraq under Saddam Hussein, Malaysia, Indonesia, Russia, the Eastern bloc countries, China, and Taiwan—authored by the top experts in these countries. Through these comparative case studies, this volume provides readers with the analytical tools for assessing whether the current round of economic shocks will lead to political instability or even regime change among the world’s autocracies. This volume identifies the duration of economic shocks, the regime’s control over the financial system, and the strength of the ruling party as key variables to explain whether authoritarian regimes would maintain the status quo, adjust their support coalitions, or fall from power after economic shocks.
Economic Shocks and Authoritarian Stability homes in on the economic challenges facing authoritarian regimes through a set of comparative case studies that include Iran, Iraq under Saddam Hussein, Malaysia, Indonesia, Russia, the Eastern bloc countries, China, and Taiwan—authored by the top experts in these countries. Through these comparative case studies, this volume provides readers with the analytical tools for assessing whether the current round of economic shocks will lead to political instability or even regime change among the world’s autocracies. This volume identifies the duration of economic shocks, the regime’s control over the financial system, and the strength of the ruling party as key variables to explain whether authoritarian regimes would maintain the status quo, adjust their support coalitions, or fall from power after economic shocks.
권위주의 통치자들은 경제적 난관을 어떻게 헤쳐나가나?
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Bloomberg
These 20 countries will dominate global growth in 2024
2024년에 세계의 경제 성장을 견인할 20개 국가
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부산 풍경/ 일베
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이런 미친짓을 언제까지 보아야 하지?
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도대체 글로벌리스트라는 단어가 왜 등장하는가?
국제정치] 한반도와 유럽에서 부활하는 '빅 브라더'의 실체
“While Democrats do old-school things debating on cable television, Trump’s digital team is aggregating the mobile advertising IDs of the entire voting population, matching location data from phone usage to other information they have” -@nfergus on shift from 4th to 5th estate
민주당이 케이블 티비에서 고전적 토론을 하고 있는 데 반해,
트럼프 디지털 팀은 전체 투표 인구의 정보를 분석하고 있다.
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"촛불계엄령 NSC, 黃이 주재…탄핵 이틀전 쿠데타 D데이"
'전시계엄 및 합수업무 수행방안' 원본 '현 시국 관련 대비계획' 공개
(서울=연합뉴스) 서혜림 기자 = 임태훈 군인권센터 소장은 21일 국군기무사령부의 '촛불 계엄령 문건'의 원본에서 자유한국당 대표인 황교안 당시 대통령 권한대행 겸 국무총리가 국가안전보장회의(NSC)를 주재해 박근혜 당시 대통령의 탄핵을 요구하는 촛불집회에 대한 군사력 투입을 논의한 정황이 확인됐다고 주장했다.
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JCR
A Water Baby,
The Capture,
By Herbert James Draper (1863-1920)
전복 껍질 속에 아이가 들어 있고, 여인은 미역을 옷처럼 두르고 있다. 신화적인 그림이지만, 익숙한 바닷가의 풍경처럼 느껴진다.
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Jon Stewart Mill
Keynes compares Das Kapital to the Koran
케인즈가 막스의 자본론을 코란과 비교하며, 둘 다 구시대적이고 무미건조한데 어떻게 불과 칼을 휘두르며 세계를 삼켰는지 이해할 수 없다고 고백하고 있다.
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인위적인 금리 인하의 경제적 결과
금리를 시장 시세보다 낮게 책정하는 게 자본가들과 고약한 채권자들을 벌주고 대다수에 혜택을 주는 정책이라는 생각이 널리 퍼져 있다. 또 채권자들은 게으른 부자들이고 채무자들은 근면하게 생활하는 빈자(貧者)들이라는 고정 관념도 있다.
하지만 현대에는 대농장과 주식, 부동산 소유자들이 채무자이고, 평범한 소득의 채권 소유자, 은행 저축이나 보험에 든 사람, 사회보장의 수혜자들이 채권자들이다.
중세에는 포고령으로 금리를 금지했지만, 현대의 케인즈를 비롯한 경제학자들은 여신 확장으로 금리를 낮추거나 폐기하고 있다.
은행이 여신을 통해 돈을 제공하는 유통 신용Circulation credit은 허공에서 돈을 만들어내는 것과 같아서, 이 돈이 시장에 유통되면 상품과 임금의 가격을 높이게 된다.
시장경제에서는 시장에서 결정된 가격, 시간당 임금, 금리를 바탕으로 기업가가 가장 저렴하고 가능한 최선의 방법으로, 소비자의 요구를 만족시키기 위해 노력한다. 이때 그의 계산에 바탕이 되는 가격, 임금 등이 정부에 의해 왜곡되면, 그의 노력은 투자 오류가 난다. 그리고 그렇게 해서 생산된 상품이 시장에 나가면, 소비자들에게 불요불급한 상품이므로 잘 팔리지 않게 되고, 경제는 ‘불황’이 된다.
생산의 크기를 결정하는 것은 생산 요소의 결핍이다. 가격, 임금, 금리 등은 단지 결핍의 정도를 표시하는 지표일 따름이다. 이런 지표를 통해 사회는 특정 사업을 하려는 기업가에게 경고를 보낸다: 이 생산 요소는 건드리지 마시오. 이것은 보다 시급한 요구를 만족시키기 위해 따로 떼어놓은 것이오.
통화 팽창주의자들은 여신 확장이 호황기를 가져올 수 있다고 주장하는데, 그 말은 맞다. 하지만 그들은 그렇게 인위적으로 만들어진 호황은 오래 가지 못하고, 반드시 전반적인 불황을 몰고 온다는 사실은 무시한다.
만일 은행들이 계속해서 여신을 확장해서 인플레를 유발하게 되면, 사람들은 휴지나 다름없는 돈을 버리고 상품을 선호하게 된다. 1923년 독일의 인플레 사태 때 이런 일이 일어났었다. 돈의 가치가 제로가 되어감에 따라, 사람들은 물물교환을 하거나, 외국 화폐를 사용하게 된다.
이와 반대로 은행이 여신을 중단하면, 사람들은 공포에 사로잡힌다. 기업들이 파산을 피하기 위해 돈을 필요로 함에 따라, 금리가 천정부지로 솟아오른다. 또 재고를 시장에 떨이로 처분함에 따라 가격이 폭락한다. 결국 생산 활동이 위축되고, 노동자들은 해고된다. 어느 쪽이든 여신의 확장은 경제 위기로 끝내고 만다.
25년 후의 사과 둘 보다 오늘의 사과 하나를 원하는 사람이 있는 한, 금리는 자본주의든 사회주의든 어디에도 있다. 그것은 영원한 인간 행동의 범주에 속하기 때문이다.
The Economic Consequences of Cheap Money
Ludwig von Mises
[From a memorandum, dated April 24, 1946, prepared in English by Professor Mises for a committee of businessmen for whom he served as a consultant, this article appears in The Causes of the Economic Crisis, and Other Essays Before and After the Great Depression (2006) as chapter 5, "The Trade Cycle and Credit Expansion: The Economic Consequences of Cheap Money."]
The author of this paper is fully aware of its insufficiency. Yet, there is no means of dealing with the problem of the trade cycle in a more satisfactory way if one does not write a treatise embracing all aspects of the capitalist market economy. The author fully agrees with the dictum of Böhm-Bawerk: "A theory of the trade cycle, if it is not to be mere botching, can only be written as the last chapter or the last chapter but one of a treatise dealing with all economic problems."
It is only with these reservations that the present writer presents this rough sketch to the members of the Committee.
I. The Unpopularity of Interest
One of the characteristic features of this age of wars and destruction is the general attack launched by all governments and pressure groups against the rights of creditors. The first act of the Bolshevik Government was to abolish loans and payment of interest altogether. The most popular of the slogans that swept the Nazis into power was Brechung der Zinsknechtschaft, abolition of interest-slavery. The debtor countries are intent upon expropriating the claims of foreign creditors by various devices, the most efficient of which is foreign exchange control. Their economic nationalism aims at brushing away an alleged return to colonialism. They pretend to wage a new war of independence against the foreign exploiters as they venture to call those who provided them with the capital required for the improvement of their economic conditions. As the foremost creditor nation today is the United States, this struggle is virtually directed against the American people. Only the old usages of diplomatic reticence make it advisable for the economic nationalists to name the devil they are fighting not the Yankees, but "Wall Street."
"Wall Street" is no less the target at which the monetary authorities of this country are directing their blows when embarking upon an "easy-money" policy. It is generally assumed that measures designed to lower the rate of interest, below the height at which the unhampered market would fix it, are extremely beneficial to the immense majority at the expense of a small minority of capitalists and hardboiled moneylenders. It is tacitly implied that the creditors are the idle rich while the debtors are the industrious poor. However, this belief is atavistic and utterly misjudges contemporary conditions.
In the days of Solon, Athens's wise legislator, in the time of ancient Rome's agrarian laws, in the Middle Ages and even for some centuries later, one was by and large right in identifying the creditors with the rich and the debtors with the poor. It is quite different in our age of bonds and debentures, of savings banks, of life insurance and social security. The proprietary classes are the owners of big plants and farms, of common stock, of urban real estate and, as such, they are very often debtors. The people of more modest income are bondholders, owners of saving deposits and insurance policies and beneficiaries of social security. As such, they are creditors. Their interests are impaired by endeavors to lower the rate of interest and the national currency's purchasing power.
It is true that the masses do not think of themselves as creditors and thus sympathize with the noncreditor policies. However, this ignorance does not alter the fact that the immense majority of the nation are to be classified as creditors and that these people, in approving of an "easy-money" policy, unwittingly hurt their own material interests. It merely explodes the Marxian fable that a social class never errs in recognizing its particular class interests and always acts in accordance with these interests.
The modern champions of the "easy-money" policy take pride in calling themselves unorthodox and slander their adversaries as orthodox, old-fashioned, and reactionary. One of the most eloquent spokesmen of what is called functional finance, Professor Abba Lerner, pretends that in judging fiscal measures he and his friends resort to what "is known as the method of science as opposed to scholasticism." The truth is that Lord Keynes, Professor Alvin H. Hansen and Professor Lerner, in their passionate denunciation of interest, are guided by the essence of Medieval Scholasticism's economic doctrine, the disapprobation of interest. While emphatically asserting that a return to the 19th century's economic policies is out of the question, they are zealously advocating a revival of the methods of the Dark Ages and of the orthodoxy of old canons.
II. The Two Classes of Credit
There is no difference between the ultimate objectives of the anti-interest policies of canon law and the policies recommended by modern interest-baiting. But the methods applied are different. Medieval orthodoxy was intent first upon prohibiting by decree interest altogether and later upon limiting the height of interest rates by the so-called usury laws. Modern self-styled unorthodoxy aims at lowering or even abolishing interest by means of credit expansion.
Every serious discussion of the problem of credit expansion must start from the distinction between two classes of credit: commodity credit and circulation credit.
Commodity credit is the transfer of savings from the hands of the original saver into those of the entrepreneurs who plan to use these funds in production. The original saver has saved money by not consuming what he could have consumed by spending it for consumption. He transfers purchasing power to the debtor and thus enables the latter to buy these nonconsumed commodities for use in further production. Thus the amount of commodity credit is strictly limited by the amount of saving, i.e., abstention from consumption. Additional credit can only be granted to the extent that additional savings have been accumulated. The whole process does not affect the purchasing power of the monetary unit.
Circulation credit is credit granted out of funds especially created for this purpose by the banks. In order to grant a loan, the bank prints banknotes or credits the debtor on a deposit account. It is creation of credit out of nothing. It is tantamount to the creation of fiat money, to undisguised, manifest inflation. It increases the amount of money substitutes, of things which are taken and spent by the public in the same way in which they deal with money proper. It increases the buying power of the debtors. The debtors enter the market of factors of production with an additional demand, which would not have existed except for the creation of such banknotes and deposits. This additional demand brings about a general tendency toward a rise in commodity prices and wage rates.
While the quantity of commodity credit is rigidly fixed by the amount of capital accumulated by previous saving, the quantity of circulation credit depends on the conduct of the bank's business. Commodity credit cannot be expanded, but circulation credit can. Where there is no circulation credit, a bank can only increase its lending to the extent that the savers have entrusted it with more deposits. Where there is circulation credit, a bank can expand its lending by what is, curiously enough, called "being more liberal."
Credit expansion not only brings about an inextricable tendency for commodity prices and wage rates to rise it also affects the market rate of interest. As it represents an additional quantity of money offered for loans, it generates a tendency for interest rates to drop below the height they would have reached on a loan market not manipulated by credit expansion. It owes its popularity with quacks and cranks not only to the inflationary rise in prices and wage rates which it engenders, but no less to its short-run effect of lowering interest rates. It is today the main tool of policies aiming at cheap or easy money.
III. The Function of Prices, Wage Rates, and Interest Rates
The rate of interest is a market phenomenon. In the market economy it is the structure of prices, wage rates and interest rates, as determined by the market, that directs the activities of the entrepreneurs toward those lines in which they satisfy the wants of the consumers in the best possible and cheapest way.
The prices of the material factors of production, wage rates and interest rates on the one hand and the anticipated future prices of the consumers' goods on the other hand are the items that enter into the planning businessman's calculations. The result of these calculations shows the businessman whether or not a definite project will pay. If the market data underlying his calculations are falsified by the interference of the government, the result must be misleading. Deluded by an arithmetical operation with illusory figures, the entrepreneurs embark upon the realization of projects that are at variance with the most urgent desires of consumers. The disagreement of the consumers becomes manifest when the products of capital malinvestment reach the market and cannot be sold at satisfactory prices. Then, there appears what is called "bad business."
If, on a market not hampered by government tampering with the market data, the examination of a definite project shows its unprofitability, it is proved that under the given state of affairs the consumers prefer the execution of other projects. The fact that a definite business venture is not profitable means that the consumers, in buying its products, are not ready to reimburse entrepreneurs for the prices of the complementary factors of production required, while on the other hand, in buying other products, they are ready to reimburse entrepreneurs for the prices of the same factors. Thus the sovereign consumers express their wishes and force business to adjust its activities to the satisfaction of those wants which they consider the most urgent. The consumers thus bring about a tendency for profitable industries to expand and for unprofitable ones to shrink.
It is permissible to say that what proximately prevents the execution of certain projects is the state of prices, wage rates and interest rates. It is a serious blunder to believe that if only these items were lower, production activities could be expanded. What limits the size of production is the scarcity of the factors of production. Prices, wage rates and interest rates are only indices expressive of the degree of this scarcity. They are pointers, as it were. Through these market phenomena, society sends out a warning to the entrepreneurs planning a definite project: Don't touch this factor of production; it is earmarked for the satisfaction of another, more urgent need.
The expansionists, as the champions of inflation style themselves today, see in the rate of interest nothing but an obstacle to the expansion of production. If they were consistent, they would have to look in the same way at the prices of the material factors of production and at wage rates. A government decree cutting down wage rates to 50 percent of those on the unhampered labor market would likewise give to certain projects, which do not appear profitable in a calculation based on the actual market data, the appearance of profitability. There is no more sense in the assertion that the height of interest rates prevents a further expansion of production than in the assertion that the height of wage rates brings about these effects. The fact that the expansionists apply this kind of fallacious argumentation only to interest rates and not also to the prices of primary commodities and to the prices of labor is the proof that they are guided by emotions and passions and not by cool reasoning. They are driven by resentment. They envy what they believe is the rich man's take. They are unaware of the fact that in attacking interest they are attacking the broad masses of savers, bondholders and beneficiaries of insurance policies.
IV. The Effects of Politically Lowered Interest Rates
The expansionists are quite right in asserting that credit expansion succeeds in bringing about booming business. They are mistaken only in ignoring the fact that such an artificial prosperity cannot last and must inextricably lead to a slump, a general depression.
If the market rate of interest is reduced by credit expansion, many projects which were previously deemed unprofitable get the appearance of profitability. The entrepreneur who embarks upon their execution must, however, very soon discover that his calculation was based on erroneous assumptions. He has reckoned with those prices of the factors of production which corresponded to market conditions as they were on the eve of the credit expansion. But now, as a result of credit expansion, these prices have risen. The project no longer appears so promising as before. The businessman's funds are not sufficient for the purchase of the required factors of production. He would be forced to discontinue the pursuit of his plans if the credit expansion were not to continue. However, as the banks do not stop expanding credit and providing business with "easy money," the entrepreneurs see no cause to worry. They borrow more and more. Prices and wage rates boom. Everybody feels happy and is convinced that now finally mankind has overcome forever the gloomy state of scarcity and reached everlasting prosperity.
In fact, all this amazing wealth is fragile, a castle built on the sands of illusion. It cannot last. There is no means to substitute banknotes and deposits for nonexisting capital goods. Lord Keynes, in a poetical mood, asserted that credit expansion has performed "the miracle … of turning a stone into bread." But this miracle, on closer examination, appears no less questionable than the tricks of Indian fakirs.
There are only two alternatives.
One, the expanding banks may stubbornly cling to their expansionist policies and never stop providing the money business needs in order to go on in spite of the inflationary rise in production costs. They are intent upon satisfying the ever increasing demand for credit. The more credit business demands, the more it gets. Prices and wage rates sky-rocket. The quantity of banknotes and deposits increases beyond all measure. Finally, the public becomes aware of what is happening. People realize that there will be no end to the issue of more and more money substitutes — that prices will consequently rise at an accelerated pace. They comprehend that under such a state of affairs it is detrimental to keep cash. In order to prevent being victimized by the progressing drop in money's purchasing power, they rush to buy commodities, no matter what their prices may be and whether or not they need them. They prefer everything else to money. They arrange what in 1923 in Germany, when the Reich set the classical example for the policy of endless credit expansion, was called die Flucht in die Sachwerte, the flight into real values. The whole currency system breaks down. Its unit's purchasing power dwindles to zero. People resort to barter or to the use of another type of foreign or domestic money. The crisis emerges.
The other alternative is that the banks or the monetary authorities become aware of the dangers involved in endless credit expansion before the common man does. They stop, of their own accord, any further addition to the quantity of banknotes and deposits. They no longer satisfy the business applications for additional credits. Then the panic breaks out. Interest rates jump to an excessive level, because many firms badly need money in order to avoid bankruptcy. Prices drop suddenly, as distressed firms try to obtain cash by throwing inventories on the market dirt cheap. Production activities shrink, workers are discharged.
Thus, credit expansion unavoidably results in the economic crisis. In either of the two alternatives, the artificial boom is doomed. In the long run, it must collapse. The short-run effect, the period of prosperity, may last sometimes several years. While it lasts, the authorities, the expanding banks and their public relations agencies arrogantly defy the warnings of the economists and pride themselves on the manifest success of their policies. But when the bitter end comes, they wash their hands of it.
The artificial prosperity cannot last because the lowering of the rate of interest, purely technical as it was and not corresponding to the real state of the market data, has misled entrepreneurial calculations. It has created the illusion that certain projects offer the chances of profitability when, in fact, the available supply of factors of production was not sufficient for their execution. Deluded by false reckoning, businessmen have expanded their activities beyond the limits drawn by the state of society's wealth. They have underrated the degree of the scarcity of factors of production and overtaxed their capacity to produce. In short: they have squandered scarce capital goods by malinvestment.
The whole entrepreneurial class is, as it were, in the position of a master builder whose task it is to construct a building out of a limited supply of building materials. If this man overestimates the quantity of the available supply, he drafts a plan for the execution of which the means at his disposal are not sufficient. He overbuilds the groundwork and the foundations and discovers only later, in the progress of the construction, that he lacks the material needed for the completion of the structure. This belated discovery does not create our master builder's plight. It merely discloses errors committed in the past. It brushes away illusions and forces him to face stark reality.
There is need to stress this point, because the public, always in search of a scapegoat, is as a rule ready to blame the monetary authorities and the banks for the outbreak of the crisis. They are guilty, it is asserted, because in stopping the further expansion of credit, they have produced a deflationary pressure on trade. Now, the monetary authorities and the banks were certainly responsible for the orgies of credit expansion and the resulting boom; although public opinion, which always approves such inflationary ventures wholeheartedly, should not forget that the fault rests not alone with others. The crisis is not an outgrowth of the abandonment of the expansionist policy. It is the inextricable and unavoidable aftermath of this policy. The question is only whether one should continue expansionism until the final collapse of the whole monetary and credit system or whether one should stop at an earlier date. The sooner one stops, the less grievous are the damages inflicted and the losses suffered.
Public opinion is utterly wrong in its appraisal of the phases of the trade cycle. The artificial boom is not prosperity, but the deceptive appearance of good business. Its illusions lead people astray and cause malinvestment and the consumption of unreal apparent gains which amount to virtual consumption of capital. The depression is the necessary process of readjusting the structure of business activities to the real state of the market data, i.e., the supply of capital goods and the valuations of the public. The depression is thus the first step on the return to normal conditions, the beginning of recovery and the foundation of real prosperity based on the solid production of goods and not on the sands of credit expansion.
Additional credit is sound in the market economy only to the extent that it is evoked by an increase in the public's savings and the resulting increase in the amount of commodity credit. Then, it is the public's conduct that provides the means needed for additional investment. If the public does not provide these means, they cannot be conjured up by the magic of banking tricks. The rate of interest, as it is determined on a loan market not manipulated by an "easy-money" policy, is expressive of the people's readiness to withhold from current consumption a part of the income really earned and to devote it to a further expansion of business. It provides the businessman reliable guidance in determining how far he may go in expanding investment, what projects are in compliance with the true size of saving and capital accumulation and what are not. The policy of artificially lowering the rate of interest below its potential market height seduces the entrepreneurs to embark upon certain projects of which the public does not approve. In the market economy, each member of society has his share in determining the amount of additional investment. There is no means of fooling the public all of the time by tampering with the rate of interest. Sooner or later, the public's disapproval of a policy of over-expansion takes effect. Then the airy structure of the artificial prosperity collapses.
Interest is not a product of the machinations of rugged exploiters. The discount of future goods as against present goods is an eternal category of human action and cannot be abolished by bureaucratic measures. As long as there are people who prefer one apple available today to two apples available in twenty-five years, there will be interest. It does not matter whether society is organized on the basis of private ownership of the means of production, viz., capitalism, or on the basis of public ownership, viz., socialism or communism. For the conduct of affairs by a totalitarian government, interest, the different valuation of present and of future goods, plays the same role it plays under capitalism.
Of course, in a socialist economy, the people are deprived of any means to make their own value judgments prevail and only the government's value judgments count. A dictator does not bother whether or not the masses approve of his decision of how much to devote for current consumption and how much for additional investment. If the dictator invests more and thus curtails the means available for current consumption, the people must eat less and hold their tongues. No crisis emerges, because the subjects have no opportunity to utter their dissatisfaction. But in the market economy, with its economic democracy, the consumers are supreme. Their buying or abstention from buying creates entrepreneurial profit or loss. It is the ultimate yardstick of business activities.
V. The Inevitable Ending
It is essential to realize that what makes the economic crisis emerge is the public's disapproval of the expansionist ventures made possible by the manipulation of the rate of interest. The collapse of the house of cards is a manifestation of the democratic process of the market.
It is vain to object that the public favors the policy of cheap money. The masses are misled by the assertions of the pseudo-experts that cheap money can make them prosperous at no expense whatever. They do not realize that investment can be expanded only to the extent that more capital is accumulated by savings. They are deceived by the fairy tales of monetary cranks from John Law down to Major C.H. Douglas. Yet, what counts in reality is not fairy tales, but people's conduct. If men are not prepared to save more by cutting down their current consumption, the means for a substantial expansion of investment are lacking. These means cannot be provided by printing banknotes or by loans on the bank books.
In discussing the situation as it developed under the expansionist pressure on trade created by years of cheap interest rates policy, one must be fully aware of the fact that the termination of this policy will make visible the havoc it has spread. The incorrigible inflationists will cry out against alleged deflation and will advertise again their patent medicine, inflation, rebaptizing it re-deflation. What generates the evils is the expansionist policy. Its termination only makes the evils visible. This termination must at any rate come sooner or later, and the later it comes, the more severe are the damages which the artificial boom has caused. As things are now, after a long period of artificially low interest rates, the question is not how to avoid the hardships of the process of recovery altogether, but how to reduce them to a minimum. If one does not terminate the expansionist policy in time by a return to balanced budgets, by abstaining from government borrowing from the commercial banks and by letting the market determine the height of interest rates, one chooses the German way of 1923.
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