Pimco - world's biggest investor - says eurozone can't survive

Back around 1992 and before the common currency was implemented, The Wall Street Journal had a series of three, front-page articles reviewing several centuries of history regarding attempts to create a common currency where everything else remained uncommon, independent and uncoordinated. With the exception of the United States of America (which grew into cohesion under Federalism concepts as states were added to the Union), there wasn't a single example where the attempt at creating a common currency succeeded -- and that, the Euro was destined to repeat that history, albeit via several decades of agony trying. Comes Pimco in 2015 to repeat the observations and prediction two decades into the Euro experience. I didn't take the effort tonight to locate that series of articles, but it would be interesting to conduct a search and review those articles in hindsight. It would be more meaningful and credible now.

What the UK and the USA on the whole do not realise, is the determination of most good people in Europe to make this work.

I don't think it was possible to impose strict fiscal rules on member states from the outset. Not only would it have been an unattractive proposition, but the rules would probably been inappropriate for individual applicants.

People here in the UK forget that we had 3 attempts to join the EEC. Our stumbling economy and currency were the main problem.

So my point is, those countries who now realise that the EEC and the Euro must survive, for historical reasons if no other, will also realise that a central bank and common fiscal policy is the way forward. Some might fall off the truck in the process. Broadly speaking, that's up to them.

The whole idea of a central planning committee deciding monetary policy is idiotic. There should be no central planning committee deciding monetary policy because they are incapable of performing the task to which they have been assigned. The only reason they have existed so long is because people still believe in the Keynesian economics dogma. Keynesian economics is more of a oxymoron than a theory of economics.

Pimco says the eurozone can't survive "unless countries are prepared to cede sovereignty and become a "United States of Europe". This supposed unforeseen crisis which must be averted by Europe becoming a "United States of Europe" is part of a process Karl Marx called the dialectic. Europe is being herded like sheep in to this World Government paradigm by design.

Economic decisions should be made by the producers and consumers who make up economies not by a central planning committee, economists or the government.

The eurozone central planning committee is a failure. They should get rid of it, not give it more power and become a "United States of Europe".

The eurozone is an example of what Albert Einstein meant when he said "Insanity: doing the same thing over and over again and expecting different results."

Insanity.

Its is important to understand the link between fiscal policy and monetary policy and how are they shaped by politics. At the heart of all this is the desire of powerful politicians, influenced by big business. Europeans are busy getting colonised right infront of their eyes.

Like the free market crash of 2008?

Yes, more or less. We evolve in unification - splitting - reunification cycles. Eurozone should not be an exception.

Well to be honest, No matter what you do, There will always be crisis and economic disasters one way or the other..
Do you believe free market works?- Idealism,
Central Planning works?- Idealism
Anarchism works?- Idealism

Utopia is a dream,Not a truth
Giving total control towards free market is neither an answer-Dominance of power prevails at the top and the economy will be controlled by producers and crony capitalists
Masses are always destined to suffer, no matter what

Making it work for Greece and possibly Ukraine is another story.

Hello smikester:

That wasn't a free market crash any more than the one being engineered right now before your very eyes.

Highly leveraged debt, the stock market bubble, the bonds bubble, quantitative easing aka printing money which ultimately only benefits the very richest, negative interest rates, being paid to borrow money which is created out of thin error, being punished for keeping your savings in a bank. Does any of this sound like the result of sound monetary policy to you ? Who's in charge of this Alice in Wonderland economics disastor being created right now. The central banks. The ECB, FRB. Who was running things during the crash of 2008 ? Think hard now.

Economic decisions should be made by the producers and consumers who make up economies not by a central planning committee, economists or the government. And yes a free market economy is better than a centrally planned economy.

But a free market economy does not mean it has no rules or regulations. Same with free speech. There are limits to free speech and limits to what should be allowed in a free market.

Central bank manipulations of markets to make them fit some ivory tower model only result in distortions of markets. Have any of these people ever had a real job or run a business ?

The problem in an economy is not how can the central banks create enough money to stimulate demand, but not too much to cause a bubble. And that by the way in a nut shell is the central banks whole bag of tricks. Pretty simple isn't.

Creating money does not create prosperity. The real goal of economics is to produce the maximum amount of goods and services in the most efficient way possible and thus raising the standard of living of people. This is best done in a free market. When central banks inflate the currency they cause misallocation of resources and the artificially stimulated part of the economy must eventually collapse as the money flows through the economy and the market seeks price equilibrium to reestablish the relative price levels before the stimulus. But in order to maintain the level of business that was reached because of the stimulus and even bigger amount of stimulus must be applied the next time around. The economy becomes more and more distorted and the stimulus must get bigger and bigger each time. This is what we have been suffering from. In other words the central banks/Federal Reserve interference in the economy is the cause of the very problem they say they are trying to prevent.

So will having a free market economy eliminate recessions, depressions and unemployment ? No it will not. But if there are any recessions or depressions they will be short lived and the economy will emerge from them better off. An unemployment will be minimal.

A recession could be caused for example by excessive investment in one sector of the economy which cannot sustain the expected amount of business from that investment. And so that sector suffers unemployment. But in a free market the pricing mechanism will tell workers and investors where they should redirect their efforts and the economy will correct it self. In the end the overall standard of living of the economy as a whole improves even though the workers in that sector of the economy will have suffered through no fault of their own.

Do you have a cell phone or know any one who owns one ? Ever wonder about happened to the jobs of all those workers in the hard line phone business ? They have suffered through no fault of their own. Hard won skills that have taken years to develop suddenly obsolete by changes in technology. See Joseph Schumpeter's creative destruction.

Money created out of thin air, being paid to borrow money, the elimination of moral hazard, meaning private profits and public losses all of this insanity can be laid at the feet of the central banks not free markets. Ask your self would any sane person pay you to borrow money from them ? Why were so many corporations allowed to get away with private profits and public losses ? This is crony capitalism aided by central bank market manipulations. Look up Japan's Abenomics and tell me if that makes any sense to you.

Free markets with rules enforced by an honest government. Rules that encourages business investments and places responsibility for profits and losses with those same businesses is what we should have. Not this crony capitalism - central planning committee economy we now have.

Those who want to know how economics really works can read the below books and find out.

Just reading these first two books will do wonders for your understanding of economics.

This is the number one book on economics that every one should read.
Economics in One Lesson by Henry Hazlitt
https://mises.org/library/economics-one-lesson

This book is an excellent explanation of economics.
Essentials of Economics by Faustino Ballve
https://mises.org/library/essentials-economics

This book is an excellent explanation of money and banking.
The Mystery of Banking by Murray Rothbard
https://www.mises.org/library/mystery-banking-1

Once you read the below book by Griffen you’ll realize how corrupt our entire financial system is. It will explain how the Federal Reserve created by a banking cartel to institutionalize the creating of money out of thin air for their
benefit not yours is one of the greatest crimes of the century.
The Creature from Jekyll Island: A Second Look at the Federal Reserve
by G. Edward Griffin

A very good basic explanation of economics.
Basic Economics by Thomas Sowell

United States of Europe

no brainer.
You cannot have monetary union without political union.
3 options
1) a united state of europe
2) a commercial currency and a local currency
3) go back to a local currency.

Just get rid of the bad apples in the basket.

Hello Eagleprice:

You're right "There will always be crisis and economic disasters one way or the other..". In free markets people can make disastrous business decisions resulting in the loss of their business and unemployment. The difference though it is their money not the public's that is being invested and loss. In our printing money out of thin air economy, you have perfect illustrations of the saying a fool and his money are soon parted. Or the other one saying, easy come, easy go. In which kind of economy do you think you will get you the best results ? The best bang for the dollar if you will.

Free markets should have rules and regulations on what should be allowed.

Control in a free market is decentralized instead of centralized and the people are better off for it. Compare North Korea's economy and South Korea's economy and tell me which is better. Or compare West Germany and East Germany before the fall of the Berlin Wall.

Your entire post is written in absolutes, either or, all black or all white. But reality has many gradations. Which method works better, not which one is utopia is how you should look at the problem. When you look at it that way it becomes much clearer.

As far as you saying "Masses are always destined to suffer, no matter what", again you are speaking in absolutes not gradations of reality. Go back a few hundred years ago in Europe when the masses worked at subsistence level and when crops failed they starved. The great potato famine of Ireland for example. Or they worked the lands of a lord and owed him fealty. And if they displeased their lord they would be thrown off the land and again they would starve. Or how about the Black Plague of Europe that wiped out a third of the population. Can you really compare the suffering of the masses back then to the standard of living the masses enjoy today ? We all are better off today than back then.

See my earlier post #10, for more reasons why free markets are better than centrally planned ones.

Much can be said on the probabilities of a euro failure, but unless the central bank allows it .. it will never happen, we could actually see a recovery in the eurozone instead .. at the end of the day.. its a market makers game.. its in their best interest that the "crowd" go on the opposite direction.

So just to verify I did understand you well, what you're saying is that China, a centrally planned economy, didn't do well enough because you, as an brainwashed austrian, think a free market would have resulted in an even stronger China.

maybe Pimco said that few minutes after set pending buy hahaaaa LOL

Thanks for your time Borg and the detailed answer to my comment. I don't necessarily agree with all you have said. Particularly, I take exception to your implication that I need a lesson in simple economics. You won't win many friends with that attitude.

My point is that I fear that during natural ebbs and flows of economic forces, however caused, there is room for megalomaniacs to gain power with nationalistic agendas. They speak well and smile a lot but pander to the small minded who will love to blame others and fuel the kind of xenophobia that starts trade wars or worse.

You mention the Irish potato famine in a later post. This, and the civil war in Ireland is exactly the type of problem that European unity can prevent.

Don't bother to reply if you expect an acknowledgement.

Best post ever from a guest account.

My remark that follows might be irrelevant to the subject being discussed here but I'm going to say it here and right here: I wish for the day that traders get rid of their conspiracy theory mentality. The market place is a very diverse and complex conglomerate of activities, to make the assumption that its manipulated by some big players in one way or the other is at best plain nonsense.

I agree.

Hello barkie:

Actually China agrees a lot with my opinion about free markets and not having a 100% centrally planned economy. A Communist economy as you know is a centrally planned economy. Centrally planned economies don't work very well for the people, except in the minds of arm chair academicians who have never had to live under Communism.

After Mao Zedong's death, the leader of China, Deng Xiaoping implemented many free market economic reforms in China that would have had Mao Zedong rolling in his grave. A free market as you know is by definition not a centrally planned economy. Seems strange that if China was doing so great with its "a centrally planned economy" as you are suggesting that they would be making these free market changes. Shouldn't they be making their economy even more centrally planned ?

Deng Xiaoping lived under Communism and saw its failures. After seeing the success of the free market in other Asian countries for example Japan, Singapore and South Korea, Deng Xiaoping decided to introduce free market reforms to China. Thanks to him the standard of living of hundreds of millions of Chinese was raised and China is now the second strongest economy in the world after the United States.

Deng Xiaoping said about his free market reforms "it doesn't matter whether a cat is black or white, if it catches mice it is a good cat".

China's economic success can be credited to Deng Xiaoping's free market reforms, but I would not call their economy a 100% free market economy. There are many centrally planned elements which are not examples of a free market.

So to answer your question
"So just to verify I did understand you well, what you're saying is that China, a centrally planned economy, didn't do well enough because you, as an brainwashed austrian, think a free market would have resulted in an even stronger China."

Yes, China because of its free market reforms is a stronger China both economically and militarily. But don't take my word for it look it up, or ask some one from China.

You could take a look at the book The Ascent of Money: A Financial History of the World Paperback by Niall Ferguson. There was also a PBS program based on his book.

While you are at it you might look up brainwashing. Brainwashing is typically a state sponsored process of indoctrination. Part of this process is using the main stream media to spread the government propaganda and to make sure no contradictory view points get reported fairly. Keynesian economics is what the government wants you to believe in. But perhaps you might consider a different view point :-)

Hello smikester:

I'm sorry that my post offended you, by implying you need a lesson in basic economics. It is difficult in this type of medium to know how to best present one's view point and yet some how appeal to as wide a readership as possible. For some the free market principles I discuss may be new. And for that person it may elicit a curosity to know more. That was my intention in presenting a reading list. For those with a background in economics already, the book list may be redundant. The book list was not intended to offend you or any one. And again I apologize.

I think having a booklist on basic economics in my post was a good idea given its purpose. If you or any one else can tell me how do that in a less offensive way please let me know :-)

Thank You

Borg

Hi Pal,

All well and good, Yeah free markets are better,I do understand it's the private confidence that moves the economy into the waves of creativity and innovation. I believe free markets will be better off along with dynamic planning rather than static ones. The difference between u and me is that, I am taking the side of Joseph Schumpeter whereas you're taking the views of Mises and static economy, remember both of them are Austrians but they look the economy as a different mechanism.

When I mean by suffering,I am emphasizing the real aspects of the world. Wht is the real aspect of the world?
The struggles, competition, Individuality and the survival of the fittest.Only by moving into the waves of Creative-destruction,by suffering the change and pain. Human civilization as a whole takes a new approach and next leg

Economy is a mechanism rather than a static emblem. It moves into waves of private- public innovation and confidence

We need to plan in a dynamic way along the economy, Rather than exploiting it with Keynesian dogma..

Mises believe the world will be better with free markets, whereas Schumpeter says nothing is better but we should embrace and move along with free markets, Economic waves.The best we can do is to apply dynamic planning along the economic waves- More regulation or less regulation depending upon the scenario

China's success is not simply attributed to free markets, It's the dynamic planning and regulation worked hand in hand with capitalism to avoid crony capitalism or oligopolism

Austrians are wrong in many aspects. But nonetheless I am influenced by both Hazlitt and Hayek

Have you done any research? Have you visited any market makers? Or personally met any maket makers? They do control and can move the market...just fyi. No conspiracy here, just truth!

Awesome post and could not agree more with every bit of it.

This makes my day mate. Bravo.

"To tolerate those who misunderstand me, and to get along with those unwise ones, isn't this clement enough to be called a gentleman?"- Confucius

Hi Borg, thank you for your explanation. You have summarized many points. There are several points I want to discuss. We will discuss creative destruction on another occasion. It's a very interesting subject.

First, what you say about economics, money, goods and services, people, prosperity, and most efficient way. There are too many points, arent they?

So, just take "the most efficient way". What is it? Does it exist? If it does, who knows abt it? And how can we identify it?
If we can, how can we achieve it? Is it achievable?

Too many questions, aren't they? And not all them has an answer or the answer.

So, let's forget it. Let's forget economy. Just do what needs to be done.

Yes, Confusius is very clever. Is he practical? He didn't talk abt economics, he talked abt how someone should behave. Well, economics is abt ppl.

Fact 1. Market-Makers do not control the market. They respond to the market conditions by taking advantage of opportunities presented to them (panic selling or thin trading)

Fact 2. Market-Makers are fully aware of the activities of trading syndicates and other professional operators that place substantial orders. Thus doing whatever is available to better their own accounts accordingly through "price manipulation", but they can only do so if the market allows them to do so.

Hello frx_trader:

To answer your questions about economics:

"So, just take "the most efficient way". What is it? Does it exist? If it does, who knows abt it? And how can we identify it?
If we can, how can we achieve it? Is it achievable?"

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It is best to start with some definitions.

1.
First What is your definition of a market ? Think about that for awhile before you continue.

For some reason the definition of a market, even in books on economics is poorly defined even though the definition may be accurate. For instance a definition of a market as a place where goods are bought and sold is accurate. But what about an electronic market where buyers and sellers never meet face to face, but nevertheless they are able to buy and sell. So what is needed is a more fundamental definition of a market.

So what is the best definition of a market ? A market is created by people who disagree on value but agree on price.

For example some body has a product to sell for x number of dollars. That person offers it for sale but nobody wants to pay the asking price. If nobody is willing to pay the asking price, then there is no market for that product. At least not at that price.

2.
In economics what is the definition of value ? How would you define value ?

A seller may insist that the value of a product is determined by the amount of labor taken to produce a product. This is called the labor theory of value. See Karl Marx's labor theory of value. But is that true ?

So what exactly is value ?

The theory of value. The price of any thing in the market is determined by the consumer. “The consumer confers value by seeking to acquire it. Hence, the value of a thing is never objective, but always subjective… The monetary price of a thing is not the measure of its value, but only an expression of it.”
See
Essentials of Economics by Faustino Ballvé
https://mises.org/library/essentials-economics

3.
What is economics ?

Paraphrased from the book Basic Economics by Thomas Sowell

"If we all lived in the Garden of Eden we wouldn't have an economy because we could have any thing we want, when ever we wanted it.

So without scarcity, there is no need to economize and therefore no economics.

A classical definition of economics from the British economist Lionel Robbins is

Economics is the study of the use of scarce resources which have alternative uses."

....................................................................................................................................

Two of the most basic principles of economics is that people tend to buy more of product at a lower price and less at a higher price and likewise producers tend to produce more at a higher price and less at a lower price.

A fundamental principle of free markets is private ownership of the means of production.

Producers are faced with many different types of consumers, each with many different desires for products and yet some how there must be a way in the economy to best satisfy the consumers in the most efficent way possible using scarce resources. Price rationing is how this is done. The pricing mechanism is what is used to automatically ration scarce resources to where the demand is greatest in the most efficient way possible. The pricing mechanism works without a central planning committee using some ivory tower model of how the economy should run to try and control it.

Scarce resources, products, goods, services that are highly valued command a higher price and the producer who can provide that product for the best price gets more business and enjoys higher profit. The consumer in turn wants that same product for the lowest price possible.

So the producer's task is to produce a product in the most economical way possible and to try and obtain the highest price and the consumer's task is to obtain that same product for the lowest price possible. Each party in the economy is trying to obtain the best price for them selves.

Since consumer's express their values through prices and producers who produce products the most efficently get the most business then it follows that this type of arrangement is the most efficent type of economy. In other words a free market economy, where the people express their demands with prices and where the producers who can satisfy those demands best are the ones who stay in business. Producers hope to make a profit and if they do not they go out of business. The people are ultimately the boss in this type of economy, not some unelected bureaucrats or central planning committee.

The free market is a system where the producer and consumer are both trying to use their resources in the most efficient way possible to buy and sell the products they want and need. And who better to make these decisions than the people making up the system and the ones who will directly enjoy the benefits.

So what about a socialist economy where prices are determined by a central planning committee ? Is it possible for that system to distribute resources effiently ?

This question was best answered by Ludwig von Mises in his essay
Economic Calculation in the Socialist Commonwealth
http://library.mises.org/library/economic-calculation-socialist-commonwealth

From the article:
Economic calculation problem
http://wiki.mises.org/wiki/Economic_calculation_problem

"The problem referred to is that of how to distribute resources rationally in an economy. The free market solution is the price mechanism, wherein people individually have the ability to decide how a good or service should be distributed based on their willingness to give money for it. The price conveys embedded information about the abundance of resources as well as their desirability which in turn allows, on the basis of individual consensual decisions, corrections that prevent shortages and surpluses; Mises and Hayek argued that this is the only possible solution, and without the information provided by market prices socialism lacks a method to rationally allocate resources...

Ludwig von Mises argued in a famous 1920 article "Economic Calculation in the Socialist Commonwealth" that the pricing systems in socialist economies were necessarily deficient because if government owned or controlled the means of production, then no rational prices could be obtained for capital goods as they were merely internal transfers of goods in a socialist system and not "objects of exchange," unlike final goods. Therefore, they were unpriced and hence the system would be necessarily inefficient since the central planners would not know how to allocate the available resources efficiently.[1] This led him to declare "...that rational economic activity is impossible in a socialist commonwealth."[1] Mises developed his critique of socialism more completely in his 1922 book Socialism, an Economic and Sociological Analysis.

Mises said "Where there is no free market, there is no pricing mechanism: without a pricing mechanism, there is no economic calculation."

Hello Eagleprice:

We agree free markets are better. But neither I nor Mises believes in static economies. What ever gave you that idea ? An economy where the demand never changes, where prices are always the same, where people always want the same thing and never change. An economy where the businesses that exist now, will exist forever. A free market by definition means people are free to buy or sell at what ever price they voluntarily agree on. And since the world is dynamic, not static, prices will change as the ability to produce products improve, or agriculture benefits or suffers from the weather or people's demands change. Static economy ? That is just plain silly.

Or maybe the problem is I just don't know what you mean by "static economy" ?

Hello JeffZhou:

I'm glad it made your day. I like Confucius too.

Hello Ill-b-back:

Thanks. I'm glad you liked it

I did indeed, been waiting quite a long time for a clear, comprehensive post on this topic. thank you

Hello Borg

When I mean by static economy- Mises thought that Money supply is controlled by central bank since they directly influence the Purchasing power and proposed a one sided theory. When I say static- I am pointing out the actual one sided thinking of Austrian tradition.

Austrians talk about money supply a lot -But forget the overall sources from which money is exchanged or created
Do you really think,Just by controlling Interest rates central banks can control money supply? Think again ! Is central banks are the only sources of Monetary power?

All right in order to give you the clarity, Mises and other Austrians thought "Lassiez fairez" or minimal regulation approach is suitable in every phase of economy- A static view which is totally wrong and a clear example of idealism- There are certain times government needs to regulate the efficiency -More regulation and intervention are required at certain times!! but not all the time..

He propagated free markets are better approach to everything else (I agree), But totally misunderstood about government's role in Free market

Austrians confuse themselves with efficient regulation and govt exploitation-which made them to believe that government is of no use except in some cases.

They keep promoting the Positive side of free markets and hide the negative ones - A bias

Some theories of Austrian economics are outright flaws. Money supply theory, Gold is wealth theory etc...

They believe in theory of rational expectations -Sorry this theory is debunked all the time, a clear example of paradox.

In actual terms , Free market produced some of the undesirable outcomes such as slavery, apartheid , Oligopoly , Monopoly, We cannot deny the fact ,with some regulation we would've avoided these consequences

Austrians misunderstand between efficient government and corrupted ones

Of course in the modern world,Govt is exploiting everyone from every angle but it's a sign of corruption, not an efficient government

Mises's view become much clear if you read the Human action.. Only a few can understand his rigorous writing and very few can think over it's concept

If I am not wrong , Hayek had more differentiation from mises and Hayek's ideas are much more real and practical.
Even Henry Hazlitt had a different thinking model compared to mises.

In terms of Mises, I disagreed with 40% of his thoughts.

Those of you struggling with definitions in economics need look no further than here: http://www.forexfactory.com/showthread.php?t=216864

I didn't think it was comprehensive.

Hello Eagleprice:

Before Deng Xiaoping there was plenty of dynamic planning and regulation working hand in hand with communism to avoid crony communism or oligopolism. What brought China out of its economic slumber was Deng Xiaoping's free market reforms.

All economies have planning and regulations whether they be hard liner commmunist economies or free market economies. What changed in China was the introduction of free market reforms, not free market reforms plus planning and regulations. China already had plenty of planning and regulations. In fact that was the problem with the communist system. Going away from communism towards a free market by definition means less centralized planning and regulation. If you don't understand that, then you don't understand the concept of a free market economy. And yes, you will always need planning and regulation working hand in hand with what ever economic system you have to avoid crony ...ism or oligopolism. But that is a constant. The free market reforms was the variable. Think of it as a kind of math equation if you will.

I am curious as to what you find wrong about Austrian economics. Please elaborate.

Borg

Thanks Borg for taking the time to answer my question. I understand inefficiency in the market whether it's government control or free market. I avoid to use "socialist" terminology.

I also understand that free market is better than government control. Governments should provide regulation that doesn't distort too much of market mechanism.

I argued about the most efficient way using some models. So we can only say something is the most efficient way in a model. We have infinite number of models of a market, therefore we have infinite number of most efficient ways. We should only pick an amount of market models, and find the most efficient way of these models.

So, the most efficient way is among this finite number of market models.

I digged deeper into free markets and know very well what exactly it is ... as per my subjective knowledge.

A communism- More regulation all the time by nature its a static model (Anyway it fails because you know why)

A free market- Less regulation all the time by nature a static model (It works but inefficient- will become more efficient with dynamic planning)

Economy needs more regulation at certain phases and less regulation at certain phases

A synthesis of More and less regulation at proper times and application is called dynamic planning

Austrians are not an infallible school in the economic discipline- You need to know this... But they are way better than others

The list of wrong theories keeps building, if we consider the practical outcomes of all their propositions

I believe you've took their ideas as taken for granted without thinking outside the box..

It is clear that Austrian theory of money supply failed when QE didn't created inflation. That's enough to suspect a mistake elsewhere

Their Business cycle is solely based on central bank and nothing else- Seriously it's wrong

But how do I know all these? I am a philosopher by qualification- I don't take any theories as taken for granted without justification and secondary, I make bets on Market based on Macro business cycles. Practically speaking Austrian theories have failed several times in history

ok

Hello Eagleprice:
I am still having trouble with your, term static economy. But saying
"Mises thought that Money supply is controlled by central bank since they directly influence the Purchasing power and proposed a one sided theory. When I say static- I am pointing out the actual one sided thinking of Austrian tradition."

----
is part of your definition of a static ecoomy does not sound quite right to me. You say
"Mises thought Money supply is controlled by central bank since they directly influence the Purchasing power and proposed a one sided theory."
----
Well yes the central banks do control the money supply and yes the money supply does directly influence purchasing power. When central banks inflate the money supply aka create money out of thin air ,it reduces the purchasing power of the currency. For example more dollars in circulation results is less purchasing power of the dollar. This is just the most basic of all economic principles at work, namely the law of supply and demand.

.................................................................................................................

You say
"Austrians talk about money supply a lot -But forget the overall sources from which money is exchanged or created
Do you really think,Just by controlling Interest rates central banks can control money supply? Think again ! Is central banks are the only sources of Monetary power"
----
Central banks, the fractional banking system, interest rates, money, economics are well covered by the Austrians. What sources exactly "from which money is exchanged or created" are you talking about that the Austrians have not covered that deserve mentioning ?

The central banks are responsible for creating trillions of dollars of debt. And they haven't stopped this money creation. What other significant sources of monetary power are you referring to besides you and me ?

.................................................................................................................

You say
"All right in order to give you the clarity, Mises and other Austrians thought "Lassiez fairez" or minimal regulation approach is suitable in every phase of economy- A static view which is totally wrong and a clear example of idealism-

There are certain times government needs to regulate the efficiency -More regulation and intervention are required at certain times!! but not all the time.."

----
The idea of a "minimal regulation approach is suitable in every phase of economy" does not preclude the idea of "More regulation and intervention are required at certain times!! but not all the time". A "minimal regulation approach" to the economy does not mean that there can never be cases where "more regulation and intervention" are required. A "minimal regulation approach" to problems just means to use a minimum amount of regulation to deal with the problem at hand, which may mean more regulation than before. In other words you can have ""more regulation and intervention" with a "minimal regulation approach". It may sound contradictory but it is not.

Think of it like Albert Einstein said. "Everything Should Be Made as Simple as Possible, But Not Simpler"

..................................................................................................................

You say "Mises and other Austrians thought "Lassiez fairez" or minimal regulation approach is suitable in every phase of economy".

----
Perhaps the confusion can be cleared up with a few definitions.

..................................................................................................................

Free market is a summary term for an array of exchanges that take place in society. Each exchange is undertaken as a voluntary agreement between two people or between groups of people represented by agents. These two individuals (or agents) exchange two economic goods, either tangible commodities or nontangible services.[1]
http://wiki.mises.org/wiki/Free_market

In economics, laissez-faire describes an environment in which transactions between private parties are free from state intervention, including restrictive regulations, taxes, tariffs and enforced monopolies.
http://wiki.mises.org/wiki/Laissez-faire

Austrian School
http://wiki.mises.org/wiki/Austrian_School
...In particular, they voice serious concerns about the distorting and damaging effects of government involvement in commerce, arguing that few government regulations in this area are necessary or desirable

Libertarianism is a political philosophy[1] that views respect for individual choice and individual liberty[2] as the foundation of the ideal society, and therefore seeks to minimize or abolish the coercive actions of the State as that is the entity that is generally identified as the most powerful coercive force in society.
http://wiki.mises.org/wiki/Libertarian

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Your statement "Mises and other Austrians thought "Lassiez fairez" or minimal regulation approach is suitable in every phase of economy" must be referring to Murray Rothbard who was a libertarian. Murray Rothbard believed in a society free of all state control which was his vision of libertarianism. He belongs to the Austrian school of economics, but not every Austrian economist agrees with Murray when it comes to his views on libertarianism. Much of what Murray Rothbard believed though in was of course main stream Austrian economics.
See
For a New Liberty: The Libertarian Manifesto
Murray N. Rothbard
https://mises.org/library/new-liberty-libertarian-manifesto

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You say
"Some theories of Austrian economics are outright flaws. Money supply theory, Gold is wealth theory etc..."

Actually their money supply theory is quite sound. Please explain why you believe it is deficient.

The below book is the best explanation of money and the business cycle that I know of. Money is never explored in depth by most economists, except to say it is a medium of exchange. Rothbard describes what money really is and how government and central bank (Federal Reserve System) meddling has turned it in to inflationary fiat money. All of this meddling exaggerates business cycles. This is explained very well in this book. The 2008 financial crisis, our current economic crisis, the euro zone crisis were all caused by government and central bank manipulations of money:
What Has the Government Done With Our Money by Murray Rothbard
http://mises.org/books/whathasgovernmentdone.pdf

Austrian economics "Gold is wealth" theory a flaw. I don't see it. They describe gold as a commodity which has been used as a medium of exchange in many civilizations for hundreds of years. This is economics history not theory.

Gold is a commodity which is a store of value. Unlike fiat money which we have now. An ounce of gold back in medieval times would have bought you a nice suit back then and today it would still get you a nice suit and more.

Keynesian economics "Fiat money is wealth theory" is an outright flaw. How could you believe otherwise. Central bank currency inflation, aka creating money out of thin air, reduces the purchasing power of your fiat dollars. So you have less wealth because of their money supply theories. This is just the law of supply and demand working here. Pretty basic stuff. The law of supply and demand laws applies to all schools of economics.

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You say:
"They believe in theory of rational expectations -Sorry this theory is debunked all the time, a clear example of paradox."

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It is not clear what you mean here. Are you saying businesses should not fail if they have rational expectaions. And the fact that businesses fail means that they are irrational. In a free market consumers and producers voluntarily agree to trade goods and services. Businesses compete for their customers and try to make a profit. If they fail to make a profit they go out of business. Indviduals likewise compete with what they hope are marketable skills and expect to be profitably employed. In both cases businesses and individuals use the pricing mechanism to tell them where the demand is greatest and where they should concentrate their efforts. Central bank interventions in the market place distort the market place pricing mechanism and cause resources, goods, labor to go to businesses that would not otherwise have gone there. These businesses then grow because of this malinvestment. But after this injection of money in to the market, prices will then seek equilibrium back to the relative price levels they were before the stimulus. The businesses that were created because of the stimulus cannot maintain the same level of activity and as a result with no new stimulus these businesses will fail resulting in the negative side of the business cycle.

Maybe you are saying businesses should know that an artificial stimulus of the market place is in play and therefore they should anticipate the end of the stimulus and thus avoid the negative effects of it ending. But since they can't seem to do that, and we keep having business cycles then that proves the Austrian theory of rational expectations is wrong. Sorry, people and businesses try and act rationally, but they are not central bank mind readers.

The fact that a free market economy works so much better than a centrally planned economy tells me that it is a more rational kind of market. Perfect, no, better, yes. If you care to debunk that statement using Austrian economics then perhaps you don't understand Austrian economics.

Central bank interventions in the market place to stimulate it in to prosperity is an irrational expectation.

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You say:
"In actual terms , Free market produced some of the undesirable outcomes such as slavery, apartheid , Oligopoly , Monopoly, We cannot deny the fact ,with some regulation we would've avoided these consequences"

None of those practices were the result of the free market. They are the result of immorality. And all of these practices were in fact regulated. But the regulators were no more moral than the people engaged in these practices.

If you are saying Austrian economists believe in any of these practices then you are just plain wrong.

Believing in free markets as the best kind of economy does not mean you believe there should be no rules or no laws or no morals or no regulations or that you believe in slavery. The Nazis didn't believe in free markets, and yet they practiced human slavery, mass murder and many other almost unimaginable atrocities. Do you know where the word Nazi comes from ? It's short for National Socialism. So maybe if you are a socialist then you must believe in "slavery, apartheid , Oligopoly , Monopoly, mass murder..".

Being free of a central planning committee to conduct your won financial affairs in a free economy does not automatically mean you believe that slavery should be practiced. And just because you believe in socialism with its central planning committee does not mean you agree with Hitler's or Stalin's or North Korea's version of socialism. But those kinds of leaders interestingly enough, all believe in centrally planned economies. Can you guess why ?

From the book "Human Action" by Ludwig von Mises. Some of his thoughts on rules and laws in a free society.

p 280
Liberty and freedom are the conditions of man within a contractual society.

p 281
If government were in a position to expand its power ad libitum, it could abolish the market economy and substitute for it all-round totalitarian socialism. In order to prevent this, it is necessary to curb the power of government. This is the task of all constitutions, bills of rights, and laws. This is the meaning of all the struggles which men have fought for liberty.

p 283
Freedom, as people enjoyed it in the democratic countries of Western civilization in the years of the old liberalism's triumph, was not a product of constitutions, bills of rights, laws, and statutes. Those documents aimed only at safeguarding liberty and freedom, firmly established by the operation of the market economy, against encroachments on the part of officeholders...

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You say
"Austrians misunderstand between efficient government and corrupted ones"

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Really ? Where did you get that exactly please ? In fact a government can be highly efficient and yet totally corrupt. See Nazi Germany. Mises was 100% familiar with Nazi Germany, Soviet Russia and corruption, and that needs no further
comment.

Borg

Hello smikester:

I of course thought it was a comprhenisve reply along with a reading list, to your post #6
"Like the free market crash of 2008?"

But if you saw some thing missing please let me know.

Hello smikester;

You might like these sources better.

An excellent glossary of economics trerms.
http://wiki.mises.org/wiki/Main_Page

Another good glossary of economic terms.
glossary.econguru.com

I appreciate your efforts here, Borg. I think they are somewhat wasted on this platform unfortunately, and I don't agree with most of what you say. This usually engenders such a flip response from me.

Pimco, essentially a German company, has stated the obvious, something I noted years ago in these forums. That's all.

Hello Eagleprice:

You say:
“ It is clear that Austrian theory of money supply failed when QE didn't created inflation. That's enough to suspect a mistake elsewhere”

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Not true.
The failure of QE to create inflation is not proof of the failure of the Austrian theory of money supply. Unless of course you also are saying that it is proof the theory of supply and demand failed “when QE didn't created inflation”. The law of supply and demand applies to all schools of economics not just Austrian economics. So to understand what happened “when QE didn't created inflation” you need to think outside the box. The theory behind QE which is actually a Keynesian theory not a Austrian theory is that by increasing bank reserves, banks will lend more money and stimulate the economy in to prosperity. Of course with more money circulating in the economy there will be more price inflation. And again that idea is just the theory of supply and demand. What actually happened is that the most of the money that the banks was suppose to lend to businesses as a result of QE did not get lent out. And with a sluggish economy exerting deflationary pressures this also reduced any inflationary effects of QE. And there you have it. The the theory of supply and demand is still valid. And the Austrian theory of money supply was never in danger of being disproved.


You say:
“Their Business cycle is solely based on central bank and nothing else- Seriously it's wrong”

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Not true. They say most not all.
From Austrian Business Cycle Theory
http://wiki.mises.org/wiki/Austrian_Business_Cycle_Theory
“All Austrian theorists consider the unsustainable expansion of bank credit through fractional reserve banking as the driving feature of most business cycles. ”

You say:
“Practically speaking Austrian theories have failed several times in history”

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Like I said the free market isn't perfect. A free market with rules, regulations, laws and morals to protect the rights of all people is certainly the best type of market.

In any case Eagleprice I enjoyed chatting with you. You have brought up many interesting points to discuss in this thread and for that I thank you. It certainly seems like we agree on more things than we disagree on.

Borg

Sorry Bro
I can point up majority of the paradox in your statements,it may take an entire blog oops!! and you're comparing my term efficient government with Nazis!! Nope..

I hope you'll get clear idea if you know where mises and co is getting funded from... I can't help but just provoke you think critically in every angle and aspect,Trust me there is bundle of mistakes in their theories and I can write 200 pages book out of it.

Money supply is controlled by central banks is absolutely false there are multiple agents involved in it when you mean by supply-demand,you shouldn't look at just one supply-demand from central bank ,think in terms of other sources of supply-demand

Anyway You have gone way too much into Austrians even accepted their fallible theories as truth. Sorry,Pal- Economics is not a science and they are not facts, just assertions.

You keep pointing out at free market references even when I agree with it

In my article nowhere I have accepted Keynesianism and their nonsense

But nonetheless I suggest you to read wealth of nations and then look at the Austrians, You'll see the other side.
Don't just stick to Austrian books even read other thoughts such as Milton friedman,Minsky etc

Thanks for you posts
Regards
Eagleprice

Hope this will helps http://econfaculty.gmu.edu/bcaplan/whyaust.htm

I was imprressed to see the headlines of a "big" power saying EuroZone is not factible.... well after more reading he is following the plan as his peers...

Well he wants the countrys of EU to release soverignty so they can control us more easily, just look a bit on the internet about "New world order" and all the premade plans for us sheeps