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The Problem Isn't Over-Production; It's Mal-Investment!
Submitted by Patrick Barron via Mises Canada,
Mr. Max Ehrendfreund, writing in the Washington Post’s Wonkblog, believes that he has discovered something new: that the world is producing too much and doesn’t know what to do with it. His solution, of course, is to confiscate the overproduced products, such as oil and cotton, from its rightful owners and give it to the people who need it. This phony problem and its statist solution goes back at least as far at the 1930’s socialist calls for “production for use” vs. the hated capitalist concept of “production for profit“.
Mr. Ehrenfreund commiserates that a “surplus…challenges some basic principles of conventional economics…”. Ah, now we see why Mr. Ehrenfreund has a problem; he understands only “conventional economics”. Austrians have no such problem understanding why many commodities are currently in surplus. Our understanding of Austrian business cycle theory tells us that years of interest rate suppression by monetary authorities worldwide has disrupted the time structure of production; i.e., that artificially low interest rates have led entrepreneurs and their business partners to believe that sufficient resources exist for the profitable completion of longer term projects, such as increasing investment in oil and cotton production. Austrians do not contend that there cannot be a surplus of some goods. Of course, there can! But we know that a surplus of some goods means that there is a scarcity of others. Resources were “malinvested” in some projects instead of those more urgently desired by the public.
Here’s a rather humorous example. A good friend was teaching in West Germany during the age of Tito, when he and his wife decided to vacation along Yugoslavia’s beautiful Adriatic coast. While there they tried in vain to find swimming accessories, like fins and masks, but shop after shop sold only one product. That one product? Panama hats! True story. So here is a good example of zero demand for Panama hats and a scarcity of swimming accessories in one of the most beautiful seaside vacation spots in the world. But these surpluses and scarcities are not always so obviously related. A surplus of oil and cotton may mean that there is a scarcity of millions of other goods that could otherwise have been produced.
The socialist dogma, to which Mr. Ehrenfeund seems to be enamored, blinds him to the concept that a successful economy does not need centralized control. In fact a successful economy needs no guidance at all, except the rational decisions of the owners of the means of production to put their resources to the most desired use. How do they know what that “most desired use” is? The price system tells them! A dynamic economy is controlled by millions upon millions of people making billions upon billions of decisions that are in constant flux. Manipulating the price of any factor of production, such as cotton prices, will cause disruptions. But our governments have done much worse than manipulate the price of a few major factors o f production; they have manipulated the price of money itself, the medium of exchange that is the lubricating and knowledge transmission device for ALL economic decisions.
So, Mr. Ehrendreund, brush up on your Mises, Rothbard, Hayek, Habeler, and Garrison. Your confusion will disappear to be replaced, no doubt, by exasperation that you ever could have harbored such silly notions as those you espouse in your article.
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I don't understand why people on the adriatic don't want a panama hat.
The main stream economist will never understand Austrian economics if they admited that it was viable they would lose thier jobs. Austrian economics means and end to central planning and banking (the way its done now). No fascist Gov't (we live on one now the USA) can have a free market so therefore they can never accept Autrian economic models. With this we can infer one thing they will continue until a major collapse happens. Then they will try it again unless stopped some how and sound constitutional money comes back.
Well they Ruined Alexander the Great's Empire, the Egyptian Empire, the Greek Empire, the Roman Empire, the European Colonial Empires.
USA will fall, and looks like China will be most favored Nation for the Fascist. But the land is wide open in Australia and Canada isn't that populated. Both Aus and CA have lots of Mining assets.
There's never a smooth transition between empires as some people expect. The territorial limits of nations always get redefined. So maps of the future will probably look very different.
THANK YOU CENTRAL PLANNING!!!!
Welcome... to Obamaville. A socialist's paradise come true. Wealthy government and government connected people/organizations. Everyone else dirt poor. Praise be to Dear Leader.
Over-production??? I don't understand. Don't you just keep lowering the price until you sell everything you make?
The people put in the effort, the labour. The stuff got built. So obviously the stuff could afford to get built because the labour was there to build it. Now the people get to enjoy the fruits of their labour by buying what they produced at an affordable price. Or something like that. Sorry, I'm all confused.
Or do we just leave it all on the shelves, to deteriorate and be destroyed so that the producer doesn't have to lower prices?
A bit like them capitalists the world over who make houses that no-one can afford to buy, and then leave them empty until it's time for the houses to be demolished. Can't possibly sell them cheap now. They might become affordable.
Or a bit like that time when power outages forced major supermarkets to pour tonnes of milk down the drain before it went off. Couldn't possibly give the stuff away. It might cost future customers.
Can't sell that over-production cheap or give it away. Gotta make a PWOFIT!!!!! There is only perfect Capitalism and perfect Communism. There is NO middle way so don't even bother looking for any alternatives because they don't exist! And if you got something cheap or free then you are evil and will destroy all life on earth due to your evil laziness so don't even think about it. Back to work you scummy serf scumbag!*
*I hid a little bit of sarcasm in that paragraph. See if you can find it.
http://dilbert.com/strip/2015-05-06
Been a long time. I haven't really cured my addiction to ZH. I just happen to be in a location with extremely bad internet (both phone and computer). It is an absolute pain typing this. (Virus? Letters taking seconds to appear on screen.) ZH pages often take an hour or more to load up - at which point I don't have time to read them. Yes, that is an hour for just a few pictures and some text.
Still got the problem of ads completely covering my phone screen so I can't read articles on the phone.
Good thing the telephone company is no longer a govt monopoly and we've got competition to ensure excellent service. I mean, if one internet provider is crap then I can just go to the other one, can't I? Two phone companies is competition, isn't it? What about three or four phone companies / ISPs? Oligopoly??? Never heard of the word before in my life... Much...
To all my ZH friends out there, Howdy.
To all the ZHers who think I'm a twat: Fukkit, Howdy too. Don't worry. If my reception stays this bad, I won't be saying much.
Too all the Fuckwits out there: May you experience the errors of your ways... 'cos trying to explain stuff to ya simply ain't working.
Damn, I've said too much already. Drunk with the perceived power of typing crap on the internets. I really must go.
<p>Been a long time. I haven't really cured my addiction to ZH. I just happen to be in a location with extremely bad internet (both phone and computer). It is an absolute pain typing this. (Virus? Letters taking seconds to appear on screen.) ZH pages often take an hour or more to load up - at which point I don't have time to read them. Yes, that is an hour for just a few pictures and some text.<br /><br />Still got the problem of ads completely covering my phone screen so I can't read articles on the phone.<br /><br />Good thing the telephone company is no longer a govt monopoly and we've got <em>competition</em> to ensure <em>excellent service</em>. I mean, if one internet provider is crap then I can just go to the other one, can't I? Two phone companies is competition, isn't it? What about three or four phone companies / ISPs? Oligopoly??? Never heard of the word before in my life... Much...<br /><br />To all my ZH friends out there, Howdy.<br />To all the ZHers who think I'm a twat: Fukkit, Howdy too. Don't worry. If my reception stays this bad, I won't be saying much.<br />Too all the Fuckwits out there: May you experience the errors of your ways... 'cos trying to explain stuff to ya simply ain't working.<br /><br />Damn, I've said too much already. Drunk with the perceived power of typing crap on the internets. I really must go. </p>
20 minutes later and I'm having trouble posting this comment. Goooo Competition and Broadband and internets!!!
Something we produce a surplus of is stupid economic theories. These definitely should be exported.
I think the only thing in scarcity is your time. Everything else really is free. If I work for 5 hours and only make 5 bucks it is not a waste of money it is a waste of my time. If I can automate so I can make 5 bucks in .5 seconds then that is a good use of my time. Or if I can get someone else tp give up their time to do the task I will buy their time with their money.
Let the robots waste their time and lets do well instead.
Good point,
Of course it's mal-investment, but it results in overproduction. It's still not the root cause. Here's a perfect example:
http://debtcrash.report/entry/oil-price-drop-root-cause-analysis
Those who spew words like, statist, socialist, liberal, conservative, greenie, tea-bagger and the rest are actively stopping themselves from actually thinking about the topic at hand.
WTF are you babbling about?
This article is shit because the author is too stuck on his political ideals to see things clearly.
Get it yet, fool?
Thank you for expressing your idea more clearly. Now I can thoroughly grasp how stupid an idea it is.
Coming from you, it is a compliment.
http://thearchdruidreport.blogspot.com/2014/04/the-four-industrial-revol...
AND
http://thearchdruidreport.blogspot.com/2014/04/mentats-wanted-will-train...
If you had said "Arch Druid" in the first place, all this would have been cleared up.....
You, my friend, are a perfect example of one who simply stops thinking because of a single word.
Actually I'm wrong. You didn't even START thinking so I'm not sure what to say now...
Or in your case, seeing those words triggered you from thinking about the topic at hand. What I find fascinating is that it has made you react in such a fashion as to miss the fact that the article can be summarized by your own username!
WTF?
Are you aware that there's two voices in this article?
He must be part of the "No Labels" movement. It's a progressive political organization started a few years ago in an attempt to keep people confused. Stop calling me a marxist I'm just here to help.
Taking the initiative to govern one's self does, in no way, exclude the possibility that government exists.
Barron is right in calling Ehrendfreund's opinions wrong.
But Barron's claims about what a, "successful economy," needs are also wrong.
Again, this article is shit.
False. In this case, Socialist expresses exactly the course of action reccommended, as well as calling to mind the absurd results of actually implementing anything like this; sometimes short-cuts in thinking are accurate. What happens when you, for instance; "actually think about the topic at hand"; anything ?? No. I didn't think so.
The author uses the term "socialist dogma" but I don't see the rest of these terms you despise so much.
Somehow you think that the use of the term socialist means that he is "actively stopping [him] self from actually thinking about the topic at hand".
I suppose we are also supposed to infer that since only you can determine when others have stopped thinking, you must be a deep thinker.
Please, share some deep thoughts!
You didn't see the word, "statist," up there?
And your suppositions are, for the most part, false.
:)
I would like to confiscate the salaries of WonkBloggers and use their money to buy myself more beer!
Duh, how do we all get access hundreds of billions of dollars at zero interest? Gotta get you some of the "mal-investment"....
gee, who knew that by giving a relative few people access to all the free money they want that they would enrich themselves...
Problem is, these fuckers are now in charge and I don't see them indicting themselves anytime soon.
the guillotine grows hungrier...
No no no it's "lobbying for profit" now. The ROI is so much better than actually trying to make a product.
Solyndra comes to mind. Get big government grants, pay yourself millions and millions, and the whole spending spree ends up producing NOTHING. Meanwhile, you are rich enough to retire.
Makes one wonder just how many people's "jobs" are misallocations of capital too...and will be proven to be soon...
Just as a thought experiment:
What if Rich people had to live in communities instead of being hidden away in Castles, High Rises, Gated Communities, or compounds. No exclusive get-aways and if they are in charge of big entities the have to live in USA.
I mean they aren't accountable now are they?
They don't fear people as the extract wealth, hoard corporate assets, loot, and put Americans on Social Security.
Well same for VICHY DC.
- What Jobs don't add value to GDP?
Lawyers, most Bankers, Tax Accountants, Tax Planners, Financial Planners, Tax Preparers.
75,000 pages of Income Tax Rules
Millions of Regulations
Streamline & Standarize and people that don't add value and Rentiers can do more productive things.
We call this Corruption.
Anyone with a brain knows to avoid most people and that usually means a gated community sealed off from envious lowlifes.
Sure it is all artificial GDP without making industries that waste time and create inefficiency they loose control.
We have such incredible abundance in this universe the only shortages are artificially created, by design. If everything you ever desire was available for free you would not need their fiat and ots control also would disappear
Exactly Artificial GDP. But also MSM & .gov spout useless data about Inflation (BTW), .gov data on Inflation has no Utility except for calculating Social Security Cost of Living Increases since SS would go broke with any other figures that reflect living costs.
Yet another assclown Marxist, sdpouting the same drivel that has failed to bring anything but devistation and despair for the whole of human history.
I'll leave comment upon his surname to others.
How about you? Are you aware that there's two voices in this article?
Why do you smear someone refuting Marxism with the label of Marxism?
Are you aware that there's two voices in this article?
Max Ehrendfreund would be the Marxist in question. I really didn't think I had to spell that out for anyone here, considering that the article's author is affiliated with Mises. Thanks for lowering the bar.
I was vacationing around that same time period, only I was in Panama, and there wasn't a damn hat to be had; so I ended up wearing a flipper on my head to keep from getting my bald spot sunburned. Damn supply chain breakdown!!
It's both. Inventory build ups and mal-invesment.
Um... of course it's both. Excessive inventory build-ups are a symptom of malinvestment. Where malinvestment goes, inventory build-ups follow.
Try re-reading the article until it makes sense to you.
They are just one symptom. Anyone who is participating in Tech Bubble 2.0 is also malinvesting. Anybody buying sovereign bonds at negative yields is malinvesting.
"The Problem Isn't Over-Production; It's Mal-Investment!"
WRONG
The problem is massive over-population of proletariat vermin -
just imagine how prosperous society would be if all the proletariat who cannot fully support themselves financially just disappeared overnight -
ALL the entitlement programs would be obsolete - that is 60% of government spending in the USA - even more in the socialist EU !
Then the income taxes could be reduced by 60% - WOW ! - just imagine what a HUGE boost in personal and national prosperity that would provide !
Recycle the proletariat vermin NOW !
The proletariat *are* the society. The reality is we are 20 years from making *all* humans into this category because compared to robots we are *all* useless eaters.
And what pupose or meaning will the robots have to produce things for themselves. Life will only have the value we give it.
Neither Mises nor Marx was a biophysical economist so they can both go suck eggs.
Biophysical is that like Conservation or Ecology... or Anarchy.
I've heard of Historical Economics in Germany.
See: http://en.wikipedia.org/wiki/Thermoeconomics
and White's Law
Reminds me of Zeitgeist, build things to last long time, make things more valuable, buildings, roads, transportation, greenhouses, organic farming, teach people to value space more, value efficiency more, ranch animals that are efficient or find ways to feed them more efficiently.
Like the Minerals or Alge spread in the Ocean that fed the new fishery and expanded fish catches in following years.
Grow Hydroponic Lettuce and herbs at home to save.
Would think Biophysical Economic makes sense, but calls for a central or agreed state laws to limit waste. Of course if people value efficiency then laws are not needed. Like Taboos prevent many things.
Like if having Bill Gates type wealth is Taboo, you then would not have $100 Million dollar Compensation for Bankers when Investors could get the money in Dividends.
don' fo'git da big misdreckshun o' invessmunt munny..d' munny spend on d'highah edgacashun...
And here I thought it was:
- Tax Havens like Cayman Islands
- Decapitalization of Industry
- Free Trade Agreements
- Off Shore Production & Out Sourcing, to cut Jobs & Compensation
- Free Trade is unaditable, there are no worker rights, slave trade can be used to make blue jeans for the USA
- R & D for Tech industry has moved off shore since that is where production is
- Greed, Bribes, Association with Thieves, are a way of life in Washington DC
- Greed, Bribes, Association with Thieves, are a way of life in Wall Street & FED & SEC & FTC & FINRA
- There is no Ethos in US Business, Cost Cutting Eliminates the Consumer Economy, Middle Class, and Jobs
- Flooding the Country with Immigrants INCREASES the Labor Supply DRIVING down wages (both unskilled & skilled Labor)
- Leveling the US Wage Rates & Inflating the many costs associated with Real Estate is Heartless & an Attack on all Americans
- Driving Down Labor Compensation while Inflating the FRN (USD) is an Attack on all People
- Seeking to Level out Global Wages is an Attack on US People/Middle Class/US Investments
---------
But yeah, FED Actions have thrown fuel on Malinvestment & Looting of Corporate Assets by Executives, Profits that could have been returned to Stock Holders. Hoarding & Looting is a big problem with High Compensation for Cutting US Earning Power. TARP, ZIRP/LIRP, QE add to the problem while shafting Fixed Income Persons and Manipulating Markets to Create Bubbles which will again hurt people or Investors and likely require some new Bailouts.
Corporate Bailouts - The New Normal.
- We all KNOW GREED is at work here
- SO How Do We Instill Ethos??
A. Legislation
B. New Regulations or Enforcement and Implementation of Existing Regulations
C. Make Sure the Looters & Politicians Get Exposed in Public and Hold Their Entire Families to Blame
Amen, Mr. Patrick Barron. Washington Post columnists telling people that more socialism will solve the problems socialism has created.
I agree 100%. Mal-investment it is! Just look around you and you can see that an economy built around all income growth and profits to a tiny fraction of 1% results in a chase for yield or a chase for safe havens for $$. Real-Estate in New York and London have gone mad, all based on overly rich elites seeking to pour billions into safe havens, instead of into productive investment in industry and technology. Housing bubbles, stock bubbles, and education bubbles, these are taking up most of the capital.
Oh, let me guess .... Capitalism sucks .... no, Socialism is the monkey wrench, the hammer and the sickle .... that jams the gears .... of a smooth running economy !
Yes.
Was just thinking we need a list of Male.
- Mal-Investment
- Mal-Adjustment of our US Adults
- Mal-Thinking of Voters & Raisers of Kids
- Mal-Digestion of US History
- Mal-News Reporting
- Mal-State of the Union
- Mal-Focus on Computer Games, TV, Social Websites
- Mal-Honesty of US Federal Politicians
- Mal-Executives of Corporations & Fed.gov
- Mal-Democracy at Federal Level
- Mal-Republic that has Aggressive Foreign Policy & Wars
- Mal-NATO
- Mal-Budgeting at Federal Level
- Mal-Federal Budget Increases on MIC & Education & Spies
- Mal-Intelligence Agencies
- Mal-DHS duplicates its own efforts, has little success
- Mal-Intelligence Operations Create Mujahedin, Al Qaeda, ISIS, IS
Mal-investments .... predictable, expected consequences .... of Keynesian socialism .... end of story !
When there are no incomes you cannot depend on market forces so all these comments about malinvestment entirely miss the point.
American vulture capitalists and half-bright economists have shipped all the production to China, so that's where the incomes are. Peel off the top 1% and 99% of the American economy is a disaster. Markets can't fix that, without some kind of major intervention - not to mention bringing back about 10,000,000 jobs. Of course automation is another, parallel issue.
The *good* news is that we do have enough stuff. Ask anyone back in the 1960s, 1970s, and they thought we'd be out of stuff by the 1980s. So either we need some new thinking on producing real incomes in the US, or we need some old thinking of central planning and handouts of everything from coal to yachts.
Huh? I thought WaPo was a news parody publication, like The Onion. Isn't it?
Washington Post !
Washington Post !
Washington Double Post !
The Washington Compost does provide much unintentional entertainment...
According to Austrian economics, it is impossible to know what the correct interest rate ought to be. Yet Barron is confidently telling us that the interest rate is too low. How does he know? What does he think the "correct" interest rate is? "Central planning is bad, and here's how to do it right!" What a clown.
There's no contradiction. He doesn't claim to know what exactly interest rates should be, but there is no doubt that they are significantly lower than what the free market would have because of central bank intervention.
If guv started killing people because they decided the population was too large, and someone said that this was wrong and nature should be allowed to take its course, would you accuse that person of assuming to know who should live or die?
"Central bank intervention" doesn't make any sense here. If the Fed raised interest rates, that would also be "central bank intervention". Anything the Fed does is "central bank intervention", by definition.
The only way to have a free market in money would be to abolish the Fed, allow anything to be used as money, and allow anyone to open a bank and do anything they like short of fraud. If that happened, no one has any idea what interest rates would be or what the property distribution would look like.
He's still a clown.
Abolishing the Fed is something many posters here, myself included, strongly advocate.
Short of fraud (or coercion), all businesses, including banks, would have to provide some sort of value or else they won't have customers. Technically, yes, anything would be allowed as money, but some things, such as precious metals, are far more salable and hence tend to become universally accepted as money without any decree.
"If that happened, no one has any idea what interest rates would be or what the property distribution would look like."
The future is always uncertain, with or without the state. However, at any given time, interest rates would be at some finite value and people would have some property. A command driven economy only ensures that some people benefit at the expense of the masses.
"What does he think the 'correct' interest rate is?"
Divest six years' worth of QE from the fed's balance sheet and you'll quickly find your answer.
"How do they know what that “most desired use” is? The price system tells them! A dynamic economy is controlled by millions upon millions of people making billions upon billions of decisions that are in constant flux."
You DO realize that you have just given a very apt description of a Socialist economy, with the means of production being owned and controlled by the workers themselves, making their own decisions for the benefit of themselves and the company as opposed to being subject to control by outside 'forces' who operate for their own benefit, and at odds with what is good for everyone.
We don't WANT that kind of centralized control, whether it's by governments or corporations. Government over-control is NOT a hallmark of Socialism, despite the common belief that it is. Government control of the people's lives crosses into fascist territory, if anything.
On the other hand, Socialism makes the assumption that people will naturally cooperate with each other without being coerced in some way. Just get those mean old owners and managers out of the way, and watch out! This is magical-thinking, and makes socialists sound silly.
Maybe we need to just ditch all these labels altogether. The fact is, that just like those three blind men examining the elephant, we ALL see some things as they are, but none see everything. The socialist types see some aspects of society/economy, the uber-capitalists see a different aspect, and so on. Hell, even the fascists are examining their own little section and drawing false conclusions based on their very limited views.
So yes, we need to encourage entrepreneurship and reward innovation and investment. But we also need to concern ourselves with those who are not participating in all the fun for whatever reasons. We need to utilize some of the ample resources for THEIR needs, and stop bitching about the FSA and EBT cards. And of course we need to be concerned with security, and maintain some kind of force to take care of that, which involves some control of people.
We need all of these economic "theories"... a little greed, a little compassion, and a little law and order. Neither of these theories can work without the inclusion and cooperation of all the others.
Socialist are bemused, enchanted, special fairies who want to help us all just get along !
When you think of Immigrants putting kids to work in a restaurant or family business. It makes sense. You need cheap labor, have some kids and use them to build your business and save money for expansion.
USA must have been like this till maybe WWII with Farming needing lots of labor.
But kids have to get educated and be learning.
Bingo another problem. Either Parents can't teach kids, won't teach kids, are busy with work, jobs, house, or business... OR the Public K-12 sucks.
But this is a Socialist Program, put kids in School regardless of the cost to family business.
- But you can get kids out of school to help with Planting or Harvest for short times, that just means they won't have time to Hunt, Ski, or go on Spring Break to Florida probably. S/
So what is the Answer
- Anti-Trust Laws
- Child Labor Laws
- Equal Pay for Women, Protections
- Child Schooling & Education Laws
Personally I think kids should be allowed to Apprentice at the Age of 16 or in 10th Grade to prepare for work skills.
A Libertarian or Anarchist View would allow Kids to work in parents Business instead of go to school.
"You DO realize that you have just given a very apt description of a Socialist economy, ..."
Socialist, Communist, Kibutz, Social Market Economy, Anarchy, CO-OPT Farmers Market or Farming... There are many names for political Economies just because Marx wrote it doesn't mean it isn't true or worth repeating.
You know USA and all of Europe are Socialist.
I've posted a list of Legislation that is US Socialism. Strangely the list misses a lot of laws that were implemented without bills that look socialist.
Worker Rights, Child Labor Laws, Equal Pay for Women, Union Rights. The first might have been by Teddy Roosevelt the Anti-Trust Law.
"Worker Rights, Child Labor Laws, Equal Pay for Women, Union Rights. The first might have been by Teddy Roosevelt the Anti-Trust Law."
Not done from the goodness of the heart, I'd imagine, but mainly as an end-run around a potential communist revolution in the USA and Europe.
Don't forget, communism had wide appeal in the 20's and 30's - not surprising, given the general economic and social conditions. What better strategy than to co-opt your opponent's agenda, effectively dividing his support into managable fragments?
Absent violent intervention (from the state or otherwise) you have people engaging in voluntary production and trade, which is the definition of a free market. Free markets lead to the accumulation of capital in private hands, hence capitalism.
It's crucial not to mince words if you want to undertand how the world really works.
The ideals of socialism are distinct from the realities.
"Absent violent intervention (from the state or otherwise) you have people engaging in voluntary production and trade, which is the definition of a free market."
Absent violent intervention from those engaging in voluntary production and trade, you have piracy, theft and enslavement.
Thus, like it or not, you need an organizing principle devoted to defending your peaceful production and trade, thus a division of labor (production vs defense) that eventually leads to some form of hierarchy, hence a State.
I don't see how you can avoid this, and history seems to bear me out.
There's a world of difference between using violence to defend innocent people and using violence to force innocent people to pay for a bridge that they don't want. The former does not necessitate the latter.
Recommended reading:
The Most Dangerous Superstition
Malevolent Market Forces are like propaganda or like goals of people behind the faces that persuade farmers to raise the wrong crops, use expensive farm products, to accomplish corporate Mission or Objectives.
Humanism recognizes negative human emotions and behavior.
Fraud, Greed, Crime, Lies, Fake Studies, Fake Science, Fake News, Accounting Control Fraud, Malevolent Intelligence Operations against people, Voters, and Businesses.
Ludwig Von Mises has a whole thesis on this subject. Overproduction can only exist when demand is artificially inflated by abundance of fiat money and credit - when perceived demand for goods is higher than it actually is.
In a 100% reserve non-fiat banking environment risk tolerance of lending institutions and borrowers is much lower. There's less incentive to overproduce and less systemic risk overall.
Yep...Mal-investment is precisely what the problem is and it is not fixable at this point. The credit bubble is too big.
http://www.globaldeflationnews.com/anatomy-of-a-bubble-how-the-federal-r...
1) Inexpensive fiat is the ONLY ethical money form for government debts else the taxation authority and power of government is misused for the benefit of private interests such as gold owners.
2) A non or slowly growing money supply would reward risk-free money hoarding. But progress requires investment, not money hoarding.
The solution to the possible over-issue of inexpensive fiat is to make sure that fiat is de jure and de facto legal tender for government debts ONLY by allowing genuine private monies for private debts ONLY with fiat enjoying no unnecessary advantage over them.
As for the banks, they should be 100% private with 100% voluntary depositors* and then who should care how many liabilities they create?
*This requires that the monetary sovereign provide a risk-free storage and transaction service for all users of its fiat and that service should pay no interest and make no loans.
Likely Mr. Ehrenfreund will never understand the nature of his misconceptions. It seems nearly universal that Socialists will continue to believe they know best for everyone, that central control is the answer to all problems and that we would all be happier under this system. Past history never matters!
I'm bullish on mal.
Is it inflation or deflation causing all the economic chaos today? (spoiler alert: deflation)
http://www.globaldeflationnews.com/inflation-vs-deflation-part-1which-on...
The investment is necessarily "mal" only in the sense that it was financed with stolen* purchasing power. The solution then is to reverse the theft so that the victims can afford the new production and to reform the system to eliminate future thieving. Professor Steve Keen's "A Modern Jubilee" at http://www.debtdeflation.com/blogs/manifesto (scroll down to just past Fig 11) does roughly that.
*Via government-subsidized private credit creation.