# Finance Behind the Veil of Money  ## Metadata - Author: [[Eduard Braun und Jörg Guido Hülsmann]] - Full Title: Finance Behind the Veil of Money - Category: #books ## Highlights - THE CLASSICAL ECONOMISTS had rejected the notion that overall monetary spending — in current jargon: aggregate demand — is a driving force of economic growth. ([Location 19](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=19)) - But money delivers all these benefits irrespective of its quantity. A small money stock provides them just as well as a bigger one. ([Location 23](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=23)) - “mercantilism,” ([Location 38](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=38)) - Tags: [[pink]] - Neo-mercantilism, or Keynesianism, has ravaged the foundations of our monetary system. ([Location 40](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=40)) - The theory of the wage fund was brushed aside, rather than carefully analyzed and criticized, ([Location 59](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=59)) - Dr. Eduard Braun delivers a sweeping and original essay on the foundations of finance. ([Location 65](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=65)) - Braun resuscitates the theory of the subsistence fund ([Location 69](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=69)) - without grasping the nature and significance of the subsistence fund, one cannot understand the upper turning points of the business cycle, ([Location 71](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=71)) - the author reinterprets the role of money within the theory of finance. ([Location 74](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=74)) - PPM relates exclusively to consumer-good prices, not to capital-good prices. ([Location 75](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=75)) - how order comes into what appears to be a sheer chaos. ([Location 84](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=84)) - economics as a science has become fragmented. ([Location 96](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=96)) - This disintegration seems to be the reason why most economists have stopped to ask systematic questions like: what is capital; what is the nature of money; or, in relation to the central topic of the present book, what is the nature of the financial market? ([Location 101](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=101)) - The present work is written in the tradition of one of these heterodox approaches — the so-called “Austrian school of economics.” This school of thought continues the work of the classical economists whose main intention was to understand and explain the invisible hand, or, how order is introduced into chaos. ([Location 109](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=109)) - The central topic of this book is the rationale for the financial market in society. ([Location 115](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=115)) - Tags: [[orange]] - under the title of “Financial Markets and Economic Growth.” ([Location 122](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=122)) - Tags: [[orange]] - In the eyes of a superficial observer, this market does not produce anything tangible or “real”; it even does not provide any consumable services. ([Location 343](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=343)) - Money is exchanged for money without any visible reason except for gambling in the pursuit of profit. ([Location 345](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=345)) - Joseph Schumpeter7 who coined the term “veil of money,” ([Location 353](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=353)) - In a monetized economy, the realities are, so to speak, veiled behind the observable flows of money. ([Location 354](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=354)) - The connection between the two must be clarified. ([Location 360](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=360)) - the aim is not to merely remove the veil of money from the financial market, but to examine it in detail. ([Location 361](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=361)) - The causal nexus is thought to run as follows: The more money the citizens, foreigners, and the state spend on consumption and investment, the higher aggregate demand becomes, and the more will be produced in order to meet this demand. ([Location 370](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=370)) - Note: Demand must be supported by goods produced. - According to Keynesian theory, the transmission of impulses from the financial market to the “real” economy — the so-called monetary-transmission mechanism — exclusively rests upon the influence of the interest rate. ([Location 376](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=376)) - In the course of the development of economics, “capital” has acquired numerous meanings. ([Location 401](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=401)) - modern economists in general avoid defining capital clearly as either a monetary or a real magnitude. Instead, they treat the financial market in rather-vague terms. They do not point out what they consider to be the counterpart of the monetary transactions in the material world. ([Location 410](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=410)) - The vagueness of the term “capital” shall be tackled in particular. Therefore, the two perspectives that seem to be confounded into the term “capital” will be separated from each other and both used to analyze the role of the financial market on their own. ([Location 415](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=415)) - They do not properly integrate the time aspect into their discussion of the logic of action. This aspect is indispensable to an examination of the financial market, as both credit contracts and the phenomenon of interest are temporal in nature. ([Location 422](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=422)) - Professor Hülsmann, in his positive theory that he proposes as a substitute for the time-preference theory, ([Location 427](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=427)) - British authors of the classical school employed a concept that is very useful in this regard. Their wages-fund theory not only provides an explanation of how an economy is financed; it is also compatible with the logic of action. ([Location 453](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=453)) - wages fund, which is a fund consisting of consumer goods. Without the maintenance of the producers — mainly the workers — being assured, production cannot take place. ([Location 457](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=457)) - the role of the financial market in this materialistic sense can only be to help to allocate the available and saved fund of consumer goods to the producing people. ([Location 460](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=460)) - it was called later on, the subsistence-fund theory ([Location 462](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=462)) - subsistence-fund theory rests upon a materialistic notion of capital, it is criticized from the point of view of capital concepts that stress the value aspect. ([Location 467](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=467)) - In accounting, capital serves as a calculatory device that helps to determine business profits as the spread between money revenues and money costs. ([Location 482](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=482)) - There is indeed a connection between the subsistence fund and money. In human actions, the purchasing power of money does not relate to all goods, but only to those that are considered to be consumer goods. This result has been indicated before by economists endorsing the claim theory of money. ([Location 491](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=491)) - what the veil of money conceals and what must be considered to be the link between the “real” and the financial sector. ([Location 498](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=498)) - our results are perfectly compatible with the so-called circulation-credit theory of the business cycle, for which Friedrich von Hayek received the Nobel Prize. ([Location 501](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=501)) - German economic crisis of 1873, chapter 22 describes the effects of artificially created credit on the economy. ([Location 506](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=506)) - The additional credit that was inserted into the economy by the financial system after the Franco-Prussian War caused reactions that indicate that the entrepreneurs were calculating as if the subsistence fund had increased. ([Location 509](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=509)) - Because of the credit expansion they acted under the illusion that more workers could be sustained for a longer time. ([Location 511](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=511)) - This book demonstrates how the veil of money can be removed from activities on the financial market. ([Location 517](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=517)) - this book contributes to our understanding of the link between “the outward mechanism of paying and spending” and the “realities of the phenomena. ([Location 522](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=522)) - methodological individualism. ([Location 528](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=528)) - hypostatize. ([Location 533](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=533)) - Tags: [[orange]] - all institutions and organizations are regarded as a result of interwoven individual acts. ([Location 535](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=535)) - all theories that are dealt with are checked for their compatibility with individual human action. ([Location 536](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=536)) - In studying the actions of individuals, we also gain knowledge of collectives and society. ([Location 538](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=538)) - logic of action,41 which he calls “praxeology.” The scope of praxeology is not to analyze individual acts, but “human action as such, irrespective of all environmental, accidental, and individual circumstances of the concrete acts.” ([Location 548](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=548)) - law of diminishing marginal utility and the law of optimal returns are immediate logical implications of this premise. ([Location 559](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=559)) - Why people act how they act, why they prefer some goods to others — these questions lie outside the realm of praxeological laws. ([Location 562](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=562)) - the cause of their direction is human choice. ([Location 564](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=564)) - Human choices and human preferences are not determined in advance. ([Location 565](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=565)) - better to define praxeology as the analysis of the pure logic of action, not of “the pure logic of choice,” ([Location 567](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=567)) - “To the praxeologist, economic theory … deals not with the content of human valuations, motivations, and choices, but with the formal fact that people engage in … motivated action.” ([Location 569](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=569)) - An important area of vagueness is the relationship between time and action. ([Location 578](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=578)) - following three chapters contain a detailed analysis of the relationship between the passing of time and the logic of action. ([Location 585](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=585)) - choices take place in instances of time. Choices therefore cannot explain phenomena that take a period of time. ([Location 588](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=588)) - time preference is not part of the logic of action ([Location 594](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=594)) - The costs of any decision, it says, are constituted by the forgone opportunities. ([Location 599](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=599)) - Note: Should this read ”the costs of any action"? - Costs only have to be incurred in action. I will argue that they only appear when an actor actually has to sacrifice potential consumption in order to obtain future results. ([Location 601](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=601)) - Interest does not only exist in the monetary economy; it is based on the logic of action itself. ([Location 604](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=604)) - the interest rate pervades the whole economy. ([Location 615](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=615)) - “from the price spread between their selling price and their aggregate factor prices.” ([Location 616](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=616)) - The equilibrium spread between the prices of consumer goods and the sum of the prices of the factors of production employed in their production is called originary interest ([Location 623](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=623)) - Mises65 explains the phenomenon of originary interest by the existence of time preference ([Location 629](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=629)) - People supposedly consider future goods as less valuable than present goods, ([Location 631](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=631)) - “The core and central point of interest theory,” the latter expounds, is that “as a general rule, present goods are worth more than future goods of the same kind and quantity.” ([Location 635](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=635)) - “Time preference is a categorial requisite of human action.” ([Location 651](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=651)) - originary interest is itself a category of human action. ([Location 654](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=654)) - If Mises now went on to show that time preference indeed was a “categorial requisite” of human action, our only point would be that the expression “preference” is misleading. ([Location 658](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=658)) - the will to consume even the minimum is not fixed in man by some praxeological law. ([Location 713](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=713)) - it is not the logic of action that forces us to breathe. ([Location 715](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=715)) - martyrs and warriors. ([Location 720](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=720)) - What they do could be said to constitute consumption for them. ([Location 720](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=720)) - not eating the apple one obtains not only a future good — the eating of the apple next month — but also a present good — the enjoyment of saving ([Location 729](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=729)) - money is a nonperishable good. ([Location 740](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=740)) - choice between “100 dollars today but not next year” and “104 dollars next year but not today.” ([Location 745](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=745)) - “because of the universal fact of time preference, a particular good is worth more at present than is the present prospect of its becoming available as a present good at some time in the future.” ([Location 747](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=747)) - Professor Hülsmann110 looks for originary interest directly in the relationship between ends and means, i.e., in the logic of action itself, not in the concrete content of human preferences and choices. ([Location 769](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=769)) - He does not succeed in bringing the passing of time and the logic of action together. ([Location 774](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=774)) - “Originary interest is the fundamental spread between the value of an end and the value of the means that serve to attain this end.” ([Location 777](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=777)) - The end is what really counts for the acting person, whereas the means is merely the thing or the action that is in between his present state of affairs and the state of affairs in which his end is realized.… ([Location 780](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=780)) - value of the ends “is fully imputed on the means,” ([Location 787](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=787)) - Note: See my note above. - Hülsmann thinks that the spread between means and ends is fundamental and independent of the time factor. ([Location 804](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=804)) - The problem with his argument is the lack of an explanation of how the value of the means is derived. ([Location 807](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=807)) - Hülsmann is trapped in a logical circle. ([Location 818](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=818)) - Hülsmann’s theory has it the other way around. It correctly looks for originary interest in action, but does not consider that the value spread between means and ends is not fundamental but presupposes originary interest. ([Location 831](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=831)) - Man does not compare the means with the ends and then only acts insofar as the ends seem more valuable to him than the means he has to give up. ([Location 835](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=835)) - originary interest, if it should happen to exist, has to be looked for: between something forgone in the present and something obtained in return in the future, i.e., between what is given up in the present and what is obtained for it in the future. ([Location 844](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=844)) - According to economic theory, value is not attached to goods in an absolute sense. ([Location 850](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=850)) - The person ranks the goods, but he doesn’t measure their value. ([Location 851](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=851)) - Value is rather an ordinal or relative concept. ([Location 852](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=852)) - It is a “trilateral relationship involving one individual and two economic goods. ([Location 852](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=852)) - A judgment of value does not measure, it arranges in a scale of degrees, it grades. ([Location 854](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=854)) - Opportunity cost, now, “is the evaluation placed on the most highly valued of the rejected alternatives or opportunities.” ([Location 859](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=859)) - “in the end, all costs are opportunity costs.”134 ([Location 866](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=866)) - the opportunity-cost theory does not incorporate the influence of time. ([Location 871](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=871)) - in order to know the present value of an alternative is “(1) some idea of the value of the future benefits which that article will yield, and (2) some idea of the rate of interest by which these future values may be translated into present values by discounting.” ([Location 877](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=877)) - Note: Using the thing we want to find as a function of the calculation. Not feasible. - presupposes a known rate of interest. ([Location 888](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=888)) - The opportunity-cost concept does not allow for the inclusion of time. ([Location 893](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=893)) - it seems to be problematical to link cost to choice. Decisions are not bound up with costs. ([Location 899](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=899)) - No opportunity cost means — from the point of view of most economists — no cost at all. ([Location 910](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=910)) - “in the theory of exchange … costs reflect the value of the things surrendered,” ([Location 916](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=916)) - Costs only appear when one has to give something away, which happens in action, not in choice. In action, property is necessary.145 As Mises states, “action always is essentially the exchange of one state of affairs for another state of affairs.”146 In the end, so to speak, “all action is exchange.” ([Location 922](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=922)) - The opportunity-cost theory creates costs where they do not exist — in decisions — and neglects costs when they actually arise — in action. ([Location 932](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=932)) - opportunity-cost concept ([Location 937](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=937)) - time-preference theory ([Location 937](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=937)) - both a matter of choice, and in pure choice no costs arise because no sacrifice is required. ([Location 938](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=938)) - relationship between the economic aspects of action and the passing of time. ([Location 940](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=940)) - When humans act, they apply means to obtain ends. ([Location 944](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=944)) - Costs only arise whenever one has to abstain from consumption in order to attain one’s end. ([Location 956](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=956)) - Consumer goods are the sacrifice that we are looking for. ([Location 958](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=958)) - costs can only be felt by the person deciding and therefore are a subjective phenomenon: ([Location 963](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=963)) - “costs are a phenomenon of valuation,” and not “a real thing.” ([Location 965](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=965)) - What is and what is not a consumer good is determined by the acting person. ([Location 968](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=968)) - evaluating human action, two things are essential. The first are the consumer goods that one wants to attain in the future; the second are the consumer goods that one has to sacrifice on the way toward this end. ([Location 973](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=973)) - “The objective of all human action is to produce value.” ([Location 978](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=978)) - term cost ([Location 982](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=982)) - true sacrifice of consumption. ([Location 983](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=983)) - The utility derived from consumer goods attained will be called revenues. ([Location 984](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=984)) - revenues are also always psychic revenues. ([Location 985](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=985)) - The difference between the psychic revenue and the psychic costs is called psychic profit. ([Location 986](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=986)) - Preferences are not predetermined. What can be said, however, is that in actual action the acting person reveals that his preferences, at this moment and in this place, are constituted such that the good he is striving for is worth more to him than the costs he has to incur. ([Location 990](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=990)) - originary interest is the price spread between the factors of production and the consumer goods they produce. ([Location 996](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=996)) - This price is what he has to trade off against the good he wants to obtain, not the paid services or goods themselves. ([Location 1000](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1000)) - The important relationship is the one between costs and revenues, and not between means and ends. ([Location 1004](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1004)) - A good that is available without a consumption sacrifice is not an economic good ([Location 1005](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1005)) - The price of a means of production reflects the consumption sacrifice that was necessary to obtain it. ([Location 1007](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1007)) - in human action, the future consumer good is valued higher than the price of the means. ([Location 1010](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1010)) - From the logic of action results our knowledge of the value spread between the consumer good sacrificed today and the consumer good attained in return in the future. ([Location 1012](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1012)) - We have therewith traced back originary interest to an underlying value spread between two goods that are both valued for their own sake. ([Location 1027](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1027)) - it is impossible to express the difference between costs and revenues in any meaningful numbers. ([Location 1028](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1028)) - the acting persons expect the revenues to be worth more to them than the costs. ([Location 1037](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1037)) - Note: They expect revenues to be greater than the cost of replacement goods. - “that interest can never be calculated other than with the formula capital multiplied by time multiplied by interest rate. ([Location 1039](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1039)) - Note: No. The rate is derived from current money & future money. - Rothbard, ([Location 1053](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1053)) - “with any given end to be attained, the shorter the period of action, i.e., production, the more preferable for the actor. This is the universal fact of time preference.… The less waiting time, the more preferable it is for him.” ([Location 1054](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1054)) - Mises’s dictum: “The characteristic feature of a priori knowledge is that we cannot think of the truth of its negation or of something that would be at variance with it.” ([Location 1075](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1075)) - “Synthetic a priori propositions are those whose truth-value can be definitely established, even though in order to do so the means of formal logic are not sufficient (while, of course, necessary) and observations are unnecessary.” ([Location 1095](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1095)) - Doesn’t this prove that, very often, people do not act in the shortest possible amount of time? ([Location 1113](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1113)) - We know a priori that man always acts as quickly as possible. ([Location 1116](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1116)) - there is always a value spread between the costs and the revenues of human action. ([Location 1121](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1121)) - Both costs and revenues constitute consumer goods for the acting person. ([Location 1121](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1121)) - by his nature, always acts in the shortest possible time, ([Location 1122](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1122)) - The size of this rate, in other words, is a matter of preferences and cannot be deduced from a priori valid axioms. ([Location 1129](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1129)) - individual rate of originary interest ([Location 1130](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1130)) - money prices where it is impossible to compare costs and revenues in an objectively verifiable way. ([Location 1130](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1130)) - Note: I don't think money price give a way of objectively verifying costs and revenues. - Preferences have nothing ([Location 1139](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1139)) - to do with the existence of originary interest. ([Location 1139](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1139)) - Preferences only come into play when the size of the rate is in question. ([Location 1140](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1140)) - means are employed to attain a coinciding end. ([Location 1147](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1147)) - Note: Can means ever coincide with ends? - in contrast to decisions, an action cannot take place at one point of time. It extends in time. ([Location 1173](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1173)) - Man acts to render conditions less unsatisfactory, i.e., in action, revenues surpass costs. Man acts in the shortest possible period of time. ([Location 1180](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1180)) - More roundabout processes of production indeed are, as a rule, physically more productive than shorter ones. ([Location 1194](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1194)) - he only chooses longer or more roundabout processes of production if they appear to him to be more productive. ([Location 1213](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1213)) - value production and not physical production. ([Location 1219](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1219)) - an indefinite number of instances where time works in the other direction and has a destructive influence on things. Milk, fruit, vegetables, meat, and even wine and wood can — if one waits too long — lose their value completely by the passage of time. ([Location 1238](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1238)) - Note: These are examples of different products. Fresh fruit today versus fresh fruit in the future. - this person values the meal (his end) more than the golden dishes (means). ([Location 1252](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1252)) - Note: What? Gold dishes as a means to the end of a meal? - The purpose of chapter 3 was to show that it is impossible to regard time preference as a matter of choice. ([Location 1262](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1262)) - ceteris paribus condition ([Location 1264](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1264)) - violates the ceteris paribus condition. ([Location 1269](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1269)) - Consumption of ice cream in winter, they say, is not the same good as consumption of ice cream in summer. ([Location 1269](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1269)) - factors derive their value from future goods213 ([Location 1284](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1284)) - In the final state of rest, i.e., in equilibrium, it is true, as we have seen, that the value spread between the price of the means — the costs, and the end — the revenues — corresponds to originary interest. ([Location 1287](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1287)) - value is a relative, not an absolute, concept, and therefore it is impossible to quantify this value spread. ([Location 1290](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1290)) - Goods of higher order are only valued when demand exists for them. ([Location 1306](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1306)) - Note: Higher order goods have value because of the value of what they produce. - the discount factor presupposes the existence of the interest as the value spread between capital goods (= means of production) and future income (= future consumption). ([Location 1317](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1317)) - circular reasoning. ([Location 1318](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1318)) - “Prices are determined by demand, demand is determined by the prices.” ([Location 1331](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1331)) - impossible to “explain interest rates in terms of individual time preferences if we assume an interest rate already to exist.” ([Location 1339](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1339)) - The interest rate that can be used to discount around only appears in equilibrium, ([Location 1345](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1345)) - when the formation of the prices of the means is completed. ([Location 1346](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1346)) - The important point here is that the ownership of consumer goods is a precondition for costs to occur at all. ([Location 1352](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1352)) - Savings are not, as Irving Fisher must have it in order to reconcile them with his theory, “simply the capitalization of future income.” ([Location 1356](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1356)) - The difference between saving and investing lies in the time dimension. ([Location 1360](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1360)) - One can only invest things that can be bound up. ([Location 1372](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1372)) - saving also means the “restriction of consumption.” ([Location 1378](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1378)) - Economically, the sacrificed consumer goods are important. ([Location 1390](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1390)) - They ([Location 1390](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1390)) - constitute the costs, they have to be sacrificed, and they are thereby invested. ([Location 1391](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1391)) - saving and investment are two categorically different things. ([Location 1392](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1392)) - As long as savings are not invested they can be consumed at any time. ([Location 1394](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1394)) - That this difference in dimensions has not been made allowance for by many economists has been the source of much discussion. Without addressing this difference one can come very easily to the conclusion that savings always equal investment. ([Location 1396](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1396)) - savings in order to pay for the costs. ([Location 1403](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1403)) - To finance actions means to mobilize the funds — the consumer goods — that are needed to defray the costs. ([Location 1403](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1403)) - The term “to support” is the expression that best corresponds to the term “to finance. ([Location 1409](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1409)) - “costs,” “revenue,” “savings,” “investment,” and “finance” were clarified as well. They all relate to the sacrifice or the gain of consumption that are necessarily part of human action; ([Location 1419](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1419)) - veil of money covering the transactions on the financial market. ([Location 1422](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1422)) - interpersonal finance ([Location 1426](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1426)) - First ([Location 1429](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1429)) - Finance constitutes the link between costs and savings. ([Location 1432](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1432)) - Second, ([Location 1434](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1434)) - the way in which the financing of the economy is actually organized and accomplished by the monetary streams on the existing financial market ([Location 1434](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1434)) - Eucken makes this point ([Location 1435](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1435)) - relationship between the nonmonetary savings necessary for financing the economy and the actual money traded has to be worked out. ([Location 1438](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1438)) - first, the stream of real goods that have the function of financing the economy, and second, the way the market economy brings them about by means of cash flows, ([Location 1441](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1441)) - which streams of goods correspond to the cash flows on the financial market. ([Location 1444](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1444)) - “social capital” ([Location 1449](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1449)) - “private capital.” ([Location 1449](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1449)) - goods, next to the factors labor and land, are necessary in a society to produce consumer goods. ([Location 1455](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1455)) - Money, of course, is not part of real capital as it does not help to produce anything. ([Location 1463](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1463)) - private capital focus on the second issue, the organization of the market economy. ([Location 1473](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1473)) - In this point of view, capital is not a means of production, but a means of making money profits. ([Location 1475](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1475)) - As all goods are evaluated homogeneously in money, businessmen are able to perform economic calculations. ([Location 1481](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1481)) - As writers who endorse the private concept of capital have the money value of the respective goods in mind, and not their physical composition — that might change in the course of time — it is a homogeneous concept. ([Location 1490](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1490)) - Note: Is this a valid term? - money prices, ([Location 1493](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1493)) - The origin of the confusion of the two capital concepts in modern — especially in neoclassical — economics can be ascribed to John B. Clark. ([Location 1497](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1497)) - “the essential function of channeling funds to those individuals or firms that have productive investment opportunities.” ([Location 1510](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1510)) - there are three economic functions of the financial market. ([Location 1518](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1518)) - first one is to determine the money price of financial assets. ([Location 1519](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1519)) - second function of the financial market, they continue, is to provide liquidity, ([Location 1523](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1523)) - third function is to reduce the search and information costs of transacting ([Location 1525](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1525)) - what precisely is allocated in “real” terms, ([Location 1548](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1548)) - Yet, they do not define the mysterious “resources” they are talking about. ([Location 1554](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1554)) - The connection that they try to establish to the “real” sector in speaking of “resources” instead of money is mere tokenism. ([Location 1563](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1563)) - Finance is only necessary when costs occur, i.e., when a consumption sacrifice is the precondition of action. ([Location 1565](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1565)) - these terms cannot reconcile the fact that finance is only needed where consumption sacrifices have to be incurred with the fact that it is not consumer goods, but money that is traded on the financial market. ([Location 1571](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1571)) - The money value of goods is not a measure for their real significance in production. ([Location 1586](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1586)) - Advances, ([Location 1596](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1596)) - consist of means of subsistence or consumer goods. ([Location 1596](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1596)) - wages-fund doctrine.” ([Location 1600](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1600)) - classical economists divided society into three separate classes, the workers, the landowners, and the capitalists. ([Location 1609](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1609)) - capitalists — and only they — save ([Location 1617](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1617)) - The latter two classes do not save. ([Location 1618](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1618)) - “wages fund” ([Location 1620](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1620)) - fund destined for the payment of workers only. ([Location 1620](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1620)) - Böhm-Bawerk ([Location 1620](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1620)) - “subsistence fund” ([Location 1622](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1622)) - better to speak of the “fund of consumer goods” or the “consumption fund. ([Location 1626](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1626)) - the term “subsistence fund” will be used here. ([Location 1628](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1628)) - the term not only refers to means of subsistence, but to all kinds of consumer goods. ([Location 1631](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1631)) - the subsistence fund in the present work constitutes a fund that provides the owners of all originary factors of production — workers and landlords — with consumer goods. ([Location 1632](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1632)) - the function of the financial market is to allocate the available subsistence fund. ([Location 1648](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1648)) - WAGES-FUND THEORY ([Location 1655](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1655)) - Before production can be started, there has to be something else in existence that maintains the workers until they have finished the product. ([Location 1661](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1661)) - A fund for the payment of wages, however defined, has to be there before work can be done. ([Location 1663](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1663)) - Note: This is a critically important point. Resources must exist first. No amount of money can change that. - the “wages fund.” ([Location 1672](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1672)) - a fund of consumer goods ([Location 1676](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1676)) - is the prerequisite ([Location 1676](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1676)) - for every form of production ([Location 1677](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1677)) - two variables that the classical wages-fund theory is composed of: the wages fund and (working) population. ([Location 1682](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1682)) - Wages are paid out of the wages fund, which is the demand for labor. The number of the workers constitutes the supply of labor. If the former grows, wages will rise; if the latter grows, wages will decrease. ([Location 1684](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1684)) - necessity of a fund of consumer goods that exists before further work can be done: ([Location 1687](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1687)) - The labour employed in producing this stock of subsistence, forms a great and important part of the past labour that has been necessary to enable present labour to be carried on. ([Location 1693](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1693)) - demand and supply of labour; ([Location 1696](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1696)) - proportion between population and capital. ([Location 1696](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1696)) - no mode of expressing by one familiar term, the aggregate of what has been called the wages-fund of a country: ([Location 1698](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1698)) - Wages Fund ([Location 1706](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1706)) - production presupposes the existence of a fund of consumer goods. ([Location 1708](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1708)) - Without this fund, no production that is not from hand to mouth is possible. ([Location 1708](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1708)) - the wages fund, the fund of consumer goods, that is invested ([Location 1716](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1716)) - Elisabeth van Dorp expresses this thought more clearly when she says that “the capitalist supplies the labourer with consumption-goods; doing this is identical with investment.” ([Location 1716](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1716)) - finance in human action is at the intersection between costs and saved consumer goods. ([Location 1719](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1719)) - wages fund can be seen as “property which might be consumed ([Location 1727](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1727)) - wages-fund theory seems apt to serve as a basis for the analysis of the interpersonal finance. ([Location 1735](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1735)) - demand for labor must consist in goods that are intended for “the use and accommodation of the labouring class.” ([Location 1744](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1744)) - wages in all countries and at all periods, depends on the ratio between the portion of ([Location 1746](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1746)) - their capital appropriated to the payment of wages, and the number of their labourers.” ([Location 1746](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1746)) - classical authors were not generally clear in their use of terms. ([Location 1763](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1763)) - three parts of capital: “free ([Location 1774](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1774)) - capital,” “intermediate goods,” and “fixed capital. ([Location 1774](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1774)) - Only the first one of these corresponds to the classical wages fund. ([Location 1775](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1775)) - subsistence fund ([Location 1788](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1788)) - every capital good must have been preceded by free capital. ([Location 1788](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1788)) - capital good is produced as a result of the expenditure of free capital. ([Location 1789](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1789)) - new capital can only be built by saving finished consumer goods. ([Location 1791](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1791)) - Positive Theory of Capital serves as a foundation for Strigl’s work, ([Location 1795](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1795)) - consumer goods are not only the end of production, but very often also its requisite. ([Location 1799](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1799)) - Without a fund of consumer goods it is impossible to wait one year for the next harvest. ([Location 1800](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1800)) - different orders of goods. ([Location 1816](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1816)) - Consumer goods ([Location 1817](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1817)) - first order. ([Location 1817](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1817)) - With higher-order goods it is impossible to pay real wages or, in our terms, to incur any kind of costs. ([Location 1821](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1821)) - In order to do so one has to command savings, i.e., consumer goods. ([Location 1821](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1821)) - subsistence fund ([Location 1828](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1828)) - increase in wages ([Location 1830](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1830)) - Classical economists did not address this problem. ([Location 1831](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1831)) - Richard von Strigl ([Location 1832](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1832)) - the subsistence fund has to support not only those who produce the final goods, but also those who produce the raw materials necessary for the production of the final goods, ([Location 1835](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1835)) - many consumer goods perish in a very short time. ([Location 1841](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1841)) - problem is solved in real life by synchronization. ([Location 1841](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1841)) - Tags: [[blue]] - The output of the processes that conclude today is used to finance those processes that will produce output only in the future. ([Location 1844](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1844)) - it is still the subsistence fund, and only the subsistence fund, that is necessary to finance production. ([Location 1845](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1845)) - The subsistence fund, or free capital, is the only thing necessary to finance production. ([Location 1856](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1856)) - a means to support the owners of the factors of production labor and land. ([Location 1860](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1860)) - only thing that is needed in order to finance production, is the availability of consumer goods ([Location 1863](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1863)) - the task of any market whose function might be to finance the economy would be to allocate the subsistence fund. ([Location 1865](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1865)) - Strigl thinks that the object of the capital markets is the subsistence fund, the free capital. ([Location 1871](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1871)) - supply on the capital market, ([Location 1873](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1873)) - subsistence fund, ([Location 1873](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1873)) - demand stems from those who want to start production. ([Location 1874](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1874)) - The role of the capital or financial market within the economy would therefore be the allocation of the wages or subsistence fund. ([Location 1877](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1877)) - Tags: [[blue]] - what is traded on these markets is a fund of consumer goods. ([Location 1881](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1881)) - The fact that only consumer goods are able to finance production is rarely kept in mind by the authors who work with the notion of real capital. ([Location 1882](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1882)) - the transfer of these already-existing goods does not absorb any resources or cause costs. ([Location 1887](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1887)) - No costs whatsoever arise in the mere transfer of ownership of intermediate goods. ([Location 1889](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1889)) - only the subsistence fund, a part of real capital, is necessary to finance the economy. ([Location 1900](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1900)) - The term “financial” market is a better fit. ([Location 1902](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1902)) - the theory does not explain what goods the subsistence fund is supposed to consist of. ([Location 1916](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1916)) - Those who organize the production process in the market economy do not give a thought to the subsistence fund. ([Location 1923](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1923)) - Ferdinand Lassalle, ([Location 1926](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1926)) - modern mass production hinders the capitalist from consuming all of the output himself. ([Location 1933](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1933)) - they generally try to maximize their money profits. They buy the factors of production for money and sell the product against money. ([Location 1938](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1938)) - wages-fund theory ([Location 1945](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1945)) - many economists have opposed it vigorously. ([Location 1945](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1945)) - Henry George ([Location 1951](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1951)) - Progress and Poverty ([Location 1952](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1952)) - “the abandonment of the wages-fund doctrine … made possible the acceptance of Keynesianism and the policy of inflation, deficits, and ever expanding government spending.” ([Location 1968](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1968)) - wages or subsistence-fund theory seems to be pivotal to economics. ([Location 1970](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1970)) - wages fund, ([Location 1981](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1981)) - doesn’t depend on union ([Location 1981](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1981)) - but on the propensity of the capitalists to accumulate savings. ([Location 1982](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1982)) - from the wages-fund theory follows the idea of harmony between the two “classes,” capital and labor. ([Location 1989](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1989)) - If the capitalists thrive, so will workers. ([Location 1992](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=1992)) - arithmetical ratio, ([Location 2005](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2005)) - Note: This assumption is the fatal flaw in the Malthusian theory. - “iron law of wages. ([Location 2009](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2009)) - This law is nothing else than the pessimistic interpretation of the wages-fund theory. ([Location 2009](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2009)) - Of the two variables that determine the well-being of laborers, the wages fund and population, only the latter is considered to be — at least in the long run — amenable to influence. ([Location 2013](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2013)) - confusion between real capital and private capital. ([Location 2025](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2025)) - not a pre-existing fund, but demand for the final product determines the payment of wages ([Location 2028](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2028)) - Note: Pre-existing fund and demand are the same. Demand only occurs when a person has something to offer. - marginal-productivity theory seems to be congenial to the subsistence-fund theory rather than in contradiction with ([Location 2033](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2033)) - First ([Location 2040](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2040)) - Second, ([Location 2047](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2047)) - Third, ([Location 2050](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2050)) - Fourth, ([Location 2057](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2057)) - distinguish real from money terms ([Location 2064](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2064)) - according to the notion of real capital, the wages fund is seen as a (real) fund of consumer goods, ([Location 2069](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2069)) - according to the private notion of capital, the wages fund is considered as representing the money wages that could be paid to workers, ([Location 2071](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2071)) - Couldn’t these funds, the private capital of the employer, be paid out in wages as well? ([Location 2074](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2074)) - confusing real with money terms. ([Location 2076](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2076)) - upper limit of wages determined by the fund of consumer goods provided by the capitalists. ([Location 2080](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2080)) - that there is a certain national fund, ([Location 2092](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2092)) - wages are definitely limited by the amount of consumer goods available. ([Location 2100](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2100)) - Note: Important point. Wages limited by amount of consumer goods, not the amount of money. - Thornton constantly confuses money with real factors. ([Location 2102](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2102)) - by confusing real and money factors, real and private capital, it is maintained, Thornton arrives at the conclusion that the wages fund is not of a fixed size but “indefinite.” ([Location 2106](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2106)) - Note: Herein lies the flaw in Modern Monetary Theory. (I capitalize with some reluctance.) - The rest of the money fund in the hands of the capitalists cannot be said to potentially raise real wages in case it was paid out to workers. ([Location 2127](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2127)) - Consumption by one group of people can only be increased at the expense of the consumption by other groups. ([Location 2127](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2127)) - he reaches his conclusion by confusing private capital with real capital. ([Location 2132](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2132)) - amount of wages ([Location 2137](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2137)) - determined by ([Location 2138](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2138)) - consumers’ income ([Location 2138](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2138)) - Demand for commodities is not demand for labour. ([Location 2157](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2157)) - Contrary to Mill’s view, a demand for commodities is a demand for labour. ([Location 2173](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2173)) - Without somebody being able to pay in advance, or to grant credit, nothing could be produced. ([Location 2176](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2176)) - Demand for commodities is not a demand for labor at all if no one, including the workers themselves, is willing to advance the wages or the means of subsistence. ([Location 2177](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2177)) - the decision as to whether the proceeds of sale will be used to re-create the wages fund still rests with the capitalists.” ([Location 2179](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2179)) - Principles of Economical Philosophy by Henry D. MacLeod: ([Location 2187](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2187)) - importance of a solid banking system to the labouring classes. ([Location 2191](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2191)) - money and credit make it possible to anticipate the results of production before they actually accrue. ([Location 2195](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2195)) - the actor demonstrates that he values the consumer goods he wants to obtain more than the consumer goods he gives up in order to get the former. ([Location 2198](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2198)) - marginal-productivity theory claims that, in equilibrium or the static state,453 workers are paid according to the value of their product, ([Location 2206](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2206)) - “we know that wages come not out of capital, but out of products.” ([Location 2211](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2211)) - Without production, wages would not and could not be. ([Location 2213](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2213)) - The workers produce their wages themselves. ([Location 2220](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2220)) - Note: Consider the production of a new product. - last section. There it was the purchasing power of the consumers that allegedly determined wages. ([Location 2221](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2221)) - it doesn’t follow from this that they are producing their own wages. ([Location 2226](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2226)) - “the product does not in the main exist at the moment when wages are paid. ([Location 2232](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2232)) - someone else must be there who possesses consumable commodities ([Location 2233](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2233)) - wages are determined by the “constant stream of commodities that come into the market at any moment; therefore ([Location 2237](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2237)) - today most workers do not produce consumer goods but are employed at intermediate stages of ([Location 2243](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2243)) - To be precise, however, the marginal-productivity theory does not claim that the workers are paid with their own product. They are paid according to its value or, more exactly, its discounted value.466 It is surely this marginal value product, not the commodity per se, that is meant by the term marginal product. ([Location 2245](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2245)) - Note: Consider the flow. The workers get paid no matter how the consumer pays. If, for example, the consumer pays with credit due in one month, and the workers get paid weekly, the workers still get paid on time. - If anything, the latter provides a causal explanation of how the price of the factor services emerges in the first place and why a price differential remains. ([Location 2268](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2268)) - So by no means does the marginal-productivity theory debunk the wages-fund theory. ([Location 2280](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2280)) - The two theories are not irreconcilable, as also some wages-fund apologists maintain,475 but fit well with each other. ([Location 2281](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2281)) - The young and growing trees have value; and this repays us for our labor, ([Location 2318](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2318)) - Note: Not sure this makes sense. - the additional water immediately produces its effect. ([Location 2329](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2329)) - Note: Not really so. A lot of elements influence the delay between inflow & outflow. - this scenario shows that the trees that can be cut every year are not just the fruit of present labor planting the new trees. ([Location 2336](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2336)) - wages of the present planters, ([Location 2339](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2339)) - must be advanced to them. ([Location 2339](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2339)) - The newly planted trees have a money value ([Location 2341](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2341)) - Note: No. They have value only for those willing to exchange something today for new trees. - notion of real capital. ([Location 2357](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2357)) - if one removes the veil of money from the financial market, what surfaces are flows of consumer goods. ([Location 2361](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2361)) - Tags: [[blue]] - The main question will be how the monetary streams on the financial market are connected to the subsistence fund. ([Location 2363](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2363)) - the purchasing power of money only relates to consumer goods. ([Location 2364](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2364)) - Tags: [[blue]] - The Keynesian argument that wages depend on consumer spending assumes an automatic nexus between spending on consumer goods and spending on laborers that does not exist. ([Location 2368](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2368)) - notion of real capital. ([Location 2375](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2375)) - Tags: [[orange]] - underlie the “financing” of production. It stresses the importance of persons and their needs. ([Location 2376](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2376)) - Tags: [[orange]] - the function of the financial market can only be to allocate the means of subsistence to the workers and landowners. ([Location 2378](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2378)) - The classes underlying classical economics are mere placeholders ([Location 2382](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2382)) - Tags: [[orange]] - the financial market does not allocate the available “means of subsistence,” but money. ([Location 2389](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2389)) - money and money prices are central in guiding the actions of people. ([Location 2394](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2394)) - concept of real capital ([Location 2401](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2401)) - Tags: [[orange]] - explain the concept of business capital and to reconcile it with the concept of real capital that was the topic of part II. ([Location 2403](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2403)) - Tags: [[orange]] - purchasing power of money only relates to consumer goods or, in other words, to the subsistence fund. ([Location 2408](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2408)) - George Reisman, the context of a constant quantity of money ([Location 2411](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2411)) - Tags: [[orange]] - separate two kinds of behavior. ([Location 2414](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2414)) - Tags: [[orange]] - any medium of exchange is only a technical means to obtain ends, and not an end in itself.500 “The sole use of money is to be exchanged for goods, and if it had no price and therefore no exchange-value, it could not be exchanged and would no longer be used.”501 People make efforts to get it because of its power to purchase other things that they would like to have. ([Location 2415](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2415)) - Note: So obvious, yet so frequently overlooked. - money is a mere item in transit. ([Location 2422](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2422)) - This attitude toward money we will link to the consumption sphere. ([Location 2424](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2424)) - Anyone who encounters money in his actions is necessarily part of the consumption sphere. ([Location 2430](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2430)) - to make money is the end of these actions,505 and the labor services and intermediate goods are considered to be the technical means, the items in transit. ([Location 2436](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2436)) - Note: Not really. See below. - In this business sphere, the acting persons orient themselves according to money earnings and ignore the satisfaction of needs that are the reason for acquiring money in the first place. ([Location 2442](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2442)) - The one point that counts is whether the observed action is part of the business sphere or the consumption sphere. ([Location 2456](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2456)) - The preferences of individuals are, so to speak, data for the economist. ([Location 2466](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2466)) - The gap between the two can be bridged by means of an analysis of the purchasing power of money. ([Location 2471](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2471)) - Chapter 17 deals with the claim theory of money. ([Location 2473](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2473)) - Tags: [[orange]] - a direct connection between goods and money does not exist. ([Location 2476](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2476)) - what is traded on the financial market can be argued to be the power to purchase consumer goods, or, figuratively speaking, the fund of consumer goods. ([Location 2477](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2477)) - they are able to replace the psychic comparison of revenues and costs with a more objective way of doing things. ([Location 2489](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2489)) - According to Hülsmann, Frédéric Bastiat’s value theory rests upon his contention that needs and satisfactions are incommensurable and that, therefore, human services can only be evaluated insofar as they are exchanged. ([Location 2523](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2523)) - “The task which acting man wants to achieve by economic calculation is to establish the outcome of acting by contrasting input and output. ([Location 2536](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2536)) - The typical entrepreneur who orientates himself by his money earnings translates “the incentives of human action, that are felicitously labelled ‘value difference’ or ‘profit motive’ [to the] business process.” ([Location 2544](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2544)) - Money that one is in possession of and that can be used to incur costs we call savings ([Location 2555](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2555)) - capital accounting. ([Location 2564](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2564)) - Tags: [[orange]] - entrepreneur compares money figures whereas the isolated individual compares psychic costs and revenues. ([Location 2575](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2575)) - “total profit.” ([Location 2579](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2579)) - Tags: [[orange]] - (total calculation) ([Location 2580](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2580)) - Tags: [[orange]] - Value fluctuations of assets and liabilities do not concern him. ([Location 2587](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2587)) - Note: These are not “value” fluctuations; they are price fluctuations. - As he wants to get information about his income periodically he has to think of a different method. ([Location 2604](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2604)) - this is done by capital accounting ([Location 2605](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2605)) - Assets and liabilities might fluctuate in value for a number of reasons. For example, if a mark-to-market rule is employed, the value of assets changes according to their market prices. ([Location 2610](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2610)) - Note: Again, not value. - Profit calculated this way would not fit into our notion of the logic of action. ([Location 2613](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2613)) - According to Rieger, what is done in the valuation of assets on the balance sheet is that the future monetary end of an object is anticipated and discounted (eskomptiert) to the accounting date. ([Location 2624](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2624)) - Note: That’s not how accounting principles worked. Mark-to-market was created to overcome monetary inflation. - They accept that present profits are calculated by comparing this year’s balance sheet with last year’s. ([Location 2634](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2634)) - Note: Where do these ideas come from? - the valuation of present objects according to future events contradicts the Generally Accepted Accounting Principles (GAAP). ([Location 2638](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2638)) - Note: This statement contradicts earlier statements. - The GAAP are left to a political process that supposedly contains both inductive and deductive elements “because the businessmen and their miscellaneous associations as well as the deductively working scientists influence the political process with their views and input.” ([Location 2671](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2671)) - With this in mind it would be idle to think of how and if at all one is able to determine GAAP. One would have to look at them as an institution that is the result of human action but not of human design. ([Location 2684](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2684)) - Pascal Salin stresses the role of competition as a discovery process precisely for the “hard to define norms of financial accounting.… ([Location 2705](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2705)) - Business calculation not only conforms to, but stems from the nature of the capitalistic business.” ([Location 2719](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2719)) - Accounting rules that provide the best information concerning the performance of the business as a whole also help best to avoid the wasting of resources,600 or better, from the point of view of the business, the wasting of money. ([Location 2724](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2724)) - the realization principle. It says that assets have to be recorded on the balance sheet with historical cost until they or the products they help to produce have been sold against money or at least a claim on money.603 Up to the point when assets lead to money inflow the balance sheet contains the costs of these assets, ([Location 2734](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2734)) - Capital accounting, if effected according to the realization principle, contrasts historical cost and presents money inflow. ([Location 2743](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2743)) - lower-of-cost-or-market rule. This principle erodes607 the realization principle insofar as the latter wants the historical costs to be incorporated into the balance sheet, whereas the former wants the historical costs only as long as the market does not show a lower price. ([Location 2747](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2747)) - the realization principle and lower-of-cost-or-market only differ on one point — the imputation of expenses. ([Location 2811](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2811)) - Instead, definite malinvestments are thus written off. ([Location 2816](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2816)) - Malinvestment remains malinvestment, even though the whole project might still turn out to be profitable. ([Location 2832](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2832)) - the difference is only a case of forgone profit, not of loss. ([Location 2839](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2839)) - Tags: [[orange]] - In capital accounting that follows established accounting principles, the money invested is contrasted to the money flowing back as a result of sales on the market. ([Location 2856](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2856)) - money–commodity–money framework. ([Location 2861](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2861)) - In being invested in a way that is supposed to bring about a profit, money becomes capital. ([Location 2863](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2863)) - money calculation form of the cost goods as a means to determine a money yield. ([Location 2868](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2868)) - capital is only an operand, ([Location 2876](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2876)) - Ludwig von Mises rejects every attempt to employ the term capital outside of business accounts. ([Location 2884](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2884)) - The concept of capital cannot be separated from the context of monetary calculation and from the social structure of a market economy in which alone monetary calculation is possible. ([Location 2885](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2885)) - the real and the private notions of capital. ([Location 2887](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2887)) - the former, only those goods that technically help to produce consumer goods are capital. ([Location 2888](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2888)) - the latter, all goods that a business purchases in order to earn profit generate costs and are therefore ([Location 2888](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2888)) - we have not distinguished between equity capital and debt capital. ([Location 2891](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2891)) - in the end its whole funds consist of liabilities, either toward its owners or toward its creditors. ([Location 2895](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2895)) - everyone in the business sphere is striving for an excess of monetary revenues over monetary costs ([Location 2899](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2899)) - originary interest. ([Location 2902](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2902)) - money is a nonperishable good, ([Location 2909](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2909)) - Entrepreneurial competition will tend to erase the differences that exist in the monetary profit rate in different lines of business. ([Location 2922](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2922)) - doubling of the rate ([Location 2925](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2925)) - Note: Do you really mean rate? See the Rothbard comment below to explain. I still think you use the term incorrectly. - market rate of interest ([Location 2929](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2929)) - “premeditated result of entrepreneurial ([Location 2930](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2930)) - there will always be a positive market rate of interest in terms of ([Location 2933](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2933)) - Those who would accept a smaller rate of profit than the one prevailing on the market will gladly accept the prevailing one. Those who demand a higher rate will cease investing. ([Location 2939](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2939)) - Business calculation, especially capital accounting, could be demonstrated to be in accordance with the logic of human action. ([Location 2947](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2947)) - Capital in business accounts is nothing more than a numerical expression of the monetary ([Location 2948](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2948)) - costs that have been incurred by an enterprise in order to earn revenues. ([Location 2949](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2949)) - allocate the available fund of consumer goods, ([Location 2957](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2957)) - the money that is traded in this market must bear a close relationship to this fund. ([Location 2957](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2957)) - demand for money, both of consumers and of businessmen, rests solely in its power to purchase consumer goods. ([Location 2959](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2959)) - Tags: [[blue]] - The profit motive would disappear and economic calculation would be good for nothing if the business sphere were merely self-contained. ([Location 2967](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2967)) - Tags: [[blue]] - even the demand for money by businessmen rests on the power of money to purchase consumer goods. ([Location 2969](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2969)) - Tags: [[blue]] - for consumers, money is not an end in itself, but only an item in transit. ([Location 2972](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2972)) - the purchasing power of money serves as a link between the consumption and the business sphere. ([Location 2975](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2975)) - not correct to regard money as a claim on goods of whatever kind. ([Location 2977](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2977)) - the “price” of money, as the latter is nothing else than the inverse of the goods ([Location 2980](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2980)) - Where does this exchange value come from? ([Location 2984](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2984)) - money is only demanded if it already has value. ([Location 2984](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2984)) - According to his regression theorem, money must have originated historically from a commodity that had had exchange value even before it was demanded for as a medium of exchange. ([Location 2985](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2985)) - In the consumption sphere, personal preference is the decisive factor when it comes to action or nonaction. ([Location 2992](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2992)) - psychic costs: the sacrifices of consumption that the actor must undergo ([Location 2998](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2998)) - to obtain money in the first place. ([Location 2999](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2999)) - money in acts of indirect exchange ([Location 2999](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=2999)) - serves a technical role, ([Location 3000](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3000)) - every transaction in the consumption sphere both contract partners are guided by their personal preferences. ([Location 3006](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3006)) - commodity–money–commodity ([Location 3012](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3012)) - commodity against money and money against commodity. ([Location 3013](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3013)) - In a monetary economy, all those who sell prey for money compete against each other, no matter what they want to buy with the money later on. ([Location 3017](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3017)) - tendency on the ([Location 3020](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3020)) - market for one money price to be established for each good.” ([Location 3020](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3020)) - an array of exchange ratios against consumer goods. ([Location 3022](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3022)) - money can serve as a common denominator for all exchange ratios. ([Location 3023](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3023)) - Money becomes a price index. ([Location 3025](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3025)) - Tags: [[blue]] - when people in the consumption sphere think or calculate in money, they have its power to purchase consumer goods in mind. ([Location 3029](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3029)) - money has to be left free to adjust its exchange ratios against all other goods according to the ever-changing preferences of the trading parties. ([Location 3031](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3031)) - monetary theories that want the unit-of-account function to be prior to its medium-of-exchange function must therefore be dismissed. ([Location 3033](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3033)) - Note: I think this is important. - “holding of money at ready command … enhances the utility of the resources of the consumer.” ([Location 3040](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3040)) - saving. ([Location 3045](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3045)) - “the negative act of not buying consumption goods.” ([Location 3045](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3045)) - the demand for money increases … this additional demand can only be satisfied by bidding down the money prices of nonmoney goods. ([Location 3052](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3052)) - Note: Assuming no increase in the quantity of money. - considers money to be an item in transit between the costs he must incur to get it ([Location 3057](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3057)) - and the revenues he obtains by means of its purchasing power. ([Location 3057](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3057)) - Usually, the habits of people683 change rather slowly. ([Location 3059](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3059)) - Prices will therefore also be rather stable in the course of time. ([Location 3060](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3060)) - Note: Again, assuming no significant increase in the quantity of money. - money income. ([Location 3064](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3064)) - two separate transactions, ([Location 3067](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3067)) - commodity against money and money against commodity. ([Location 3067](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3067)) - As long as money is not a good that the actors value for its own sake, money does not constitute the revenue in any transaction of indirect exchange in the consumption sphere. ([Location 3071](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3071)) - No one will incur costs for money without taking its power to deliver goods into consideration. ([Location 3076](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3076)) - Money must allow for the purchase of goods that the actor finds will yield him a psychic revenue, ([Location 3079](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3079)) - double coincidence of wants ([Location 3082](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3082)) - What one is looking for in money is its purchasing power ([Location 3086](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3086)) - For costs to occur, a sacrifice must be made. ([Location 3089](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3089)) - Without such a sacrifice, money would be available at no cost. ([Location 3090](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3090)) - Money does not constitute the costs; the sacrifice does that must be undergone in order to get it. ([Location 3091](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3091)) - a means of exchange only functions as an item of transit between costs and revenues. ([Location 3092](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3092)) - which are not based on personal preferences ([Location 3094](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3094)) - Note: At this point I do not agree with this point. Business people make choices because it helps their preference for profits or their preference to keep their jobs. I need to clarify that I disagree with this statement. Personal preferences effect all decisions. - barter exchanges are separated into two independent exchange acts: ([Location 3100](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3100)) - commodity against money and money against commodity, ([Location 3100](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3100)) - seller’s revenue ([Location 3113](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3113)) - buyer’s revenue ([Location 3114](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3114)) - the seller of the good obtains the purchasing power of the money ([Location 3120](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3120)) - The purchasing power of money is only a technical characteristic of money. ([Location 3124](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3124)) - Money itself is not the reason people sell their goods for it. ([Location 3125](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3125)) - Money does not constitute the revenue. ([Location 3126](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3126)) - These goods are the revenues. ([Location 3126](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3126)) - When I already possess money, its only use for me consists in its purchasing power. ([Location 3128](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3128)) - In choice, there is no sacrifice. ([Location 3130](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3130)) - the costs of indirect exchange are the costs that accrue in the acquisition of money. ([Location 3131](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3131)) - The sacrifices that are necessary to obtain the money are the costs, and the goods that can be had for money are the revenues. ([Location 3133](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3133)) - Tags: [[blue]] - METHODOLOGICAL PUBLICATIONS, ([Location 3145](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3145)) - value is a relative, not an absolute, ([Location 3145](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3145)) - “the prices of the goods of higher orders are ultimately determined by the prices of the goods of the first or lowest order, that is, the consumers’ goods.” ([Location 3150](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3150)) - money has an almost infinite array of goods prices ([Location 3160](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3160)) - goods price of money. ([Location 3160](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3160)) - the prices of consumer goods ultimately determine the prices of higher-order goods. ([Location 3165](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3165)) - the purchasing power of money is indeed totally determined by the actions of consumers, ([Location 3168](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3168)) - Tags: [[blue]] - The only purchasing power of money that anyone is interested in relates to consumer goods. ([Location 3168](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3168)) - “The value of money is, in the end, established in those exchange acts that relate to consumer goods.” ([Location 3171](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3171)) - The purchasing power for buying production goods is not relevant to human actions. ([Location 3176](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3176)) - the goods and services they buy in order to make money profits that are items in transit. ([Location 3181](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3181)) - time to find the link between them. ([Location 3182](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3182)) - all actions in the latter totally depend on the potential of the employed money to become income again in the consumption sphere ([Location 3183](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3183)) - the services of the worker are only an item in transit for the employer. ([Location 3192](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3192)) - against the expected revenues. ([Location 3200](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3200)) - The worker will only do the job if, for him, the psychic revenue exceeds his psychic costs, ([Location 3203](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3203)) - i.e., if the purchasing power of his income is worth more to him than the hardship of labor. ([Location 3203](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3203)) - the power of money to purchase the services of the worker totally depends on its power to provide the worker with consumer goods. ([Location 3207](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3207)) - subsistence-fund theory ([Location 3215](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3215)) - subsistence fund in a moneyless society. ([Location 3220](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3220)) - the worker is employed in roundabout ways of production. ([Location 3225](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3225)) - Each time they are paid wages, the saved power to purchase consumer goods is transferred to them. ([Location 3231](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3231)) - businessmen, ([Location 3239](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3239)) - They calculate in money prices. ([Location 3239](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3239)) - these transactions presuppose as well that money has the power to purchase consumer goods. ([Location 3255](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3255)) - all the money in the business sphere must be able to become income of some person partaking in the production process. ([Location 3265](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3265)) - must be able to provide psychic revenues to these persons. ([Location 3267](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3267)) - The demand for money in the business sphere will thereby increase depending on the number of stages that money has to pass through until it is paid out as income to originary factors of production. ([Location 3281](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3281)) - “business money, ([Location 3284](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3284)) - Note: Money cannot be separated into "business" and "consumption." All money must have value for consumption exchanges. - in nearly every transaction some of the business money will enter the consumption sphere. ([Location 3297](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3297)) - order to be accepted in payment, the business money must therefore have the power to purchase consumer goods as well. It does not constitute a closed circular flow, but is connected to the consumption sphere as well. ([Location 3297](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3297)) - additional demand for money in the business sphere will have the same consequences as if the consumers themselves had initially increased their balances: prices will ([Location 3301](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3301)) - the income of the owners of the originary factors of production depends on consumption expenditures, the money ([Location 3312](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3312)) - increases in saving are generally followed by decreases in the prices of final consumer goods ([Location 3329](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3329)) - “gross saving” or “gross investment. ([Location 3334](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3334)) - Gross investment, in their definition,750 is the amount of money spent on factors of production during a specified period of time. ([Location 3334](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3334)) - The saved money can only be used in investments, that is, it can only enter the business sphere if it can be paid out as income. ([Location 3345](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3345)) - The additional savings do not decrease the income of the factors of production, but increase it. ([Location 3348](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3348)) - Saving shifts income, but does not decrease it. ([Location 3351](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3351)) - The business sphere does not absorb the savings but passes them on to the originary factors of production. ([Location 3352](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3352)) - Several renowned economists maintain that money constitutes nothing less than claims on consumer goods. ([Location 3373](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3373)) - the above-named authors have not provided an in-depth explanation of their assertion that money represents consumer goods. ([Location 3393](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3393)) - The theories in question all stress the unit-of-account function of money, ([Location 3395](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3395)) - The first way ([Location 3402](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3402)) - money is integrated into the price system and its value is established just as the value of all other goods in a constantly on-going process. ([Location 3411](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3411)) - The second way ([Location 3413](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3413)) - unit-of-account function of money. ([Location 3414](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3414)) - start from ([Location 3414](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3414)) - a world where equilibrium conditions already prevail. ([Location 3415](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3415)) - a reform of the real, non-Walrasian world of uncertainty. In equilibrium, all exchange ratios are fixed. ([Location 3418](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3418)) - In this world, no special medium of exchange is necessary in order to bring the exchange ratios down to one common denominator. By means of a simple calculation, any good can serve as a common denominator. ([Location 3425](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3425)) - there will be no demand for or supply of a special medium of exchange.772 As money is nothing more than a counting unit, it does not “enter the utility function” of individuals. ([Location 3429](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3429)) - money would not even exist in general equilibrium. ([Location 3435](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3435)) - In equilibrium, the exchange ratios are given before any actual exchange takes place. ([Location 3436](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3436)) - In this view, the unit of account exists independently of any commodity being eventually chosen as a concrete medium of exchange. ([Location 3440](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3440)) - In other words, the unit-of-account function can be isolated. ([Location 3440](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3440)) - In the theories in question, the unit-of-account function is logically prior to and independent of the medium-of-exchange function. ([Location 3442](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3442)) - The balances, of course, would not have value of their own, as they only represent the value of the goods they are a claim on. ([Location 3456](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3456)) - Credit could be said to be, in a sense, prior to money. ([Location 3465](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3465)) - It is a means to accomplish payments, but not a good of its own that is a subject of demand or supply. ([Location 3467](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3467)) - What we have tried here was to find the logic behind and the starting point of those theories that stress the unit-of-account function of money and interpret money as a claim on goods. ([Location 3481](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3481)) - The most important point that can be said against this claim theory of money is that it cannot be integrated into the price system. ([Location 3483](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3483)) - an interpretation of money as claims on goods might be a helpful analogy, but ([Location 3485](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3485)) - laws of supply and demand, this cannot be said of money if it is interpreted to be a claim. A claim is a right. ([Location 3488](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3488)) - money is in no way a legal right to any kind of good. Contracts presuppose the assent of all contract partners. ([Location 3492](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3492)) - Money is accepted voluntarily. ([Location 3494](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3494)) - the claim theories of money cannot compensate for the lack of a demand-and-supply analysis of the value of money. ([Location 3500](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3500)) - With all these ratios available no medium of exchange seems to be necessary any more. Only units of account are needed further on. ([Location 3505](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3505)) - Black-Fama-Hall system, ([Location 3515](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3515)) - But, ([Location 3517](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3517)) - we live in a world of change. ([Location 3517](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3517)) - we began with a system of already-established exchange ratios. These ratios are frozen once the unit of account has been defined ([Location 3520](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3520)) - “The market … is not viewed as the place where goods are exchanged, but rather as a clearinghouse for debts and credits. ([Location 3522](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3522)) - Between an abstract unit of account and a real good there cannot be any exchange ratio that might adapt itself to “the ever-changing conditions of supply and demand.” ([Location 3527](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3527)) - demand. There ([Location 3529](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3529)) - establish its value” simply by accepting “the proposed money in payment of taxes and other obligations to itself.” ([Location 3537](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3537)) - The decision of a state to accept “anything it chooses” as money does not create any exchange ratio between different goods or between goods and money. ([Location 3541](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3541)) - Adolph Wagner who was of the opinion that the idea of money as a claim on consumer goods contains all big socialist problems. ([Location 3547](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3547)) - Building upon the work of Eugene Fama and Fischer Black, Greenfield and Yeager deal with a society in which no definable quantity of a medium of exchange exists. ([Location 3550](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3550)) - BFH system presupposes is the definition of the unit of account by the state authority. ([Location 3552](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3552)) - what takes place is not market exchange, but clearing, or payment of debts. ([Location 3562](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3562)) - Greenfield and Yeager ([Location 3590](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3590)) - theory does not provide a mechanism that allows for dynamic changes in the price structure, ([Location 3591](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3591)) - value of the unit of account is not established in the exchange process. ([Location 3591](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3591)) - “tracked the CPI ([Location 3609](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3609)) - Note: But, does that not require an unexpected level of accuracy in the CPI? - This lack of an adaptive mechanism is what unites the BFH system with the claim theories of money, ([Location 3646](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3646)) - more-conventional monetary system where the unit of account and the medium of exchange are identical. ([Location 3647](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3647)) - Money that is supposed to grant access not to a specific good, but plainly to all goods, can only and must be the object of an independent act of exchange, and therefore can only and must be a thing of value. ([Location 3699](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3699)) - The “nature of money” is not correctly described by the analogy of a claim on goods. ([Location 3701](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3701)) - businessmen ([Location 3710](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3710)) - calculate and act in money terms. ([Location 3710](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3710)) - in striving for monetary profits, entrepreneurs are totally dependent on the wishes of consumers. ([Location 3711](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3711)) - sellers of goods and services of the first order ([Location 3719](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3719)) - transmit the orders received from the public to all those producing goods and services of the higher orders. ([Location 3720](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3720)) - All money–commodity–money actions depend on the fact that money is accepted in the consumption sphere as income and profit payments. ([Location 3725](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3725)) - in maximizing their money profits, businessmen not only direct production in a way that best conforms to consumer wishes, but they also organize the allocation of the available consumer goods. ([Location 3728](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3728)) - private notion of capital ([Location 3733](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3733)) - money can only serve this function because it has the power to be used in the consumption sphere, ([Location 3736](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3736)) - it allows the access to what may be called the subsistence fund. ([Location 3737](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3737)) - Tags: [[blue]] - capital is neither perpetual, as Knight maintains, nor must it be replenished out of additional savings after every transaction, which is Hayek’s position. The truth lies in between. ([Location 3746](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3746)) - financial market, in allocating money, actually allocates the available fund of saved consumer goods. ([Location 3752](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3752)) - Tags: [[blue]] - the well-being of individuals is a subjective phenomenon that cannot be measured. ([Location 3757](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3757)) - Tags: [[blue]] - Economic growth cannot be defined unambiguously. ([Location 3758](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3758)) - Tags: [[blue]] - although we cannot measure well-being, we at least know that all human actions are directed toward it. ([Location 3759](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3759)) - every addition of a new and profitable enterprise to the business sphere increases the well-being of the involved people compared to what otherwise would have been. ([Location 3764](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3764)) - Capital as the calculatory form of these costs is consequently a signal — and only that ([Location 3767](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3767)) - Business capital is ([Location 3771](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3771)) - homogeneous. ([Location 3771](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3771)) - boom-bust cycle, collective malinvestments. ([Location 3775](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3775)) - growth of the business sphere must be financed with additional money savings entering it from the consumption sphere. ([Location 3776](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3776)) - The entrepreneurs selling goods to consumers only accept the money of the latter because it has the power to buy consumer goods. ([Location 3791](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3791)) - “capital is self-perpetuating.” ([Location 3802](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3802)) - The business sphere, so it appears, is financed by consumption, not by any kind of saving. ([Location 3825](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3825)) - Note: It's savings in that the owner does not consume the proceeds. - it must not be inferred ([Location 3827](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3827)) - that consumer spending is able to provide a stimulus to production. ([Location 3827](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3827)) - consumer spending, ([Location 3834](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3834)) - Note: Supported in turn by production. - He does not have to save part of it in order to keep his business going. ([Location 3841](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3841)) - Note: Not really true. If he does not save - or reinvest- his revenue the business will cease. He has that choice with each turn of his capital. - these savings have been set free again and their owner is in a position to decide whether to save further on and reinvest the money, or to disinvest and consume it. ([Location 3848](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3848)) - inadmissible to add up the maintained savings of all businessmen and call the result “gross saving. ([Location 3854](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3854)) - revenues are smaller than the costs, ([Location 3862](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3862)) - Note: I think Rothbard says the inventory has no cost. He incurs a cost when he spends - or reinvests - his revenue. - it is not enough to count on the replenishment of business money by consumer spending. ([Location 3866](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3866)) - There will always be a need for further finance out of savings that must necessarily come out of income. ([Location 3866](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3866)) - connection between the business sphere and the consumption sphere ([Location 3924](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3924)) - historical money costs of the company’s assets. ([Location 3927](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3927)) - capital accounting can be interpreted this way. It reveals whether the available consumer goods have been allocated to the owners of the factors of production in a way that increased the well-being in society. ([Location 3938](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3938)) - The costs or the revenues that appear in the action of one person can be financed out of the savings of someone else. ([Location 3960](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3960)) - “In a credit transaction, a present good is exchanged for a future good, or rather, a claim on a future good. ([Location 3969](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3969)) - Money loans, correspondingly, consist in the exchange of money for a claim on future money payments. ([Location 3970](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3970)) - The existence of credit thus enhances the division of labor in society. ([Location 3977](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3977)) - financial intermediaries ([Location 3981](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3981)) - financial intermediaries into two groups, the brokers and the dealers ([Location 3988](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3988)) - define the financial market as the market for money ([Location 3994](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3994)) - loans. ([Location 3995](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=3995)) - Credit is nothing else than the transfer of power to purchase consumer goods. ([Location 4002](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4002)) - The financial market thus corresponds to what we have called the subsistence-fund market. ([Location 4003](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4003)) - The saver (or the intermediary) might provide equity capital ([Location 4012](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4012)) - If profits accrue, he is entitled to receive dividends. ([Location 4013](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4013)) - Note: Maybe not entitled. - The financial market therefore does not determine the market interest rate.917 Instead, it “adjusts the rate of interest on loans”918 to the rate of interest that permeates the whole economy as the price spread between money costs and money revenues. ([Location 4030](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4030)) - Whenever somebody demands money on the financial market, he needs its power to purchase consumer goods. ([Location 4038](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4038)) - Credit serves as a means to transfer the power to purchase consumer goods. ([Location 4044](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4044)) - In the end, the function of the monetary loans is to allocate the available power to purchase consumer goods. ([Location 4049](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4049)) - it is fair to call the financial market the subsistence-fund market. ([Location 4051](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4051)) - the money that the savers have not used to buy these goods. ([Location 4053](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4053)) - Size transformation ([Location 4063](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4063)) - small amounts of dispersed savings are collected and they are lent out on a large scale. ([Location 4064](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4064)) - risk transformation ([Location 4066](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4066)) - the overall risk can be reduced ([Location 4068](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4068)) - term transformation ([Location 4071](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4071)) - lend money and to abstain from consumption ([Location 4075](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4075)) - They are therefore in need of being financed permanently. ([Location 4077](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4077)) - mobilization of capital and term transformation. ([Location 4094](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4094)) - The whole credit is split up into fungible shares denominated in small amounts932 that are called securities. ([Location 4102](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4102)) - on the primary market the savings are transferred from the savers to the company. ([Location 4106](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4106)) - The possibility to trade fungible securities has given rise to the “market for the exchange for pre-existing securities”935 that is usually called the secondary market. ([Location 4110](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4110)) - Its main function is thus “to promote liquidity for the owners of existing securities.” ([Location 4113](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4113)) - financial intermediaries, most notably banks. ([Location 4121](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4121)) - golden rule of banking ([Location 4130](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4130)) - Hübner consequently calls for a golden rule according to which banks may not lend out credit that is longer than the credit they receive. ([Location 4135](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4135)) - systematic mistakes in maturity mismatching only occur in case of a fractional-reserve banking system, ([Location 4151](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4151)) - The possibility of term transformation rests on the permanent replenishment of short-term savings. ([Location 4155](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4155)) - In part V, it was demonstrated that the capital in business accounts as well as the cash flows on the financial market bear a close relationship to the subsistence fund. ([Location 4162](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4162)) - The money loans that are traded on the financial market constitute power to purchase consumer goods. Only with the help of consumer goods, or with the power to acquire consumer goods, is it possible to finance the economy. ([Location 4163](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4163)) - Capital on the balance sheets signifies the amount of the subsistence fund that has been channeled through the respective enterprises. ([Location 4165](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4165)) - Capital accounting helps to determine whether the past sacrifice of potential consumption is outweighed by the resulting power to consume. ([Location 4166](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4166)) - ASSUMED a constant supply of money. ([Location 4170](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4170)) - Angel Rugina ([Location 4173](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4173)) - “natural financing.” ([Location 4174](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4174)) - or “artificial financing. ([Location 4178](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4178)) - 1974 Friedrich von Hayek was awarded the Nobel Prize in economics for his contributions to the circulation-credit theory of the trade cycle. ([Location 4181](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4181)) - expansion of circulation credit ([Location 4187](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4187)) - commodity credit ([Location 4191](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4191)) - involves an exchange of present goods for future ([Location 4192](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4192)) - Concerning money, commodity credit means an exchange of present money against a claim on future money. ([Location 4196](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4196)) - circulation credit ([Location 4197](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4197)) - stems from the power of banks to lend additional money into existence. ([Location 4198](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4198)) - this kind of credit creation implies very little or no cost to the issuing bank. ([Location 4201](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4201)) - the gain of the party who receives before he pays is balanced by no sacrifice on the part of the other party. ([Location 4202](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4202)) - Circulation credit is not a proper credit transaction, at least according to Mises’s (and our) definition, as “the essential element, the exchange of present goods for future goods, is absent.” ([Location 4204](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4204)) - If a creditor is able to confer a loan by issuing claims that are payable on demand, then the granting of the credit is bound up with no economic sacrifice for him. ([Location 4206](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4206)) - Rugina’s terminology, circulation credit constitutes artificial finance ([Location 4208](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4208)) - additional circulation credit makes entrepreneurs behave as if the amount of the available subsistence fund had increased. ([Location 4210](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4210)) - Tags: [[blue]] - those versions of the ABCT that are expounded in terms of the subsistence or wages fund are superior to those that use different concepts. ([Location 4215](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4215)) - German economic crisis of 1873. The latter lends itself to closer examination because the boom preceding the crash had been fed by artificial financing to a high degree. ([Location 4218](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4218)) - Circulation-Credit Theory ([Location 4229](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4229)) - Mises also stresses the importance of the fund of consumer goods — the subsistence fund — when it comes to determining the possible length of the production processes. ([Location 4237](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4237)) - whole available subsistence fund is necessary on the one hand and sufficient on the other for paying the wages ([Location 4239](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4239)) - savings, in influencing the subsistence fund, determine the way production is organized in the economy: ([Location 4245](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4245)) - The size of the subsistence fund is hereby indicated to the entrepreneurs by the rate of interest such that an increase of the fund leads to a decrease of the interest rate. ([Location 4249](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4249)) - Note: This is an important concept; and simply stated. - “a reduction of the rate of interest … must necessarily lead to a lengthening of the average period of production.” ([Location 4251](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4251)) - Note: I'm not sure of this causal relationship. Lower Interest rates do not cause an lengthening of the structure of production. An increase in the subsistence fund causes lower interest rates AND a longer structure of production. - Whereas the latter does not cause any systematic problems, the existence of circulation credit causes the whole boom-bust cycle. ([Location 4253](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4253)) - “a rate of interest is established in the loan market which corresponds to a longer period of production.” ([Location 4257](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4257)) - Note: Lower rates send false signals to the market. - Entrepreneurs, when they evaluate the profitability of the different production processes, do not orient themselves according to the size of the subsistence fund, which they cannot observe, but by the interest rate. ([Location 4259](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4259)) - Note: Not just interest rates, but prices in general. - A time must necessarily come when the means of subsistence available for consumption are all used up although the capital goods employed in production have not yet been transformed into consumption goods.… The means of subsistence will ([Location 4264](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4264)) - prove insufficient to maintain the labourers during the whole period of the process of production that has been entered upon. ([Location 4265](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4265)) - The market prices of consumption goods rise and those of production goods fall. ([Location 4269](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4269)) - higher consumer-goods prices and lower production-goods prices, ([Location 4271](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4271)) - the increase of the subsistence fund has been an illusion. ([Location 4272](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4272)) - sooner or later the interest rate must rise even if there were no legal limits on the expansion of circulation credit. ([Location 4274](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4274)) - Economic goods that could have satisfied more important wants have been employed for the satisfaction of less important; ([Location 4284](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4284)) - additional circulation credit creates the illusion of an increase of the subsistence fund. ([Location 4288](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4288)) - the illusion of a risen fund of consumer goods. ([Location 4291](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4291)) - “means of subsistence, ([Location 4293](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4293)) - These means are definitely “available for consumption ([Location 4294](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4294)) - Richard von Strigl is an economist who consistently emphasizes the connection between the allocation of the subsistence fund and the expansion of circulation credit. ([Location 4307](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4307)) - Money does not represent anything. ([Location 4313](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4313)) - At the end of the boom the means of subsistence become scarce and many new projects have to be stopped. ([Location 4316](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4316)) - Roundabout methods of production can be adopted only so far as the means for subsistence exist to maintain the workers during the entire period of the expanded process. ([Location 4321](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4321)) - projects that only seem profitable because of credit expansion. ([Location 4333](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4333)) - The means of production and labor that have been diverted to the new enterprises have had to be taken away from other enterprises. Society is not sufficiently rich to permit the creation of new enterprises without taking anything away from other enterprises. ([Location 4339](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4339)) - production and labor that are not available in sufficient quantities. ([Location 4343](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4343)) - People eager to embark upon processes with a longer period of production must first accumulate, by means of saving, that quantity of consumers’ goods which is needed to satisfy, during the waiting time, all those wants the satisfaction of which they consider more urgent than the increment in well-being expected from the more time-consuming process. ([Location 4351](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4351)) - the means of subsistence are the prerequisite for a lengthening of the period of production. ([Location 4356](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4356)) - An artificial lowering of the interest rate induced entrepreneurs to embark upon unsustainable (“too long”) production processes. ([Location 4361](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4361)) - Note: This is really an artificial expansion of the quantity of money, which drives down interest rates. - the drop in interest rates falsifies the businessman’s calculation. ([Location 4363](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4363)) - Note: Which to him indicates a larger capital fund than actually exists. Rising prices, together with sign of more capital, give rise to more production of those goods. But, since capital did not really exist, it must come from some other uses. - entrepreneurs do not act as if the subsistence fund had increased, but as if the amount of capital goods had increased. ([Location 4366](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4366)) - A further expansion of production is possible only if the amount of capital goods is increased by additional saving, i.e., by surpluses produced and not consumed. The characteristic mark of the credit-expansion boom is that such additional capital goods have not been made available. The capital goods required for the expansion of business activities must be withdrawn from other lines of production. ([Location 4367](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4367)) - the limiting factor here is the capital goods. ([Location 4371](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4371)) - he tries to integrate both phenomena — scarce means of subsistence and scarce capital goods — in his explanation. ([Location 4371](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4371)) - subsistence fund that consists of both capital goods and consumer goods. ([Location 4376](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4376)) - the decisive factor that marks the turning point of the business cycle is the scarcity of capital goods, not of consumer goods: ([Location 4377](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4377)) - [The entrepreneurs] embark upon an expansion of investment on a scale for which the capital goods available do not suffice. Their projects are unrealizable on account of the insufficient supply of capital goods. They must fail sooner or later. ([Location 4378](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4378)) - capital goods gain prominence. ([Location 4383](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4383)) - On the contrary, the crisis is precisely characterized by the fact that these goods are offered in such quantities as to make their prices drop sharply. ([Location 4392](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4392)) - Mises never explains why he thinks that the fact that credit expansion leads entrepreneurs to calculate as if the amount of capital goods had increased causes the business cycle. ([Location 4400](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4400)) - To sum up, the scarcity of capital goods can be remedied by producing them. When it is unprofitable to produce them they are not scarce. ([Location 4410](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4410)) - consumer goods must be there in order to be able to finance production. ([Location 4413](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4413)) - the production of consumer goods also presupposes the antecedent availability of consumer goods ([Location 4414](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4414)) - the fund of consumer goods can only be increased by saving ([Location 4416](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4416)) - the limiting factor at the turning point of the cycle must be the available subsistence fund. ([Location 4418](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4418)) - price data is relatively easy to obtain, ([Location 4435](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4435)) - lends additional money into existence, ([Location 4437](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4437)) - Note: I really wish he would quit using this phrase. Bankers don't "lend money into existence." - The longer the timespan between its costs and its revenues, the larger the effect of a reduction of the interest rate. ([Location 4456](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4456)) - The leverage effect accumulates as we go up through the supplier stages. ([Location 4483](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4483)) - expansion of circulation credit leads to an overall boom. ([Location 4505](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4505)) - All prices tend to increase, ([Location 4506](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4506)) - Note: All? - This point is what makes the circulation-credit expansion differ from a credit expansion backed by savings. If the credit had rested on savings, overall consumers’ spending would not change at all, or at least not in a large degree. ([Location 4524](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4524)) - The companies situated more upstream in the production structure will face an increase in the interest rate for new savings that will be hard to bear for some of them, as their profitability rested on the cheap credit. They turn out to be malinvestments. “The size of business activities shrinks again. The boom ends because the forces which brought it about are no longer in operation.” ([Location 4538](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4538)) - Note: It is not just the interest payments that matter. The subsistence fund will decline and the ability to pay workers will dry up. [Need to work out the details.] - During the boom phase, the prices of durable assets and goods that are employed at supplier stages remote from the consumption stages increase by a greater amount than the prices of consumer goods and goods near the consumption stages. ([Location 4561](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4561)) - After the crash, ([Location 4563](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4563)) - The supplier industries in particular face decreased demand for their products. ([Location 4563](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4563)) - liberal laws themselves did not cause the boom ([Location 4576](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4576)) - the whole business cycle would not have been possible without the immense expansion of artificial financing ([Location 4577](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4577)) - circulation-credit theory of money. ([Location 4584](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4584)) - Rothbard ([Location 4584](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4584)) - historical facts are complex and cannot, like the controlled and isolable physical facts of the scientific laboratory, be used to test theory. ([Location 4587](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4587)) - Mises’s ([Location 4589](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4589)) - always emphasizes the separation between theory and history. ([Location 4590](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4590)) - theory “aims at knowledge valid for all instances in which the conditions exactly correspond to those implied in its assumptions and inferences,”1042 history deals with the “concrete content of human action.” ([Location 4590](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4590)) - historical sciences “cannot teach us anything ([Location 4593](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4593)) - which would be valid for all human actions.” ([Location 4594](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4594)) - made entrepreneurs act as if the subsistence fund had increased immensely. ([Location 4655](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4655)) - The reparations were actually a source of artificial finance. ([Location 4667](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4667)) - second factor that made entrepreneurs behave as if the subsistence fund had grown can be found in the reaction of the German monetary system to the reparations. ([Location 4668](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4668)) - The expansion of artificial financing during the Gründerzeit affected the economy in a way perfectly compatible with the ABCT. It does not matter in this regard that the interest rate did not decrease very strongly. ([Location 4697](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4697)) - stimulated by interest rates that are too low, ([Location 4716](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4716)) - Note: Not by low interest rate!! By the availability of money!! - This fits well with our theory. Consumer industries are not affected as much by the leverage effect as the industries at higher stages. ([Location 4722](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4722)) - What happened was not a modification of the production structure, but an overall boom in all sectors that could only be upheld by a subsisting credit expansion. ([Location 4744](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4744)) - the collaboration of stock companies and the state when it comes to financing government expenditures is seen in some important events in history. ([Location 4834](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4834)) - concession system ([Location 4857](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=4857)) - methodological individualism. ([Location 5055](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5055)) - the financial market is, in real terms, a market that allocates the available consumer goods. ([Location 5057](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5057)) - First of all, ([Location 5059](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5059)) - Only action extends in time. ([Location 5064](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5064)) - an acting person, in acting, demonstrates that he values what he achieves — his revenues, more than what he gives up in order to get it — his costs. ([Location 5064](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5064)) - second step ([Location 5068](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5068)) - the one important thing to do from a technical or materialistic standpoint is to provide the involved persons with what they want and need. ([Location 5074](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5074)) - Only the people that produce and maintain these things must be thought of. ([Location 5075](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5075)) - the technical prerequisite for the financing of production is a fund of consumer goods that can be allocated to these people. ([Location 5076](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5076)) - the third step ([Location 5078](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5078)) - consumption sphere ([Location 5083](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5083)) - business sphere. ([Location 5083](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5083)) - in this sphere money bears a close relationship to the fund of consumer goods. ([Location 5088](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5088)) - unveil that the whole business sphere with its monetary calculations depends on the fact that the money that is employed there has the power to become income in the consumption sphere. ([Location 5093](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5093)) - Money would never be accepted in payment if it didn’t have the power to purchase consumer goods. ([Location 5094](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5094)) - Tags: [[blue]] - In the end, all people are only interested in money because it can be used to buy consumer goods. ([Location 5095](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5095)) - Tags: [[blue]] - we were able to establish a connection between money and the subsistence fund even in the business sphere. ([Location 5097](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5097)) - What is transferred in credit transactions is the power to purchase consumer goods. ([Location 5099](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5099)) - the financial market is the market for the subsistence fund. ([Location 5100](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5100)) - The balance sheet keeps track of the potential to consume once sacrificed in financing the corresponding project. ([Location 5104](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5104)) - When there is profit, the company has contributed to society’s power to consume. ([Location 5106](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5106)) - Tags: [[blue]] - artificial credit expansion makes entrepreneurs calculate as if the fund of consumer goods available for the financing of production had increased. ([Location 5111](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5111)) - Tags: [[blue]] - Entrepreneurs are not aware of this fact because they are not able to look through the veil of money. ([Location 5114](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5114)) - human well-being and its growth are subjective phenomena. ([Location 5132](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5132)) - the role of money — and the financial market in general — in allocating the available fund of consumer goods. ([Location 5141](https://readwise.io/to_kindle?action=open&asin=B00I3OOTEI&location=5141))