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Showing posts from May, 2009

Agregate Demand and the US Savings Rate

In my last post, I touched on the differences between the economic theories of John Maynard Keynes and Ludwig von Mises. Immediately aftward, I was directed to this story in the New York Times. It seems that americans are saving more instead of spending the their money on consumer goods. Up until this downturn, about 70% of the US Economy was consumer spending, and in 2005, the US Savings rate was negative 2.7%. The "stimulus" is supposed to stimulate spending to get money moving again. But it isn't happening as planned. Folks are saving for down payments because they don't expect to get zero down home mortgages; they're saving to replenish their decimated retirement and college funds. The austrians believe that the best way to "fix" the economy is to allow the "malinvestment" created by the false signals in the economy (from the open market ops and deficit spending) to be liquidated and the resources repurposed into better investments. It'

Keynes vs. Mises -- Whose Theory Will Rule

When I was in high school I was one of those geeky - nerdy kids. This was the late 1970's and calculators were just coming on the market, so I had a Texas Instruments SR-50A in a pouch on my belt and a slide-rule in my shirt pocket. If the PC had existed back then, I would have been a prototypical computer geek. One of my favorite classes was Vocational Electronics. One day during my Junior year the instructor gave us a lab assignment involving resonant circuits. We were to build a tank circuit with an inductor and a capacitor in parallel, calculate the frequency the circuit should resonate at, then measure the voltage across the circuit as we varied the frequency to see if the formula actually worked. There were two of us working on the lab. I finished the lab quickly; Mike, well, not so quickly. While I waited for him to finish the assignment, I started experimenting with values of capacitor outside the range from the assignment. As I got farther and farther and farther away fro