“Low Interest Rates Harm Minority-Owned Small Businesses
Economists within the Austrian tradition have long pointed out that artificially low interest rates favor certain kinds of investments over others, including “more durable capital goods” and “more roundabout production processes.” Although disputed by economists of the Keynesian tradition, Benjamin Thompson points to a new National Bureau of Economic Research paper that found much empirical evidence to support this Austrian contention about low interest rates. In short, low interest rates tend to favor big business by incentivizing large, long-term investments over small, short-term investments, which clearly gives advantages to large market players over small businesses.
What does this have to do with the racial wealth gap? One of the best ways to build wealth is by establishing a successful business.”
I recommend the book, The Skyscraper Curse: And How Austrian Economists Predicted Every Major Economic Crisis of the Last Century, by Dr. Mark Thornton of the Mises Institute and Auburn University. My review of the book, below, is for Section I only of the book. I plan to write a Section II review. Richard Duke
Please note the Cantillon effects” [SEE BELOW]. This is the same as Nehemiah 5 in the Bible. The currency system of the world destroys the poor—more than anything else that exists in the world. THE CURRENCY SYSTEM IS A TOTAL ABOMINATION AGAINST GOD.
But, as usual, the English translation of the most important verse is TOTALLY WRONG (very typical of the English translation of the Bible—worst language experts say on the globe to translate from Hebrew and Greek). The English translation states the poor people who had to sell their children to stay alive were paying tribute to the king; and this is totally and completely wrong—it is “unequal weights and measures”–NOT TRIBUTE–which means–debased silver (inflation):
THE FINANCIAL SYSTEMS OF THE WORLD—FIAT CURRENCY AND FRACTIONAL RESERVE CREDIT–ARE ABOMINATIONS TO GOD AND THE GREATEST EVILS ON EARTH BECAUSE IT KILLS, STEALS FROM AND DESTROYS PEOPLE AROUND THE GLOBE EACH DAY. PASTORS MUCH PREACH ABOUT THE GREATEST EVILS IN THE WORLD BECAUSE OF THE DESTRUCTION IT CAUSES–JUST LIKE IT DID IN THE DAYS OF NEHEMIAH. Cantillon effects FOLLOW NEHEMIAH 5.
And there was a great cry of the people and of their wives against their brethren the Jews. For there were that said, we, our sons, and our daughters, are many: therefore, we take up corn for them, that we may eat, and live. Some also there were that said, we have mortgaged [arab—pledged, exchanged] our lands, vineyards, and houses, that we might buy corn, because of the dearth [ra’ ab—hunger]. There were also that said, we have borrowed money [keceph—silver; and by implication money] for the king’s tribute [middah—height or breadth; a measure], and that upon our lands and vineyards. Yet now our flesh is as the flesh of our brethren, our children as their children: and, lo, we bring into bondage our sons and our daughters to be servants, and some of our daughters are brought unto bondage already: neither is it in our power to redeem them; for other men have our lands and vineyards. Nehemiah 5:1-6.
The English translation above uses the word tribute. But the Hebrew word (middah) means height or breadth; a measure. The measure (amount) of silver content in the coins was reduced, which is debasement–INFLATION. This particular reference to a measure involving silver is made from a warning: “You shall do no wrong in judgment, in measure of weight, or capacity. You shall have just balances and just weights.” Leviticus 19:35-37. “Differing weights and measures, both of them are abominable to the Lord.” “Differing weights are an abomination [tow’ebah—something disgusting; abomination] to the Lord, and a false scale is not good.” Proverbs 20:10, 23:1.
“Thou shalt not have in thy bag divers weights, a great and a small. Thou shalt not have in thine house divers measures, a great and a small.” Deuteronomy 25:13-14
CLICK AND OPEN:
Debasement and Crony Capitalism; Nothing is New Under the Sun – By Richard Duke
CANTILLON EFFECTS DISCUSSED IN: The Skyscraper Curse: And How Austrian Economists Predicted Every Major Economic Crisis of the Last Century:
A general, but serious, reason to read this book— The Skyscraper Curse: And How Austrian Economics Predicted Every Major Economic Crisis of The Last Century— is to avoid being one of the millions who will be duped when the next crash (bust) occurs. Millions were and continue to be duped as to the reason for the boom leading up to 2007 and 2008 and why the bust occurred in 2008 relating to real estate.
Thornton begins with an important discussion of money creation and Richard Cantillon, writing: “… Richard Cantillon (1680s-1734?) [was] the first economic theorist and proto-Austrian economist …[he] showed how the interest rate and the money supply can create changes and distortions in the economy, a phenomenon now referred to as “Cantillon effects.”
Monetary inflation is affected by who gets the money and credit first and who gets it last. As fiat money is created by central banks, private banks are in a position to expand the amount of loans they make. The wealthy have established relationships with the banks, and they have the real estate and assets to provide collateral for the loans. Large, established companies and wealthy individuals are in favorable positions relative to small businesses and people with low or average incomes. The loans allow big companies and wealthy individuals to invest in capital goods during the boom phase of the business cycle. Central banks thereby create artificial inequality and poverty. This is the primary Cantillon effect of redistributing wealth.”
Review by Richard Duke on the Mises Institute website of the book: The Skyscraper Curse: And How Austrian Economists Predicted Every Major Economic Crisis of the Last Century by Dr. Mark Thornton
Cantillon effects – Mises Wiki
Cantillon is widely credited as the first to show that changes in the money supply and credit have important impacts on the economy by changing relative prices. He showed that an increase in the supply of money would cause economic expansion, but that ultimately the process would be self-reversing as prices would rise and imports would increase, sending money back out of the economy. Cantillon further showed that monetary inflation does not affect all prices equally or at the same time, but in sequences that depend on the spending behavior of money holders all along the channels of monetary flows. These ideas have been adopted and extended by Knut Wicksell, Ludwig von Mises, and F.A. Hayek and others.
Cantillon effects are the real fundamental changes in resource allocation that result from changing relative prices between the time of the creation of new money and the full adjustment to the increase in supply. For Cantillon, an increase in commodity money, such as silver, would increase employment and prices. It would impose “forced savings” and lower real incomes on those whose income was not changed due to monetary inflation, possibly leading to unemployment or emigration. If the money supply increased due to a balance-of-payments surplus, then the additional money could cause an increase in manufacturing or expansion in whatever the new money holders chose to spend their money on.
In response to the change in relative prices, more resources are allocated to long-term capital goods. Unlike other aspects of the self-adjusting market process, such as money, land, labor, and short-term or intermediate capital goods, these resources become suspended or fixed in long-term fixed capital goods. These resources become formulated in a highly specific capital good that may not be well suited to the alternative production processes of the postadjustment economy. As a result, all of the adjustment in these long-term fixed capital goods must come from a change in price and this will entail large losses and possible bankruptcies by the owners of these capital goods. To the extent that these types of adjustments are widespread, they pose a threat to capital markets and the banking system.