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Austrian economist Ludwig von Mises: final collapse of a boom (Read 101 times)
Land of Freedom
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Austrian economist Ludwig von Mises: final collapse of a boom
Jun 15th, 2010 at 11:32pm
 
Austrian economist Ludwig von Mises said, “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency involved.”
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JohnLocke
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Re: Austrian economist Ludwig von Mises: final collapse of a boom
Reply #1 - Jun 17th, 2010 at 12:59am
 
scary quote. why did he say it was inevitable?
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Re: Austrian economist Ludwig von Mises: final collapse of a boom
Reply #2 - Jul 3rd, 2010 at 6:53pm
 
The choice is to either keep the boom by continuing to expand credit with easy money which will lead to a collapse of the currency or tighten at some point leading to collapse. Either way the "fake" credit boom has to come to an end.
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meric
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Re: Austrian economist Ludwig von Mises: final collapse of a boom
Reply #3 - Jul 6th, 2010 at 4:43am
 
According to this widget: http://www.usdebtclock.org/ US government has roughly $2 trillion in revenue and interest on the debt is 6.6%.

According to this graphic: http://en.wikipedia.org/wiki/File:USDebt.png Government debt is $7.5 trillion. At 6.6% interest, interest payable by government per year is roughly half a trillion dollars. That is 25% of the government budget.

25% is huge, but not huge enough that would lead to a collapse just yet. A $60,000 income individual paying off a mortgage of $200,000 pays just over $13,200 in interest a year, which is roughly 22%.... If you take account of taxes, with an after tax income of roughly $45,000, the ratio goes up to 29%.

I suspect the government will have to rack up twice as much debt before people begin to suspect its ability to pay it off (50%). i.e I wager the US has as at least much time as it takes for the government to double its debt to tax collected ratio. How long will that be? Now that's a question to ask.
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BlackSand
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Re: Austrian economist Ludwig von Mises: final collapse of a boom
Reply #4 - Jul 6th, 2010 at 12:09pm
 
People are already worried about the debt. California is cutting government workers wages to try and save money. Even Obama has had to give into some pressure. But that doesnt mean much. Our debt will probably double during the next presidential term.
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