[Brian Allen]

Gerard Jackson - Von Mises redux

[proxy_user]

"But as I have explained before, credit expansion stimulates the capital goods industries into expanding output beyond the point that is economically justified. By the time this has been discovered these companies find themselves squeezed between rising costs and falling demand.

So in the modern world, our problem is that we keep making more goods than we can possibly use. That's not a bad problem to have.

[green iguana]

Stark, raving, looneytunes. Intermediate production spending is not excluded from GDP. The final goods price incorporates all of the intermediate production costs that went in to the final product. Jackson wants to double-count spending. What a nutbag! And if he is Brookesnews economics editor, I fully understand why I've never heard of them...

[A. Pole]

Although classical economists who relied on Smith’s authority have some excuse for being misled by this fallacy modern economists do not. In Prices and Production Friederich von Hayek described in considerable detail the complex nature of the production structure. On page 47 he also pointed out that Smith’s error led to “a justification of the erroneous doctrines of the Banking School”.

The importance of the above is vital if we are to understand what is happening at the moment (not just in the US but also in Australia) and why danger signals are overlooked. Despite evidence in 2000 that the capital goods industries in the US were cutting back, many commentators ignored this trend because consumer spending and retail sales were still holding up.

Bump

[Moonman62]

President Bush did the right thing in cutting capital gains taxes.

Congressman Bill Thomas cut the capital gains tax. GWB merely signed the bill (He siad he would sign whatever came out of Congress.). GWB was always against cutting the capital gains tax.

[Moonman62]

Obviously this situation cannot be maintained. Eventually, a matter of months, consumer spending also starts to fall. Unless, of course, the Fed pumps up the money supply, as it did in late 1999,

The Fed kept money tight all through the late 1990's. That's how the dollar got so strong. In fact, 1999 was when Greenspan started raising rates in order to destroy the stock market.

[doc30]

Sounds like tis author is trying to equate the cash flow in the production/value added/sold to consumer chain of events with actual GDP. THe final price of goods sold includes all the steps to make and add value to the product. If the author's concept were to be used, then products would be sold below cost and someone would be losing a lot of cash.