This location is shown only to members
Ron Paul started a r3volution. Camaraderie will keep it going...
Join or login to comment.
The following quote is from http://wiki.mises.org/wiki/Capital: "In the boom period of the business cycle, people consume more - even while new, unsustainable investment projects are started. Sustainable projects initially require, that investors reduce their consumption and channel their savings into new projects. But during a boom induced by a central bank, there hasn't been real savings to fund the new investments."
I don't understand the concept of WHY the investor needs to decrease consumption and create savings in order for an investment to be "sustainable."
What does the amount of your consumption and savings have to do with a successful investment?
If anyone would be willing to go over this with me tonight, I would greatly appreciate it!
0 · September 30, 2013
Laura, I'm seeing your question late but I'll comment anyway: In the Austrian framework, investment involves funneling capital from savers (those who have consumed less than their income) to borrowers (those who want to spend more than their income). In other words, investment needs to be supported by real savings. When the central bank plays with money supply, it induces investments not supported by real capital. The bust is caused by the realization that there is not enough real capital to complete all the investments that have been started. That said, your question may have been different. You asked why *investors* needs to decrease consumption. I interpret this to mean "investors" equals "savers". They are the starting point for healthy investment. The people borrowing the money don't necessarily need to reduce their consumption, but the people loaning their money to the borrowers, do (otherwise, there would be no *healthy* source of funds). Make sense?
0 · October 13, 2013
What was the topic we decided we were going to discuss?
Next: Invite friends
Help support your Meetup
Come hang out, chat and figure out how to promote liberty in Minnesota.
Topics will include:
Please join us....
1,124 Content Strategists
5,504 Beer Drinkers
102 Free Radicals
355 Bitcoin enthusiasts
10,330 Hikers & Trail Volunteers
Or sign up with email
Already a member? Log in.
Meetup members, Log in