Someone said that the one who wants to make the world a better place would do well to start with himself; and as this will keep you busy for a while. I think this is true and in crisis. But I can't specify, in the following (not from me, but from that part of the tradition of economic thinking to whose theses subscribe), the source of the problems of the world economy (and Romania) are currently confronted with the critical point I think we have not yet faced. Space available here I will allow you to expose briefly the main problem-causes of the crisis-and to make a few general considerations prior to closing.
Brief exposition of the theory of the crisis
The most coherent explanation of cyclic phenomena in economics is the theory of the so-called "Austrian". It is named so because the most important exponents of sai-Ludwig von Mises and F.A. Hayek, Murray Rothbard, or later-were part of the economic thinking initiated by Carl Menger in Vienna of the end of the 19th century, remained in history as the "Austrian school". The main feature of this explanation of the crisis-which it differentiates itself from other net-is that it is part of the console in the entire corpus of economic theory, "out of pocket", as they say, or-more academically-ad hoc. In other words, don't ask for construction time-even less outside economic theory (such as the trials of psihologizante explanation of cyclic phenomena through "optimism" or "pessimism" about the investment, for example).
Identifies the problem of economic crises on two-coordinate this mass entrepreneurial error (actual or impending bankruptcies, and inevitable, specific periods of crisis) and the fact that they seem to hit "disproportionately" from the upstream sectors of production structure (or of "capital goods") in relation to those closer to final consumption, which I might add and specify type scenario expansion-contraction (boom-bust) possibly repeating ("cyclic")-Austrian theory "," put it on account of government intervention. More precisely on account of the intervention in monetary and banking sector or "production and commercialization of money and credit". Because at present this sector is managed by each State for centralized planning, with a monopoly of the Central Bank regarding the production of money, combined with a veritable cartelizare-under the auspices of the same central banks-banking system.
Particular element underlying the phenomenon of the crisis is the so-called "fractional reserve" practiced in modern banking systems. Within them, the title of the manual-and feel-good-enter deposits "in sight" and the "full-term" not only rhetorically. Deposits at sight would mean the money held in the banks, the population considered anytime available belonging to the monetary detinerilor present (current accounts; related debit cards accounts; etc.); term deposits would be the savings bank's borrowed a particular term, which does not form part of the monetary detinerile. Fractional reserve means the minimum percentage of the amounts deposited with the banks in which they are required to store them.
This book behind the sight deposits should be 100%, precisely because this money are "la population", the bank accounts of this kind not being "a more sophisticated type of wallet". The current rules of banking activity-universal, not just allow Romanian-borrowing by banks and from these resources, within the limits of a percentage set by the Central Bank (reserve ratio). Hence the idea that it operates with "fractional" (not 1 or 100%, but subunitare). Or, if money from deposits are partially give forth with the loan, the following phenomena: it creates the illusion of double availability of resources: for those who have accounts on sight, along with those who received credits from "excess reserves" over the minimum rate required; offer loans in the banking sector exceeds real savings of the population; banks are becoming the creators of currency (Scripture) and takes place on the phenomenon of "the loan expansion" (a form of inflation).
The last point begins to foresees "crisis". This expansion of credit-provided they are neanticipata as such businesses-it creates the illusion of some availability of capital (saving) in upper economy existing in fact. This is seen in the tendency of lowering interest rates below the level that would have been in the absence of credit expansion. As a result, entrepreneurial projects which were previously unprofitable become-in the new conditions of crediting-profitable. But they really are not.
A clarification about the meaning of the interest rate. It regulates-before any issues related to liquidity risk, inflation-relationship between the assets (including money) present and future ones, meaning its credit market so it can be restored to the simplified like this: show how interest rate due to it's population to wait, abandoning the present consumption in favor of one future anticipated higher, and there's nothing but the price of this "expectations".
Returning: the expansion of the loan reduces interest rates artificially, creating the false sensation of greater availability of population to postpone consumption. Entrepreneurs launch investment projects in the broader ("long"). With "surplus" of resources from new loans enter the market bidding for goods we use in production. Here they meet with other entrepreneurs and consumers who wish to consume at present more than they imagine-in error reduction indusi artificial interest. The more voltage will be obvious when the workers caught in the new investment projects obtain salaries and they spent on consumer goods in competition with the same consumers whose availability calling has not been changed. This competition has the effect of increasing prices. For entrepreneurs, this equates to reconsider new profitability business projects which now no longer seem equally cost-effective. If the phenomenon of credit expansion (neanticipata) continue and the banking system offers new resources for the continuation of the projects were initiated, the situation is repeated, with the same felicitous outcome: prices will increase even more in the end, new investments planand again the spectrum of a rentabilitati reduced (or nonexistent). When the banking system is too exposed and new super-premium credit harder (or at all) projects in power, is "feeling" of the crisis. The previous period of expansion is replaced by a contraction. Bankruptcies occur ' in the table ', with all the consequences (the need for redundancies, has reorientarii activity, etc.). Interest rate will be returned to the real (higher). On reflection, it becomes clear that certain investment projects simply were not sustainable. Parafrazandu it on Mises, have built foundations for houses with three floors and fifteen rooms when, in fact, there were resources just for homes with a maximum of two floors and seven rooms. And desolate landscape appears of an unfinished construction site who do not deserve it (in the new economic conditions) than to be left in the Les (temporarily or even permanently).
Integrating a discoordonare crisis intertemporala of the structure of production caused by lower interest rates in artificial result of credit expansion possible through fractional reserve system. During this process, the Central Bank plays a crucial role, she coordinates in establishing that credit expansion takes place (reserve ratio; reference interest rate; "open market operations" (open market operations), etc.).
The fundamental source of the crisis he may then do other factors exert agravanti action, all in the field of government interventions: neperformanti for creditors (as in the case of the u.s. Community Reinvestment Act-that is the upshot of a House with land reform voting to every american, regardless of his creditworthiness economica); loan guarantee schemes that create moral hazard; price controls that do not allow readjusting in crisis at real market levels; the rigidity imposed by law of wages; cumbersome procedures and perverse bankruptcy; other institutional barriers that make effective reallocation of capital towards profitable sectors of the economy (social, environmental regulations, the onerous taxation etc.).
Solution: the monetary freedom
Space does not allow me to draw a more explanation of this crisis[1]. Also, I did not place to show here how the ingredients mentioned above runs and in this crisis[2]. I just wanted to draw your attention that in all discussions on the current crisis, more "simptomatologica", the question most ocolita-alone can indicate the fundamental solution is the one about the causes.
If this date is correct above crises, resulting a few things: (1) as alternate to Mr Geoana's plans as naive "avoidance" of the crisis there (after you have jumped to the floor it's late you put the problem of avoiding the contact with the ground); (2) healthy therapy anticriza supposed to work to remove the causes (reform of the banking system with fractional reserve towards 100%) reserves; (3) based on plans new anticriza governmental interventions in various forms (State aid, subsidies and nationalizari) creates more problems than it solves; (4) it would require reconsidering the entire banking and monetary system in the direction of freedom (private production of currency with all that implies[3]).
1 good Introductions in issue would be: l. von Mises, economic Cycle and credit expansion: economic consequences of budget money, available at www.misesromania.org/266/; The Austrian Theory of the Trade Cycle, available at www.mises.org/tradcycl.asp, (ed. R. Ebeling); extended treatment gives Marius Spiridon, in modern economic theory Cycle, doctoral thesis, available at www.misesromania.org/468/.
2 see articles in the last period of authors such as Robert p. Murphy or Frank Shostak in Daily Articles to www.mises.org.
3 View m. Rothbard, what has made our State money?, Ludwig von Mises Institute-Romania, Bucharest, 2006.
