Greenspan loved bubble gum, Bernanke likes ABC gum

“Credit expansion cannot increase the supply of real goods. It merely brings about a rearrangement. It diverts capital investment away from the course prescribed by the state of economic wealth and market conditions. It causes production to pursue paths which it would not follow unless the economy were to acquire an increase in material goods. As a result, the upswing lacks a solid base. It is not a real prosperity. It is illusory prosperity. It did not develop from an increase in economic wealth [i.e. the accumulation of savings made available for productive investment]. Rather, it arose because the credit expansion created the illusion of such an increase. Sooner or later, it must become apparent that this economic situation is built on sand.”

Ludwig von Mises, The Causes of Economic Crisis (1931)

The “borrow-spend-consume” culture inculcated by the Feds is killing what remains of “produce-save-invest” America.

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2 responses to this post.

  1. Posted by Sista on January 11, 2011 at 11:16 pm

    That is an awesome quote…perfectly said because it is as salient today as it was in 1931. It articulates what I see all around me–“illusory prosperity”. I’m pretty sure I have my place in the illusion, I’m just not sure of the right way out. I will start by making sure my minimal investments are backed by real stuff. I’m sure you would suggest gold and silver.
    Keep this good stuff coming. I am learning.

    Reply

  2. Posted by the rookie cynic on January 12, 2011 at 8:42 am

    Sista:
    There are very few “right ways out.” To a large degree we are at the whims of oligarchy as they control most of the media, government, and much of the economy. Owning some physical commodities that are “outside” the system is a good idea: food, water, fuel, silver, gold…SPAM. I’m learning too, of course. To paraphrase George Carlin, “I have a lot of ideas. Trouble is, most of them suck.”

    Reply

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