Currency Competition vs Boom-Bust CycleSubmitted by OctoBox on Fri, 08/19/2011 - 18:20
Boom-Bust in a Free-Society can only happen in the short-run
---during new product innovation
---the only time to grow wealth
Boom-Bust under Corporatism (even under Capitalism) happens in the mid-to-long run and it happens in the short-run too, just not as dynamically as would happen in a free-society.
Think of innovation as you would a new song -- in the beginning people go nuts, but in the long-run unless you have a monopoly on the air-waves it gets "played out" or too many other bands start to copy it and people want something new. That's how the boom-bust cycle works in a free-society -- perfect competition eliminates profitability in the long-run.
Boom-Bust Cycle (under corporatism) according to Ron Paul comes from the natural evolution of Currency Monopoly -- eventually owning the currency is not enough; that it's easier to control interest rates since all assets are valued in terms of the one currency. If you manipulate credit and interest then you can give "false" booms to assets being held in the long-run.
Everyone likes a sure bet -- rather than hunt for new innovations (etc) why not hold a few assets and just have the Fed manipulate booms-busts so you can short-and-call your own stock; it's known when it's going to happen in advance, it's high level insider trading really.
In a Free-Market the "boom bust" happens in the short-run -- because there are no guarantees and assets in the long-run have steady value. Because there is perfect competition in the currency market -- meaning currency valuation is steady in the long-run thus all assets are steady in the long-run. Further meaning the wealthy do not hold long positions in a free-society because the profit-burst the natural boom-bust potential happens at the front of the business cycle (at IPO, at 1st Product Release, at the beginning of a new Innovation).
Now a wealthy person might re-invest down the road in that same asset because they have a new innovation, but he only "holds" in the short-run (regardless).
The Poor and Middle Class are "savers" in a Free-Society (this is free-markets 101), right?
So -- what are they saving in? They save in currency which is backed by commodity or is made valuable from all the wise investments wealthy people make -- wealthy people are the borrowers in a free-society.
In a free-society (F-S) with short-run boom-busts. People do not squabble over IP Rights or Property Rights or Patents or Copyrights. Because the value (the wealth generation) happens in the short-run, you get as much profit out of the innovation as the market bears and then perfect competition sucks up the dregs.
Poor and Middle Class people (being the innovators, ideationists, and savers) own all assets in the long-run.
Wealthy people do not horde cash or assets in the long-run in a free-society -- because the valuation mechanism (currency) is free with pure competition and as all Free-Marketeers know price-value on any assets is steady and low when there is pure competition.
When RP "frees" Currency -- It will begin to free all markets and all assets from long-run boom-bust manipulation.
Perfect Reciprocity will exist between the Wealthy and Poor/Middle Class.