sexta-feira, 22 de julho de 2011

Sobre a permanência ou não no Euro

Na continuação do debate que vai correndo no Insurgente sobre a permanência ou não no Euro, fica um meu comentário:

Mas permanece o problema de quem já utiliza o Euro. Se a entrada no Euro potenciou o mau comportamento a saída do Euro obriga a uma nova reconstrução e/ou renegociação de direitos de propriedade, a moeda possuída em depósitos dentro do país e fora do país, os contratos de curto e longo prazo em euros, e as dívidas contraídas.

Uma moeda própria para países pequenos neste contexto, também potencia a contracção de dívidas em moedas externa (euros) e a prazo fenómenos de incapacidade de pagamento dessas dívidas (as crises cíclicas das balanças de pagamento).

Suponho que é uma questão de preferência de linha de acção, mas entendo que me devo concentrar em:

- desaparecimento dos défices orçamentais.
- discussão sobre os males das reservas fraccionarias e a sua ligação aos ciclos económicos e desequilíbrios entre poupança e investimento.
- reivindicar a circulação das moedas naturais como o ouro e a prata (que em si, permitiria preservar os compromisso dentro do Euro, excepto no que respeita a deixar circular uma moeda que os próprios bancos centrais, tal como o próprio BCE, utilizam).

quarta-feira, 20 de julho de 2011

O Tratado de Economia ainda a descobrir

[Introduction to the Second Edition of Man, Economy, and State with Power and Market]

The Ambition of Rothbard's Treatise, by Joseph T. Salerno

"(...) Mises himself immediately recognized the profound originality and significance of Rothbard's contribution. In his review of Man, Economy, and State, Mises wrote that Rothbard

joins the ranks of eminent economists by publishing a voluminous work, a systematic treatise on economics…. In every chapter of his treatise, Rothbard … adopt[s] the best teachings of his predecessors … and add[s] to them highly important observations….[16]

Mises went on to characterize Rothbard's work as

an epochal contribution to the general science of human action, praxeology, and its practically most important and up-to-now best elaborated part, economics. Henceforth, all essential studies in these branches of knowledge will have to take full account of the theories and criticisms expounded by Dr. Rothbard.[17]

Given Mises's exacting scholarly standards and his well-known parsimony in paying compliments for scientific contributions, this is high praise indeed for a book published by a thirty-six-year-old economist.[18] More importantly, Mises evidently viewed Rothbard's work as opening a new epoch in modern economic science.

Rothbard himself was not reluctant to indicate the respects in which he considered his treatise to have been a departure from or an advance upon Mises's work. Foremost, among Rothbard's theoretical innovations was his formulation of a complete and integrated theory of production. Previously, production theory in causal-realist analysis was in disarray and had consisted of a number of independent and conflicting strands of thought that treated capital and interest, marginal-productivity theory, rent theory, entrepreneurship, and so on in isolation. Somewhat surprised by this yawning gap in production theory, Rothbard commented,

Mises has very little detail on production theory, and as a consequence it took me many false starts, and lots of what turned out to be wasted effort, before I arrived at what satisfied me as a good Production Theory. (It's involved emancipation from 90 percent of current textbook material.)[19]

In Man, Economy, and State, Rothbard elaborates a unified and systematic treatment of the structure of production, the theory of capital and interest, factor pricing, rent theory, and the role of entrepreneurship in production. Furthermore, production theory is presented as part of the core of economic analysis and covers five of the book's twelve chapters and approximately 30 percent of its text. One of Rothbard's greatest accomplishments in production theory was the development of a capital-and-interest theory that integrated the temporal production-structure analysis of Knut Wicksell and Hayek with the pure-time-preference theory expounded by Frank A. Fetter and Ludwig von Mises. Although the roots of both of these strands of thought can be traced back to Böhm-Bawerk's work, his exposition was confused and raised seemingly insoluble contradictions between the two.[20] They were subsequently developed separately until Rothbard revealed their inherent logical connection.(...)"

terça-feira, 19 de julho de 2011

Monarchy vs. Republic by Otto von Habsburg

Um belo texto:

"We come here to the formal aspect of the State -- the question of monarchy versus republic -- which is mostly discussed from a highly emotional rather than a rational point of view. The debate proceeds by arguments ad hominem. A few undignified occupants of royal thrones are enumerated, and are then presented as examples of monarchy as such. The defenders of monarchy are no better. They point to corrupt professional politicians, of whom there exist a sufficient number, and claim that this is the necessary consequence of a republican constitution. Neither is a rational argument. There have been good and bad monarchies -- good republics (like Switzerland), and others which are far from living up to the same standard.

Every human institution, after all, has its good and bad sides. As long as this world is inhabited by men and not angels, crimes and mistakes will continue to occur... Republicans are fond of claiming that a monarchical regime means the rule of the aristocracy. Monarchists, on the other hand, point to the economic difficulties, the tax burdens, and State interference in private life in present-day republics, and compare this state of affairs with the freedom and economic well-being under the pre-1914 monarchies. Both arguments are unconvincing. They use the old propagandist trick of comparing results brought about by entirely dissimilar causes. Anyone who is honest will compare present-day monarchies with present-day republics. It will then be apparent that the aristocracy of birth occupies no greater share of leading positions in monarchies than in republics, and that all states, whatever their form of government, are equally affected by the serious problems of the present day.

Republicans frequently claim, in addition, that monarchy is a form of government belonging to the past, while republicanism is that of the future. Even a slight knowledge of history is enough to disprove this. Both forms have been in existence since the earliest times (though the monarchical periods have usually lasted considerably longer than the republican ones). In any case, it is misleading to call an institution which we already find in ancient Greece, Rome and Carthage, the form of government of the future.

In any objective discussion, we must also assign this question its proper place in our hierarchy of values. It is not an accident that we speak of the "form" of government. There is a great difference between the "form" and the "content" -- or purpose -- of the State. The latter is its essential raison d'etre, its very soul. The former corresponds to the bodily form of a living being. The one can certainly not exist without the other; but in any sane hierarchy of values the soul occupies a higher place than the body.

The essential purpose of the State, its "content," is rooted in natural law. The State is not an end in itself; it exists for the sake of its citizens. It is therefore not the source of all law (a claim that is still far too widely accepted), nor is it all-powerful. Its authority is circumscribed by the rights of its citizens. It is only free to act in those fields that are outside their free initiative. The State is therefore at all times the servant of natural law. Its task is to give practical effect to this law; nothing more.

If the mission of the State is the practical realization of natural law, the form of government is a means by which the community attempts to achieve this aim. It is not an end in itself. This explains the relatively subordinate importance of this whole question. Undoubtedly a great deal of importance attaches to the choice of the right means, since this choice will determine whether or not the end is attained. But what is lasting in political life is only natural law. The attempt to realize this law in practice will always have to take account of current conditions. To speak of an eternally valid form of government, right under all circumstances, shows ignorance and presumption.

From this it would seem to follow that it is fruitless to try to determine -- mostly from the wrong philosophical premises -- the objective value of one or the other form of government. The discussion will only become fruitful if we keep in mind the end which every such form is intended to serve. It is therefore not a question of investigating what value we are to attach to monarchies or republics as such. What we must ask ourselves is which form offers the best chances of safeguarding natural law under present-day conditions.

Once this point has been clarified, we can pass on to two other problems, which have frequently been dragged into this discussion and are threatening to poison the whole atmosphere. There is constant controversy about the relation between monarchism, republicanism and democracy. Here again we encounter the blurred thinking characteristic of our era of slogans and propaganda. The concept of democracy has become infinitely elastic. In Russia it is compatible with mass liquidations, secret police and labour camps. In America, on the other hand -- and occasionally in Europe -- even political theorists are frequently unable to distinguish between republicanism and democracy. Furthermore, both words are used to designate conceptions and characteristics that go far beyond the political field, and belong to the economic or sociological sphere. It must therefore be clearly stated that, generally speaking, democracy means the right of the people to participate in determining their own development and future.

If we accept this definition, we shall see that neither of the two classical forms of government is by nature linked with democracy. Democracy can exist under both forms, just as there exist authoritarian republics as well as monarchies. Monarchists, in fact, frequently claim democracy functions better under a monarchy than under a republic. If we look at present-day Europe, there is certainly some truth in this argument, though its validity may be restricted in time and space. At the same time, it is necessary to point out that in small states which are strongly rooted in their traditions, like Switzerland, democracy and republicanism can coexist successfully.

Still more hotly discussed is the question of monarchism and socialism, and republicanism and socialism. The reason for this is largely that in German-speaking countries the great majority of the official socialist parties are republican in outlook. Hence we find there among narrow and uneducated minds the belief that socialism and monarchism are incompatible. This belief is due to a basic confusion. Socialism -- at least in its present- day form -- is essentially an economic and social program. It has nothing to do with the form of government. The republicanism of some socialist parties does not arise from their actual programs, but is due to the personal beliefs of their leaders. This is shown by the fact that the majority of the really powerful European socialist parties are not republican but monarchist. This is the case in Britain, in Scandinavia and in Holland. In all these countries we not only find excellent relations existing between the Crown and the socialists, but one cannot escape the impression that a monarchy provides a better soil for working-class parties than a republic. In any case, experience shows that socialism remains longer in power under a monarchy than under a republic. One of the great leaders of the British Labour Party explained this by the moderating and balancing influence of the Crown, which enabled socialists to carry through their program more slowly, more reasonably, and hence also more successfully. At the same time, a ruler standing above the parties represented a sufficient safeguard to the opposition, so that it need not have recourse to extreme measures in order to regain power. It could watch developments more calmly.

Whether or not this is true, the facts prove that it is unjustified to draw an artificial dividing-line between monarchism and socialism, or between monarchism and classical democracy. The same applies to republicanism. One other point must be mentioned. This is the frequent confusion, particularly among those not trained in political science, between monarchy as a form of government and one or other monarchical dynasty; in other words, the confusion between monarchism and legitimism.

Legitimism, a special tie with one person or one dynasty, is something that can hardly ever be discussed in reasonable and objective terms. It is a matter of subjective feeling, and is therefore advocated or opposed by arguments ad hominem. Any rational discussion of current problems must therefore make a clear distinction between monarchism and dynastic legitimism. The form of government of a State is a political problem. It must therefore be discussed independently of the family or person who stand, or stood, at the head of the State. Even in monarchies dynastic changes take place. In any case, the institution is of greater importance than its representative; the latter is mortal while the former is, historically speaking, immortal.

To look at a form of government merely with an eye to its present representative leads to grotesque results. For in that case republics, too, would have to be judged not on political grounds, but according to the characters of their presidents. This would, of course, be the height of unfairness.

It should be added that among the protagonists of monarchism in republican Europe, there are relatively few legitimists. King Alfonso XIII of Spain once remarked that legitimism cannot survive one generation. It is valuable where there exists a strongly established, traditional form of government, with which most of the citizens are satisfied. But this kind of legitimism can be found in republics as well as in monarchies. One can speak of republican legitimism in Switzerland and the United States just as one can speak of monarchist legitimism in Britain and Holland. In most countries of Europe, of course, there have been so many profound changes in the course of the centuries that legitimism is less frequently encountered. Under such conditions, it is particularly dangerous to have recourse to emotional arguments.

We are now in a position to define what we understand by a monarchy and a republic. Monarchy is that form of government in which the head of State is not elected, bases his office on a higher law, with the claim that all power derives from a transcendental source. In a republic, the highest officer of State is elected, and hence derives his authority from his electors, that is, from the particular group which elected him.

Leaving aside purely emotional considerations, there are good arguments for both of these basic forms of government. The most important arguments in favour of republicanism can be summarized as follows: In the first place, republics are, with few exceptions, secular. They require no appeal to God in order to justify their authority. Their sovereignty, the source of their authority, derives from the people. In our time, which turns increasingly away from religious concepts, or at least refers them into the realm of metaphysics, secular constitutional concepts and a secular form of government are more easily acceptable than a form rooted, in the last resort, in theocratic ideas. It is, therefore, also easier for a republic to embrace a secular version of the Rights of Man. The advantage this form of government offers would therefore seem to be that it is in closer touch with the spirit of our time, and hence with the great mass of the population.

In addition, the choice of the head of State depends not on an accident of birth, but on the will of the people or of an elite. The president's term of office is limited. He can be removed, and if he is incapable it is easy to replace him. Himself an ordinary citizen, he is in closer touch with real life. And it is to be hoped that, with better education, the masses will become increasingly capable of choosing the right man. In a monarchy, on the other hand, once a bad ruler has ascended the throne, it is almost impossible to remove him without overthrowing the whole regime. And lastly it is claimed that the fact that every citizen can, at least theoretically, become president, encourages a sense of political responsibility and helps the population to attain political maturity. The patriarchal character of a monarchy, on the other hand, leads the citizens to rely on their ruler, and to shift all political responsibility on to his shoulders.

In favour of monarchism, the following arguments are put forward: Experience shows that kings mostly rule better, not worse, than presidents. There is a practical reason for this. A king is born to his office. He grows up in it. He is, in the truest sense of the word, a "professional," an expert in the field of statecraft. In all walks of life, the fully qualified expert is rated higher than the amateur, however brilliant. For particularly in a difficult, highly technical subject -- and what is more difficult than the modern State? -- knowledge and experience outweigh sheer brilliance. The danger certainly exists that an incompetent may succeed to the throne. But was not a Hitler chosen as leader, and a Warren Harding elected president? In the classical monarchies of the Middle Ages, it was almost always possible to replace an obviously incapable successor to the throne by a more suitable one. It was only with the decadence of monarchism, in the age of the courtly despotism of Versailles, that this corrective was discarded. Nothing would be more appropriate in a modern monarchy than the institution of a judicial tribunal, which could, if necessary, intervene to change the order of succession to the throne.

Even more important than the king's "professional" qualifications is the fact that he is not tied to any party. He does not owe his position to a body of voters or the support of powerful interests. A president, on the other hand, is always indebted to someone. Elections are expensive and difficult to fight. The power of money and the great mass organizations always makes itself felt. Without their help, it is almost impossible to become the head of State of a republic. Such support is not, however, given for nothing. The head of State remains dependent on those who helped him into the saddle. It follows that the president is mostly not the president of the whole people, but only of those groups that helped him to attain office. In this way, political parties or groups of economic interests can take over the highest command positions of the State, which then no longer belongs to the whole people, but, temporarily or permanently, becomes the privileged domain of one or another group of citizens. The danger exists therefore that a republic will cease to be the guardian of the rights of all its citizens. This, it is stressed by monarchists, is particularly dangerous at the present time. For today the rights of the individual and of minority groups are in greater danger than ever before. Financial power- concentrations and large, powerful organizations generally are everywhere threatening the "little man." Particularly in a democracy, it is extremely difficult for the latter to make himself heard, since this section of the population cannot easily be organized and is of no great economic importance. If even the topmost pinnacle of the State is handed over to political parties, there will be no one to whom the weak can turn for help. A monarchical ruler, on the other hand -- so it is claimed -- is independent, and is there for all citizens equally. His hands are not tied in the face of the powerful, and he can protect the rights of the weak. Particularly in an age of profound economic and social transformations, it is of the highest importance that the head of State should stand above the parties...

And, finally, the Crown contributes to political life that stability without which no great problems can be solved. In a republic, the firm foundation is lacking. Whoever is in power must achieve a positive success in the shortest possible time, otherwise he will not be re-elected. This leads to short-term policies, which will not be able to cope successfully with problems of world-historical scope.

There is one more point we must consider before we can answer the question of which form of government will best serve the community in the future. Generally speaking, democratic republics represent a regime dominated by the legislature, while authoritarian regimes are dominated by the executive. The judicial power has not had the primacy for a long time, as we have shown above. It found its earlier expression in the Christian monarchies. It is frequently forgotten that the true ruler has always been the guardian of law and justice. The most ancient monarchs -- the kings of the Bible -- came from the ranks of the judges. St. Louis of France regarded the administration of justice as his noblest task. The same principle can be seen in the many German "Palatinates," since the Count Palatine (Palatinus) was the guardian of law and justice delegated by the King- Emperor. The history of the great medieval monarchies shows that the legislative power of the king -- even of a king as powerful as Charles V -- was severely limited by local autonomies. The same is true of the ruler's executive function. He was not, in the first place, a law-giver or head of the executive; he was a judge. All other functions were subordinate, and were only exercised to the extent necessary to make his judicial function effective.

The reason for this institutional arrangement is clear. The judge must interpret the meaning of law and justice, and to do this he must be independent. It is essential that he should not owe his position, his function, to any man. The highest judge, at least, must be in this position. This is only possible under a monarchy. For in a republic, even the highest guardian of the law derives his position from some other source, to which he is responsible and on which he remains dependent to some extent. This is not a satisfactory state of affairs. His most important task is not to pass judgment in actual legal disputes, but to stand guard over the purpose of the State and natural law. Above all, it is the task of the supreme judge to see that all legislation is in accordance with the State's fundamental principles, that is, with natural law. The monarch's right to veto legislation passed by parliament is a remnant of this ancient function...

The future form of the State will be something entirely new, something which will represent principles of eternal validity in a form appropriate to the future, without the errors of the past...

The hereditary character of the monarchial function finds its justification not merely in the "professional" upbringing of the heir to the throne. Nor is it merely a question of continuity at the summit of the political hierarchy, though such continuity is highly desirable when it is a question of planning for generations to come. Its deepest justification lies in the fact that the hereditary ruler owes his position not to one or another social group, but to the will of God alone. That is the true meaning of the frequently misunderstood words, "by the grace of God," which always signify a duty and a task. It would be wrong for the ruler by the grace of God to regard himself as an exceptional being. On the contrary, the words, "by the grace of God," should remind him that he does not owe his position to his own merits, but must prove his fitness by ceaseless efforts in the cause of justice.

While there is thus much to be said for a hereditary transmission of the supreme position of the State, there is also one serious drawback, which has already been mentioned. If the succession occurs automatically, there is the possibility that the throne will be occupied by an incompetent. This is the greatest danger of the monarchial system. On the other hand, this danger only dates from the period when the inflexible legitimism of Versailles came into being, and the safeguards present in one form or another in most classical monarchies disappeared. Such safeguards would therefore have to be built into any future monarchical constitution. It would be wrong to hand this task over to political bodies, as that would open the door to private interests. The decision should be left to a judicial tribunal. The king, as the highest constitutional judge of the State, cannot exercise his function in a vacuum. He will have to be assisted by a body representing the highest judicial authority, of which he forms the head. It is this body which should pronounce on whether a law or a regulation is constitutional, that is, in accordance with the purpose of the State. When the ruler dies, the other judges will continue in office. It should be their duty to pronounce on the suitability of the heir presumptive, and, if necessary, to replace him by the next in succession.

The activity of the head of State will undoubtedly go beyond the purely judicial field. He will have to control the executive, since it is his duty to see that the decisions of the judicial power are carried out in practice. Nevertheless, all these tasks will remain of secondary importance. It is in his judicial function that a twentieth-century monarch will find his primary justification."

quinta-feira, 14 de julho de 2011

Ron Paul Ad - Conviction

18 de Julho em Lisboa: “Do Conceito de Liberdade em Friedrich A. Hayek”, Samuel Paiva Pires

Via Estado Sentido

No dia 18 de Julho de 2011, pelas 15h, na sala 6 do piso -1 do ISCSP, irá ocorrer a defesa pública da minha dissertação de mestrado subordinada à temática "Do conceito de Liberdade em Friedrich A. Hayek". O júri será composto pelo Professor Doutor José Adelino Maltez (ISCSP), Professor Doutor Manuel Meirinho (ISCSP), Professor Doutor João Ricardo Catarino (ISCSP) e Professor Doutor André Azevedo Alves (Universidade de Aveiro).

Bem-vindos sejam todos os que desejem assistir. O evento está também no Facebook.

sexta-feira, 8 de julho de 2011

Is hyperinflation inevitable?

Is hyperinflation inevitable?, DETLEV SCHLICHTER,

"(...) That elastic money is a source of economic instability we should know since the British Classical economists demonstrated it more than 150 years ago, and certainly since the Austrian economists (Mises and Hayek) explained it even better a little less than 100 years ago. In a nutshell: investment funded with proper saving leads to sustainable gains in wealth; investment funded by money printing leads to boom-bust cycles. But our brave new system of unlimited fiat money is a system of super-elastic money. When the investment boom turns into a bust, the central bank can lower rates and print even more money. Debt deflations and bank defaults are things of the past, so are cleansing recessions. The business cycle can be extended. The super-credit cycle has arrived. The debt load never shrinks. It just keeps growing. Can this go on forever? No, it cannot. And the endpoint has been reached, I think.

In 2007, the dislocations created by easy money finally came back to bite the banks in a major way: U.S. subprime was the first domino, and then the larger mortgage-backed and asset-backed complex caved in. The banks had to call the cavalry: the state and the central bank. The socialization of the fallout has since been pushing state finances over the edge. Ireland and Spain, formerly states with relatively low debt-to-GDP ratios, are already insolvent or on the way to insolvency courtesy of the implicit backstop they provide to their overstretched banks. Complacent observers in the UK are still congratulating themselves for staying outside the euro, obviously missing the point that their own government is running deficits similar to those in Greece and Spain, as is the United States government. I don’t see that many differences between the various economies and major currency areas. Wherever I look I see similarities. Everywhere fiscal positions are unsustainable, and everywhere the central banks provide the ultimate backstop and stem themselves valiantly against the liquidation of the accumulated dislocations.

It is clear that in the paper money system the solvency of state and banks is ultimately underwritten by the printing press. The central bank is, according to the logic of the paper money economy, the designated ultimate bulwark, the final line of defense against bank runs and government bankruptcy. All that heavy borrowing by the states and banks over previous decades has accumulated massive claims against the printing press. These claims are coming due — now. (...)

The position the central banks have been maneuvered into is not an enviable one. They are boxed in. When rising inflation concerns and/or rising fears of defaults lift market yields and risk premiums, the central banks have to expand their balance sheets and print more money to keep the system from contracting – thereby adding to fears of inflation and even to fears of ultimate default, as easy monetary policy must obstruct the deleveraging process on the margin.

When more and more savers exit the bond market and the market for bank deposits out of concerns about inflation and excessive debt levels (something that, I may add, is not happening yet but that I consider a matter of time only), the central banks will have to step in and use the printing press to support the bond market and the banks – this will lead to the concerns of savers about the purchasing power of their savings to rise even further.

It is precisely such a vicious circle that is the main threat to a paper money economy at an advanced stage of debt accumulation. I hate to say hyperinflation is inevitable – few things are. But I consider it highly likely. Be prepared!"

terça-feira, 5 de julho de 2011

Breaking News: João Galamba chama maluquinho a Peter Schiff

Diz assim: "Vale a pena ouvir este maluquinho a gritar hiperinflação. Foi em 2009. A hiperinflação nunca chegou. Como é óbvio, na opinião de Peter Schiff ela terá de chegar. O credo assim o exige.

Nota: eu acho que a política monetária é insuficiente para dinamizar a economia."

No ficheiro áudio aparentemente de 2009 Schiff antecipa a actual política de monetização de 100% da dívida pública americana por Bernanke (o resultado prático dos Quantitative Easings) e refere também a possibilidade (no caso de Peter Schiff expressa com grande certeza) dos americanos poderem vir a experimentar (novamente) uma hiper-inflação (it's the 70's! again). Sim, o valor exacto que a inflação de preços medida por índices nos consumidores atingirá não é certo nem se sabe quando terá o seu pico, os efeitos da inflação quantitativa podem seguir vários caminhos, um dos quais, em activos reais e financeiros não detectados por tais índices, razão primeira porque tivemos uma bolha seguida de crise em primeiro lugar.

Mas é de notar que neste momento os ingleses têm 4.5% de inflação de preços no consumidor e os americanos 3.6%, sendo as taxas de juro dos bancos centrais de ... 0,5%. É o ataque à poupança. Um velho inimigo de Keynesianos.

Ah, já agora, não é uma questão da "política monetária não ser suficiente", é uma questão desta impedir mesmo uma recuperação saudável ainda que com dores no curto prazo. Sempre se evitava estar a ajudar quem mais auferiu da expansão de crédito artificial durante a bolha.

que se propõe Keynes provar

Estando a ler (reler) General Theory of Employment, Interest, and Money, by Keynes, estes 3 parágrafos indicam bem a que se propõe Keynes provar que descobriu porque a procura agregada de Consumo e Investimento são sempre insuficientes (bolds meus).

Capítulo 3 - The Principle of Effective Demand

"(...)Moreover the richer the community, the wider will tend to be the gap between its actual and its potential production; and therefore the more obvious and outrageous the defects of the economic system. For a poor community will be prone to consume by far the greater part of its output, so that a very modest measure of investment will be sufficient to provide full employment; whereas a wealthy community will have to discover much ampler opportunities for investment if the saving propensities of its wealthier members are to be compatible with the employment of its poorer members. If in a potentially wealthy community the inducement to invest is weak, then, in spite of its potential wealth, the working of the principle of effective demand will compel it to reduce its actual output, until, in spite of its potential wealth, it has become so poor that its surplus over its consumption is sufficiently diminished to correspond to the weakness of the inducement to invest.

But worse still. Not only is the marginal propensity to consume weaker in a wealthy community, but, owing to its accumulation of capital being already larger, the opportunities for further investment are less attractive unless the rate of interest falls at a sufficiently rapid rate; which 'brings us to the theory of the rate of interest and to the reasons why it does not automatically fall to the appropriate level, which will occupy Book IV.

Thus the analysis of the propensity to consume, the definition of the marginal efficiency of capital and the theory of the rate of interest are the three main gaps in our existing knowledge which it will be necessary to fill. When this has been accomplished, we shall find that the theory of prices falls into its proper place as a matter which is subsidiary to our general theory. We shall discover, however, that money plays an essential part in our theory of the rate of interest; and we shall attempt to disentangle the peculiar characteristics of money which distinguish it from other things."

Otto von Habsburg, RIP

Otto von Habsburg, RIP