The macroeconomics of capital structure

Hayekian Triangle

Having accounted separately for each of the three elements of capital-based macroeconomics, the basic interconnections among these elements follows Figure 3.7 The macroeconomics of capital structure. almost without discussion. Figure 3.7 represents a wholly private economy or the private sector of a mixed economy whose public-sector budget is in balance. It shows just how the supply and demand for loanable funds, the production possibility frontier, and the intertemporal structure of production...

Booms and busts in the emerging nations

It may seem ironic that our risk-based extension of the Austrian theory is applied to the US economy rather than to the Japanese economy and to economies of South East Asia and Latin America. The Bush Recession was a brief and minor downturn in comparison to the enduring and sometimes dramatic crises experienced by the so-called emerging nations. And the term bubble economy particularly if the bubble has already burst is applied with less controversy to those nations than to the United States....

Risk control and risk externalization

Not all conceivable policies that would interfere with the market's allocation of risk-bearing have consequences of a cyclical nature. Suppose, for example, that the legislature considers all market rates of interest of more than, say, 5 percent above the Treasury-bill rate as constituting excessive riskiness. Accordingly, it simply prohibits the payment for all such risk-bearing. A legislated Treasury-plus-five cap on interest rates would have a direct and immediate effect on credit markets....

Changes in technology and resource availabilities

Technological advance has a direct effect on the production possibilities frontier and on the market for loanable funds. Although a typical technological innovation occurs in one or a few markets, it allows, through resource reallocation, for increases in the production possibilities all around. That is, the frontier shifts outward and possibly experiences a change in shape depending on the specific nature of the change in technology the demand for loanable funds shifts to the right, as...