I don’t presume to know what collectors, investors, speculators mind set is at during purchasing. Speculators use everything from trend timing mathematical models to superstitions. It’s beyond the scope of economics.
No we do not agree.
A) You don’t explain why prices rised, we do.
B) If prices continue to rise than as you stated earlier those goods will become rationed and purchased in less quantity. Demand will be stifled. You even stated so yourself.
Buying smaller or fewer toys is not akin to a bubble. IF they purchase fewer or smaller items than the prices are rationing off those goods as intended. Since resources are now being rationed via prices the bubble never occurs.
So you contradict yourself apparently. You even admit that in the presence of a stable monetary system people would be unable to afford to participate in said bubble if the price continued to rise. As prices rise less people participate and the resources get rationed out.
True value is based off the labour theory of value, which Carl Menger, one of the earliest Austrians debunked over 100 years ago. “True value” is meaningless in an economic context.
It’s not a bubble. People are deferring consumption in other areas to spend more on a particular industry. That increased demand, and higher prices, forces a re-allocation of capital to the bubble [sic], which brings prices back down again with increased competition and investment.
wow, this thread had a lot of replies since my last post. I was gonna make another response to mickanomics but other folks have already throroughly refuted the arguments
I see you are avoiding the question… obviously the price of any individual class of goods can rise for a very wide variety of reasons other than money supply growth. Here’s a few:
A. Its a natural resource that is starting to run out (like oil)
B. It is an item that is going out of fashion and so the economy of scale is reducing (like black and white photographic film).
C. Its a resource that comes from only one location and there is increasing political unrest in that location.
D. Its a commodity that used in a product that is becoming more and more fashionable.
E. its a resource that has to be shared by more and more people through population growth (like land).
F. Its a good that is harder to grow due to some sort of climate change (man made or otherwise).
G. Its a product that becomes more expensive with increasing government regulation around the world - like more anti-pollution regulations.
I could go on and on…
Given that there are so many disperate potential reasons for a price rise in a sector, and given that the population in general would have a hard time distinguishing between these factors, I shall ask my question again:
Do you agree that, after observing a long period of price rises (for whatever reason), people have a tendency to believe that those prices will continue to rise even if they don’t understand (or even profess to understand) the reason for the price rise?
No, bubbles are caused by inflation. Sector specific changes are caused by technological progress, expectations, income/substitute effects, changes in preferences, ect, ect. A bubble is when prices in one sector rise without a proportional and corresponding decrease in prices in another sector (can only happen through inflation).
Answered this question already.
The supply of oil could continuously decline without prices rising, or without increased production. You ignore so many factors and misunderstand so many concepts.
No it can’t. You’re mixing paradigms here. If money is stable, a good can only rise if others fall. That is not a bubble, and it is not a reflection of what has gone on now, which you have based your rational exuberance post on. Your rational exuberance post is analyzing a period where the money supply was not stable, and so, we know that when the money supply inflates, bubbles form due to a mis-allocation of capital.
But why bother? You’ve been refuted over and over again.
If prices of things only ever rose because of the growth of the money supply then the relative price of one type of good compared to another would never change. This is obviously not the case. Your basis for avoiding question 2 is therefore flawed.
Borrowing to invest in X in and of itself raises the money supply, which in turn increases the nominal price of X and the rise in prices makes people more likely to borrow to invest in X and so on. This of course would be impossible if interest rates were allowed to rise in response to the increased demand for loans.
Borrowing does not necessarily raise the money supply. Rather, it relies on the means of the borrowing. If I loan $30 dollars from my savings to someone, the money supply has not increased, rather, the money has changed ownership, as in any other trade. Rather, the money supply is increased if someone deposits money in an account, and the money is loaned while simultaneously allowing the person to trade the money in their account. The additional money created is in the form of bank statements.
A price ceiling on the interest rate only creates a shortage of loans if its high enough. It operates independently of ABCT.
The only reason I am still responding, is because I am not very bright, I have a high time preference for internet debating, and there are sunk costs into this already.
Watch this
Please do the knowledge before you carry on with this debate.
