Hi all,
I’m having what I consider to be a noob confusion about some aspects of the ABCT and was hoping you could help me out.
Isn’t the whole point of investing to forgo present goods now so that you can enjoy a greater amount of goods in the future? or at least cheaper, better quality goods? I only ask this because it leads to my confusion with what ultimately brings about the bust according to the ABCT. According to the ABCT, the only sustainable interest rate is the natural interest rate, which is determined by people’s voluntary consumption/investment ratios, and when the interest ratio is artificially depressed from credit expansion, investment will shift toward longer term investments and higher order goods, and as the new money diffuses throughout the economy through higher wages and land rents, people will establish their original consumption/investment proportions, and suddenly everyone realizes that no one is actually saving enough to maintain this lengthened capital structure, and many of the investments in the higher order goods must be abandoned.
Given my understanding of the ABCT (and correct me if I’m wrong):
Can it still be possible for the benefits of the increased (but artificial) investment to end up being so pleasing to consumers that, after the capital structure has been modified, they voluntarily increase their investment/consumption ratios in such a way that the capital structure can actually be sustained? For example, if the public likes apples, and an artificially induced change in the production structure that is unsustainable without a true decrease in time preferences occurs, and the result is that many apples are produced more cheaply, is it at least possible that, since the present craving for lots of apples has been fulfilled, that the funds that originally would have gone to buying the scarcer apples shifts toward investment? Certainly not likely, but possible?