Define "irrational change in comsumption behavior".
If Im understanding it correctly, let me advance you that from an austrian perspective "irrational change in consumption behavior" is not possible because, for austrians, consumers are kings and the objective of an economic system is to produce and supply what the consumer needs and/or wants. So when there is a mismatch between what consumers demand and what the production system is offering the "fault" is always on the production system, that needs to re-organize. What is the point on having a production system that produces stuff people dont need/want?
Good point. Perhaps I should have said "spontaneous change in consumption behavior." The idea that a large number of people will be seized by the urge to hold liquid assets rather than spend or invest them.
After all, even if you end up in a situation where all coins are collectibles and nobody is willing to sell them, who is suffering from that?
People who have invested with the expectation that they'd be able to make some money? You can say that the problem is that they made a bad investment, bit what if consumer preference is inherently unpredictable? How do you maintain the capital needed to meet that preference if it isn't consistent? (Just playing devil's advocate here.)
What's the point of holding such a good? To brag to your friends how much it's worth? Of course not. The point is to eventually consume this wealth so trading can't really stop.
People do hold on to things though, even if according to your principle they shouldn't.
Based on the language in your posts it sure does not seem like you understand the philosophical underpinnings of the Austrian school. Have you even read a single page in Human Action? How about Man, Economy and State?
I must admit I'm not as well read on Austrian theory as I'd like to be. I only understand the philosophical difference on a very basic level. I will keep your suggestions in mind as I work my way down my reading list, thanks.
Well, not completely. Every individual has subjective valuation differences for why they would hold a money good. The price of doing so is expressed as an interest rate which acts as a price signal to the market to regulate production over time.
Isn't that only the case if the money's lent out?
@shawshankinmate37927- Your basic point seems to be that prices can adjust to a point where markets reach equilibrium. I believed that for a long time, but I have doubts now. It's been pointed out to me that in the real world, prices don't change that easily. It's not just the government that controls them, either. Individuals are resistant to reductions in their income as well. It is rational for them to be.
For instance, if I'm an employee, it would be an unwise decision to agree to let my boss lower my salary at will. There are costs involved in changing jobs if he lowers it below the worth of my labor, so that would allow him to consistently underpay me. It makes far more sense to lock a certain salary in contractually, even though this means some of the workers need to be laid off when the money available to pay them goes down.
Thanks, guys. What you're saying makes sense, but so far I haven't experienced that "Aha! That's why it can't happen." moment.