What you’re referring to is fractional-reserve banking. Consumer credit is just another example of that concept. If you’re claiming retail prices are reflective of consumer credit, I would agree. Just as housing prices are related to Fannie Mae, tuition prices are related to student loans, and so on.

PS>I think you misjudge most of the people who blog on this site (at least the ones I’m familiar with) and words like fascist, ruling class, retarded and much of your second and last paragraph are not going to gain their respect or reply.

Leave out the emotionalism and your points might be better understood and accepted.

Merry xmas!

THE CONCEPT OF THE FREE MARKET DOESN’T WORK WITH CONSUMER CREDIT!
the idea of consumer credit is the ability to charge more that the market will bear, that IS the only purpose of consumer credit and this flies in the face of the concept of the free market.

to put it very simply, the propaganda of the free market is nothing more than a replay of the fascist propaganda of world war II, you keep blaming the poor for the inability of the money lenders to enslave the masses as is your main agenda!
you can’t have a free market society with out removing the massive profits that the corporations make through consumer credit, and until you grasp this reality, you are doing nothing more then lieing to the people you push this propaganda on!

the main reason your concept is completely flawed is the idea that a free market allows heavy profit, this is completely false, the way the true free market works is the profit margin is EXTREMELY minimal, because of COMPETITION by producers for the purchasers of that market in a cash on the barrel for the product society, that is how a TRUE FREE MARKET WORKS!

If you want those of any inteligence to listen to your ways you have to give up the fascist idea of a ruling class and your desire to bring back caste systems, and yes folks, you are very transparent, and those born with a mind can see exactly what your up to and this is the reason that the only people that take what you say as reality are virtually retarded, as in the religious right of the United States!

Murphy writes,

But the free-market fundamentalists were certainly correct when they said that the Obama stimulus package would not pull us out of recession. It was not just Austrians but many Chicago School economists who were reminding the public of basic observations such as “the government can only spend what it first takes from the private sector.”

If this is the argument, then the argument suffers from a large lacuna in logic. Namely, we are in a period in which there are large pools of unused non-specific capital goods. So, if the government seizes control of these goods and uses them, they aren’t really (at this point in time) taking them away from the private sector in the sense that you mean it (as opposed to in the ethical sense). The private sector isn’t using them, and so it’s not so much of a problem of crowding out.

The real argument is that government use of these unused resources will not be used efficiently, and that government cannot use these resources efficiently because they lack the ability to coordinate through the price the profit/loss mechanisms.

“It is true…that many opponents of fiscal stimulus and Quantitative Easing were warning of high interest rates and price inflation. These threats have not materialized (at least yet) and on that score Krugman understandably can pat himself on the back”

What Paul Krugman doesn’t understand (or doesn’t want any of us to understand) is despite the interest rates only being 3% we in the real business world are struggling to make even 3% profit which makes even a lowly 3% rate excessive. It follows also that, if my profit was only 1%, a 3% rate on my business loan would wipe me out.

The height of the interest rate is relative.

I quote von Mises in Human Action page 552,

“Public opinion has definite ideas about a “normal” rate (of interest), something between 3 and 5 percent.”

And on page 533….

“People are, in dealing with these problems (inflationist policies), for the most part misled by comparing merely the market rates of interest as they are determined on the loan market”

Yourself and the Austrian school were always, and are now, spot on.

http://www.lovemychevy.com/VehicleDetails/new-2011-Chevrolet-Volt-Hatchback-Glendale-CA/920064903

A mere $43,700 (plus another $4000 in sales tax in CA, plus license and registration). When all is said and done, the car for the masses will be nearly $50k. I guess all those farmers that got a check for $50k can buy one.

If they can force us to buy health insurance, what’s next, we all must buy a Chevy Volt?

It’s also worth pointing out that everything the right said about why Obamanomics would fail was wrong. For two years we’ve been warned that government borrowing would send interest rates sky-high; in fact, rates have fluctuated with optimism or pessimism about recovery, but stayed consistently low by historical standards. For two years we’ve been warned that inflation, even hyperinflation, was just around the corner; instead, disinflation has continued, with core inflation — which excludes volatile food and energy prices — now at a half-century low.

Or to put it another way:

It’s also worth pointing out that everything the right said about why jumping out of an airplane would fail was wrong. Ever since we jumped we’ve been warned that we would be smashed against the ground and every bone in our bodies would be broken; in fact, no impact has been felt and none of our bones is broken. Ever since we jumped we’ve been warned that a smashing collision, a catastrophe, was looming; instead, the pleasant, weightless feeling has continued, with only a slight increase in the volume of rushing, whistling wind noises.

When interest rates do leap up and inflation skyrockets, don’t expect any mea culpa. He’ll blame everything on “speculators” and lack of sufficient regulation. He won’t be simply urging the government on to a socialist takeover of the economy but screaming for it, blaming “the right” for everything.

You can’t eat little pieces of green paper and I’m sure they make sucky firewood.

No worries; there’s still plenty of time for the predicted price rises to appear.

Low and behold the SEC came along in 1975 and ruined a perfectly viable business construct by mandating that debt be rated by a Nationally Recognized Statistical Rating Organization (NRSRO). It originally named seven such rating companies but the number fluctuated between 5 and 7 over the years.

Establishment of the NRSRO did three things (all bad):

1) It made it extremely difficult to become “nationally recognized” as a rating agency when all debt had to be rated by someone who was already nationally recognized.
2) In effect it created a nice monopoly for those in the designated group.
3) It turned upside down the model of who had to pay. Previously debt buyers would go to the ratings companies to know what they were buying. The new model was issuers of debt had to pay to get it rated or they couldn’t sell it. Of course this led to shopping around to see who would give the debt the highest rating

http://globaleconomicanalysis.blogspot.com/2007/09/time-to-break-up-credit-rating-cartel.html

Krugman’s take on this yesterday? It was the failure of free-market policies. He endorses an article where the author asserts that “Governments….[a]cknowledging that rating agencies were incompetent without doing anything to regulate them was inexcusable.”
http://krugman.blogs.nytimes.com/2010/12/22/arsonists-prosecuting-firefighters/