This arithmetic of investing, saving and spending, and profit and loss, in a fixed supply "sound money" system is very clear and simple when "marbles" are used as money. But put a $ sign in front of the same set of equations and, magically, the arithmetic changes so that "supply creates its own demand". Contrary to the clear arithmetic impossibility, Austrians believe a fixed supply zero sum sound money system is compatible with a profit seeking capitalist economy.
The only saving grace is that no real economy ever binds itself to a fixed money supply, as Austrians bemoan the coin clippers and other "currency debasers" of historical reality. Ways are always found to add "money numbers" into the equations so the money system more closely matches the positive sum value adding economic system. In our system, where money is created as loans by bankers, it is the constant spending of newly borrowed, newly created money into the economy that keeps the Ponzi arithmetic functioning. "Debt" provides the additional money that makes profits and economic growth possible.
This "money creation" is an overt violation of Austrian ideological purity. Tea Party Austrians believe the destruction of all the abominable fiat credit money is a prerequisite to any truly "sound" economic recovery; and that government spending even more borrowed money to "stimulate" this dying beast of an economy is necromancy of the lowest order. They see the economic depression and real devastation that accompanies credit destruction as a necessary and acceptable cost for restoring "sound money", even though a sound money economy is as mythical as the Biblical garden of Eden.
The real effect of debt-deflation depression is to destroy so much credit-money that all prices collapse. Then whoever still has money can buy up the economy and the country for pennies on the dollar, and we can "restore" the good old days of feudalism where you were either a rich owner or a propertyless serf. None of this uppity "middle class" nonsense, or 'democracy'.
In their defense, most Tea Party Austrians have been duped and would not actually favor a return to feudalism, even though that would be the outcome of the "fiscal consolidation" policies they advocate. Their anger and dismay at the financial and economic crisis and corruption at the highest levels of finance and government has been directed toward the government and away from the plutocrats and corporatists who are equally if not more directly responsible for the problems.
They believe, because it has been preached to them ceaselessly, that "government" is responsible for inflating the money supply, but under the 1913 monetary legislation only the privately owned banking system is allowed to create US dollar money (except coins, which remain a government power). The banking system creates all the economy's money as debt at interest. The interest is the banks' "profits", and the loan principal is their "costs". The banks' costs become the economy's money, just like capitalists' costs become the economy's earned incomes. The money to pay bank interest does not exist, any more than additional marbles to provide capitalist profits in a fixed supply golden marble system. The arithmetic is dead simple:
Business Costs = the economy's earned income; C = I
Costs + Profits = Prices; and Prices is a number greater than Costs
Therefore Prices is a number greater than Incomes
C = I; P > I
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