Financial Markets

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Lucas M. Engelhardt

ABSTRACT: The impact of interest rates on investment choices is a key element in both Keynesian and Austrian theories of the business cycle. Fuller (2013) compares the Keynesian Marginal Efficiency of Capital approach to the Austrian Net Present Value approach, claiming that the two give different rankings of investment projects. This comment provides examples to show that this is only true if factor prices are held constant. If factor prices reflect the discounted present value of the project, then the different rankings between the approaches vanishes. This result further highlights a fundamental difference between the Austrian and Keynesian views: factor price stickiness. This difference in assumptions drives the opposing views of monetary policy.

Mark Abdelnour

Thanks to high oil prices and years of cheap money, capital-intensive fracking operations became feasible in even some of the most marginal areas. But with easy money comes bubbles, and falling oil prices may soon help pop the fracking bubble.

Ryan McMaken

The homeownership rate is now back where it was forty years ago. So what did all that federally-subsidized homebuying over the past decade accomplish? There was a lot of malinvestment, and a lot of politically-favored interest groups that got richer.

Carmen Elena Dorobăț

 A surprise move from Switzerland’s central bank (SNB) sent stock markets into panic today. In just a few minutes, the value of the Swiss franc rose by 30 percent, FTSE 300 dropped by 2 percent, Wall Street futures turned negative, and the recent feeble rise in commodity prices was reversed.

Mark Thornton

Mark Thornton reviews the first year of cannabis legalization in Colorado and the fact that the predictions of the prophets of dooms have failed to materialize. Meanwhile, the power of the state in this area continues to weaken.