In the most recent issue of National Review Gary Wolfram, Professors of Economics and Public Policy at Hillsdale College wrote this in regard to Mises and Hayek’s Austrian business-cycle theory.
""This theory emphasizes the role of the interest rate in bringing together the plans of producers and consumers. The interest rate is the price of loanable funds — in effect, the price of money — and, like the price of any good or service, it gives producers information about consumers’ behavior and the actions of other producers. For example, if consumers wish to save — to put their money in banks, which lend it out — they will increase the supply of loanable funds, putting downward pressure on the interest rate. Producers can then borrow that money cheaply and invest in capital goods such as machinery, factories, and housing — which they can use to create goods for consumers to buy in the future with the money they have saved. Thus do producers and consumers arrive at the equilibrium interest rate, which matches producers’ plans to invest in capital goods with consumers’ desire to save.
What was once a mainstay of the home entertainment zeitgeist is about to be altered, perhaps forever. Blockbuster has announced that it may have to file for chapter 11 bankruptcy protection. Apparently the once mighty rental giant does not fall into the too big to fail category nor does it qualify for some kind of TARP-like bailout. Of course Blockbuster backing down on a buyout of Circuit City retail stores saw the end of that national chain, so it almost seems appropriate that the management of a company that would even consider buying Circuit City might face a similar fate.