Comments on: Leverage – The Loose Joint Which Makes The Trade Cycle Inevitable http://hayekcenter.org/?p=1820 Celebrating the 50th Anniversary of The Constitution of Liberty Tue, 07 Sep 2010 11:07:45 +0000 hourly 1 http://wordpress.org/?v=3.0 By: bill woolsey http://hayekcenter.org/?p=1820&cpage=1#comment-566 bill woolsey Sun, 08 Nov 2009 05:20:01 +0000 http://hayekcenter.org/?p=1820#comment-566 Greg, Leverage relates to capital. As I read the quotations from Hayek, he seems to be focused on resrves. These aren't the same thing. Reserves are related to monetary disequilibrium. An excess supply of money can lead to an excess supply of credit which might lead to malinvestment. Capital is related to risk. Too little capital, and the owners take excessive riisk at the expense of their creditors. Bill Greg,

Leverage relates to capital.

As I read the quotations from Hayek, he seems to be focused on resrves.

These aren’t the same thing.

Reserves are related to monetary disequilibrium.

An excess supply of money can lead to an excess supply of credit which might lead to malinvestment.

Capital is related to risk.

Too little capital, and the owners take excessive riisk at the expense of their creditors.

Bill

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