Make a Bubble, Take a Free Lunch, Break a Bank
35 Pages Posted: 27 Oct 2012 Last revised: 23 May 2015
Date Written: October 26, 2012
Standard economics is known to be incapable of integrating the real and the monetary sphere. The ultimate reason is that the whole theoretical edifice is built upon a set of behavioral axioms. Therefore, the formal starting point is moved to structural axioms. This makes it possible to formally track the complete process of value creation and destruction in the asset market and its consequences for the household and business sector. From the set of structural axioms emerge the well-known phenomena of a bubble from free lunches through appreciation to defaults due to a lack of potential next buyers.
Keywords: new framework of concepts, structure-centric, axiom set, profit, rate of interest, liquidity preference, primary market, secondary market, parrot economics, theory of value, valuation price, appreciation, depreciation, net worth, debt/income ratio
JEL Classification: E10, E21, E43
Suggested Citation: Suggested Citation