Over the weekend I read Fritz Machlup's
Stock Market, Credit, and Capital Formation ([1940] 2007). Though it is quite old, it is packed with insights about the laws governing the stock market. The impact of easy money on the markets for stocks and bonds as well as their impact on capital formation is described. It becomes clear that permanently rising stock markets are phenomena of credit expansion but he also shows that money capital is not tied up by stock markets but flows into markets for goods and services. Thus, stock markets allow localizing future inflation on good markets. In Mises' words, the book is "a masterpiece."
Machlup is always described as a very lovable person. He was not only a great economist; he also was a successful entrepreneur. In Guido Hülsmann's biography on Mises I found the following poem written by
Kenneth Boulding in honour of
Fritz Machlup:
O, happy is the man who sits
Beside or at the feet of Fritz,
Whose thoughts, as charming as profound,
Travel beyond the speed of sound,
All passing as he speeds them up,
Mach 1, Mach 2, Mach 3, Machlup.
With what astonishment one sees
A supersonic Viennese
Whose wit and vigor, it appears,
Are undiminished by the years.
I love it!
