Interrelation of the Monetary Side and the Commodity Side of the Economy

Modern textbook macroeconomics dedicates much space to the supposedly “real” side of the economy versus the “nominal” side, yet has been unable to achieve a clear separation between the two aspects. The analysis of the interaction between the monetary side and the commodity side has remained muddled. It is different from Austrian macroeconomics. Based on the analysis of the relation between capital, money, and time, Austrian macroeconomics can integrate the financial sector into its theory of the business cycle and offer an elaborate depiction of the sequences that characterize credit-driven booms and their consequent busts. On this basis, Austrian macroeconomics can derive pertinent lessons from what happened in the Great Depression and come to a set of policy implications derived from Austrian macroeconomic theory.