Great column by Steve Hanke, John Hopkins University, is coming out in the January 2010 “Globe Asia” “Booms and Busts, pp. 18-20″
“Austrian theory played out to perfection during the most recent boom-bust cycle. By July 2003, the Federal Reserve had pushed the federal funds rate down to what was then a record low of 1%, where it stayed for a full year. —
With the fed funds rate well below the natural rate, a credit boom was off and running. And as night follows day, a bust was just around the corner.
The bust has manifested itself in various forms – the most recent one being the crisis in Dubai.”
“If 40 Wall Street and other record-setting skyscrapers are a guide, Dubai could be in for a Hayekian hangover. This condition – after the Nobelist Friedrich Hayek, a leading architect of the Austrian cycle theory- follows a boom -bust cycle, and most painfully visits the most most capital-intensive projects built during the boom”