Amazingly, this is in today’s Wall Street Journal:
The classic explanation of financial crises is that they are caused by excesses — frequently monetary excesses — which lead to a boom and an inevitable bust. This crisis was no different: A housing boom followed by a bust led to defaults, the implosion of mortgages and mortgage-related securities at financial institutions, and resulting financial turmoil.
…Other government actions were at play: The government-sponsored enterprises Fannie Mae and Freddie Mac were encouraged to expand and buy mortgage-backed securities, including those formed with the risky subprime mortgages.
Government action also helped prolong the crisis. Consider that the financial crisis became acute on Aug. 9 and 10, 2007, when money-market interest rates rose dramatically. Interest rate spreads, such as the difference between three-month and overnight interbank loans, jumped to unprecedented levels.
There’s some heroic stuff in here. Things like this excite me because it shows that years and years of hard work and well-placed passions have paid off, and now, in light of the current economic meltdown, it is time for the ideas long proposed by Austrian economists and other radical free-marketeers – that have been perpetually belittled by the mainstream establishment – to take center stage and shine. Thanks to Adam Chudy for the link.
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Didn’t Austrian ideas, Hayek’s at least, sweep the top echelons of Anglo academia briefly as the 1930s crisis just began, only to be slammed aside by a plurality of statist thought? Is this WSJ piece just more de ja vu?
I agree, more and more people in the mainstream have come to at least place part of the blame for the boom on easy money. However, we should remember that these comments must always be put in context. This particular Journal article was written by John Taylor of the famous Taylor rule. Taylor believes that the central bank should set the interest rate based upon the inflation rate and GDP. Thus, he still believes that a central bank can roughly know how high or low to set its rate.
Nevertheless, we do see an increasing amount of people pulling insight out of the Austrian school, be it in references to Hayek or the ABCT, and for this we should be greatly encouraged. If this trend continues, maybe people will start to take these insights to their logical conclusion that the state should stay out of the economy.
Finally someone in the mainstream economic press who can understand the mechanics of the situation. The more we can get the raw mechanics of the problem out there, the more likely that folks will come to correct conclusions about how to fix things.
Fred Thompson has his own video on Keynesism, which he calls “liberal economics.” He’s no libertarian, but it is interesting none-the-less.
http://www.silverbearcafe.com/private/12.0/goodnewa.html
There is no shortage of lies and people willing to grasp at them or accept handouts. In the past, such as the great depression, the future was unmortgaged and population was sparse. Indebting future generations and taxing the snot out of them directly and indirectly via inflation (printing prosperity) was an option. Population growth allowed sharing the burden and, reconstruction after WW2 provided markets.
Now, the US has eaten their and our seed corn. Debasing the $US by excess printing will simultaneously piss off large international holders of $US and impoverish US by hyperinflation and trading partner retaliation. US credit rating and industrial export capacity is non-existent, as are customers with ability to pay.
The basic operation of these problems are easily explained by “Mathematics of Rule”:
http://www.nazisociopaths.org/modules/article/view.article.php/c1/32
My bet is that the stimulus train will proceed full speed over the cliff to a train wreck. This is because the drivers are terrified of public wrath as the full consequences of the major, civilization threatening financial fraud by criminal financial elites and worldwide economic collapse deepens. This catastrophe can be made to appear delayed, but not averted. There will be consequences. I doubt very much that the real perps of this mess will ever be held to account.
Reality and Austrian economics have ZERO chance of general acceptance until all other, more lucrative (open to scams) economic philosophies and the people have been milked until there is nothing left to take. Only at the point of universal impoverishment will reason have a chance to gain a foothold in the social / economic affairs of mankind.
“Only at the point of universal impoverishment will reason have a chance to gain a foothold in the social / economic affairs of mankind.”
That sounds like a good plot for a novel!
“Only at the point of universal impoverishment will reason have a chance to gain a foothold in the social / economic affairs of mankind.”
I would alter that passage to suggest merely that reason’s chances are exponentially increased at the point of universal impoverishment. But must we descend so low?
I apologize for the previous link. It’s broken.
Here ya go:
http://www.silverbearcafe.com/private/12.08/goodnewa.html
Globilization and open international trade is a lot like the centralization of government after the war between the states. When you break down the various layers of protection from local authorities to top federal positions, the free people become increasingly threatened. In the same way, allowing foreign countries to purchase mass financial securities threatens our financial security. You create only one large domino, which when it falls, the entire world suffers.
@Robert Brager
“But must we descend so low?”
Yes, because the basic problem is that predators have and are collapsing civilization (the rules by which we cooperate for mutual self-interest). Predators create no value and therefore, for them, the trade (method of survival) is: Obey or Else. They will NOT see reason until the prey is impoverished, meaning, so are they. They are too stupid to see any other option. For them, they are master, we, slave. It is their REALITY (environment) that must change and hence, truth.
@Kevin
Globalization is the adding of another hierarchical level in our “command and control” civilization and further insulating those who choose from facing the consequences. This is easily proven to be devastating to civilization:
http://www.nazisociopaths.org/modules/article/view.article.php/c1/33
I sure hope the rest of us here in the US get smart before we get poor.
My fear is that the Fed and the stimulus will fail. Followed closely by the political call to centralize banking. Not just the US, but world wide. The new “Central Bank”, the new “Lender of Last Resort”, will be the World Bank, with one “World Currency”.
When thaat happens, say goodbye to the autonomy of nations, individual rights and freedoms, and say hello to the international police forces in your neighborhood. WTO will become, by default, the new World Government.
The reason this will happen, is because the lure of the central bank is addictive to the political machine that feeds off of it. There is still one more level of corruption attainable, before the Keynesian model collapses. And since the fallout is delayed, the proponents get to feed at the trough of the central bank one more time before the ponzi scheme comes to an end.
My hope, is that we manage to wake up to the fact of the treat to our nationhood that this move will entail. My hope is that my fellow Americans will realize the end of America as we know it, and will resist. My hope is that my Canadian friends, my Australian friends, my Japanese friends, and all my other friends realize the same things, and take pride in their own nations and resist as well.
God bless us all for being individual. God damn us to hell if we become “One”.
Bill Ross,
I am afraid that impoverishment leads to conditions where cool reason is less likely to sway the actions of the destitute. Poverty increases the time preferences of many of those in its grasp (ascetics may be an exception). Higher time preference is manifested in a greater counsel granted to emotion and physiological desire than to higher though process and actions which will bear results many meals into the future. No, impoverishment will not make the task of liberty easier, but it will make the demagoguery much more appealing. Offer a starving man freedom or a meal and he will take the meal regardless of the conditions placed upon the acceptance of the food.
Already a very high time preference afflicts the populace of the States as well as many other industrialized nations, so high that the mechanics of freedom and indeed civilization are not understood by 1 in 100, and the desire to educate ones self in this regard takes a back seat to reality TV shows. Indeed it is amazing how well the market works under conditions such as we currently see. However, the willingness of current market participants to wager their stake for a part in the state kleptocracy is founded on ignorance of human action, the fundamentals of liberty, and the nature of states past and present. This willingness is only further augmented by a reduction in material wealth for the individual and society, increasing the probability that snake oil economics and socialism will gain at the expense of liberty.
A drastic reduction in living standards will be more likely to lead to authoritarianism than towards market anarchy.
@Stanley Pinchak
I agree with you insofar as our civilization has any residual wealth left to fight over. Under these conditions, the redistributors will make their emotional, envy based arguments and, people will be looking for scapegoats to blame their misery on, welcoming tyrants. However, this is a transitory phase. At some point, their is nothing left for tyrants to appease with. There will be much wailing and gnashing of teeth. The tyrants will be turned upon. They always are.
Atlas has shrugged and people no longer believe the work ethic will result in anything but slavery. Entitlements provide an alternative to working. Those who choose to work will either choose to protect themselves (reducing time and energy available for productivity) or just choose to reduce their output to minimal survival requirements, reducing their “tastiness” as prey.
A state of universal impoverishment (no productivity) will be achieved, as proven in Mathematics of Rule. Why be productive if you cannot prosper?
Necessity is the mother of invention. Hardship really makes people think. The equivalent of the Founding Fathers will arise. It is inevitable.
By your arguments, civilization could have never have started in the first place (from anarchy).
I have thought about the factors affecting the rise and fall of civilizations, start here:
http://www.nazisociopaths.org/modules/article/view.article.php/19/c0
Awsome content, what theme do you use in the blog ? can there be a section to follow the Rss?
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