Mises and Hayek predicted the great depression, what is the austrian school predicting about our current crises?
"The plans differ; the planners are all alike"
-Bastiat
In order to be in a recession we need two quarters with a drop in real GDP, we haven't had one...How could someone predict a depression?
Grant:But, more to the point, the US doesn't have it so bad compared to others: http://blog.mises.org/archives/007844.asp
I appreciate what you're saying but what other countries are doing doesn't make what the US is doing any better. If Hitler were to say "Look I've only killed 6 million Jews - is really quite triffling compared to Stalin who has killed over 20 million Russians!" then that still wouldn't make the deaths of the 6 million that Hitler killed any less tragic. In that same vein, if your goal is to avoid a recession or a depression then I don't think it's a good idea to use a country that has inflated it monetary supply by 53% in the last 12 months as your yardstick.
According to the graph you posted above the US has inflated it's total money supply by 20% in the last 12 months... this in itself is just a complete guess, since the Fed stopped publishing M3 statistics in March 2006. That alone is quite alarming, given that an ever more important component of the total money supply in recent years has been attributed to M3 (see percentage of total in the graph below): http://en.wikipedia.org/wiki/Image:Components_of_the_United_States_money_supply.svg
However, even using the very rough 20% figure, putting this into practical terms means the printing press and the banks that feed of these have confiscated roughly 1/6th of all the value held in US dollar savings (including US dollar reserves) in just the last 12 months. This is kind of like a global 16% savings tax which is presently being used to subsidies otherwise unsustainable industries.
Set aside how countries holding US dollar reserves might feel about having lost 16% of the value of the IOUs that they accepted in exchange for products and services. Let's be optimistic and presume the central banks are all going to hold on to this funny money. So we have another subsidy - so what? Well unlike European farm subsidies, monetary inflation has a severe weakness in that it produces inflation. The only way to avoid the negative consequences of inflation (a necessary bust to the boom) are by creating more inflation - and if you do that long enough eventually you're will be lucky enough to get hyper inflation (like Zimbabwe and, if they don't do something about it soon - Russia)... and not even the Fed or the banks like Hyperinflation, since it implies a complete monetary collapse.
So at one point or another, unlike European farm subsidies, even though they're very reluctant to do so the Fed, the banks and the market in general has to say goodbye to those subsidies and say hello to increased interest rates (the only way the Fed knows how to deal with inflation - even if it is just pushing on string)... monetary contraction and market correction.
The question is not whether we'll have a recession - a good number of people already believe it's here. The question is how deep will it go and how long will it last... The sheer quantity of new money that's been produced globally (not just by the US) has to make one somewhat nervous about the possible scale. Further more, the policy makers at the helm appear to be the kind of people that believe market corrections are evil and must be avoided - which might make an Austrian economist a bit concerned about the likely duration of the correction to come as well.
Tuneman:In order to be in a recession we need two quarters with a drop in real GDP, we haven't had one...How could someone predict a depression?
I think that's why it's called a prediction.
Tuneman: In order to be in a recession we need two quarters with a drop in real GDP, we haven't had one...How could someone predict a depression?
I reject this (agreeably widely adhered to) definition and it is not possible to measure GDP, even if the government were honest with the numbers they release. I think that a greater than normal rise in unemployment, with a reduction in real investment, stock market prices (breaking the long term trend) and production should be used. By this definition we are in a recession.
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