According to the bible, General Theory of Employment, Interest, and Money:
"the rate of interest [in 1929] was high enough to deter new investment except in those particular directions which were under the influence of speculative excitement and, therefore, in special danger of being over-exploited; and a rate of interest, high enough to overcome the speculative excitement, would have checked, at the same time, every kind of reasonable new investment. Thus an increase in the rate of interest, as a remedy for the state of affairs arising out of a prolonged period of abnormally heavy new investment, belongs to the species of remedy which cures the disease by killing the patient."
You see Keynes proves that interest rates were high enough to his liking in 1929(in the sectors that he thought mattered) that it had to prevent malinvestments from happening, utterly shattering the Austrian notion that malinvestments had been accumulating since the inflationary boom resulting from the Federal Reserve Act of 1913.
I'm really sorry that this somehow discredits all of Mises and Rothbard's life works. :'(
The first issue is that the central bank did not raise interest rates in reaction to a prolonged period of abnormally high investment but in reaction to the threat of rising prices from an abnormally prolonged period of fiat money (easy credit) based consumption. What causes over consumption? Low interest rates? Eventually low interest rates (Easy Credit) effects the price levels of large numbers of goods. It is at this point that central banks increase interest rates trying to avoid acellerating inflation. Even the most modest raise in interest rates creates an environment where many activities that were profitable under the lower interest rates are no longer profitable.
The sad part is that the government and its central bank tried many of the same remedies that it is trying now. The biggest is increasing government spending and decreasing interest rates. The misery peaked when the government passed the Smooth Hawley Tariff really creating a world wide depression out of a 50% stock market crash.
Followers of Keynes should not fret. There is plenty of real wealth in the US economy to destroy so the US will hopefully avoid the misery of the 1930s.
Are you trolling?, or did I faild to see the sarcasm?
I think it's sarcasm.
To darkness I condemn you...
I was hoping the sarcasm would be easier to see. I mean, how retarded do you have to be to claim that interest rates at the time of the bust prove that the market could have never fostered the Austrian boom? Astoundingly retarded. JM Keynes never ceases to amaze me.
Yeah, even if he is right on that at that stage it's far too late to "fix" the problem.
Jon Irenicus: Yeah, even if he is right on that at that stage it's far too late to "fix" the problem.
yes, except as billot1 correctly pointed out, the interest rates at the time hes referring to were a necessary reaction to the bubble burst, and have nothing to do with the cause of the cycle. keynes yet again displays his extraordinary ability to talk out of his ass.
Is the general theory worth reading if you want to argue with Keynesians and fodder grown on textbooks?Or are this forum and Hazlitt enough? Just that excerpt is so easy to argue with and his style seems very confusing, so yeah.
From what I've heard, the General Theory is a difficult book to read and also a poorly written one. So I'm not sure if it isn't maybe better to get his views from his disciples, rather than reading the book directly.
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