Booms and Busts

Mainstream economists believe that if government increases spending and injects new money into the economy, then productive wealth will follow. Austrian economists would like to differ.

This week, Bob walks through three thought experiments to show how expectations of future supply changes ripple into present prices and production decisions in ways that purely mechanical monetary frameworks like MV=PQ can't capture.

RMP is not QE, nor is it QT. It is an unprecedented, interventionist, unsound policy. The Fed is no longer backstopping the long end, forcing twenty years of interest rate suppression to finally unravel. Welcome to the Austrian nightmare.

Washington is pursuing industrial policy again, this time being an attempt to form a minerals consortium with other countries to secure minerals vital to US manufacturing. No doubt, this initiative will end up on the ash heap of bad policy.

The standard line among most economists is that deflation is as bad or even worse than inflation. In reality, the economy needs deflation now more than ever.

Washington is pursuing industrial policy again, this time being an attempt to form a minerals consortium with other countries to secure minerals vital to US manufacturing. No doubt, this initiative will end up on the ash heap of bad policy.

The standard line among most economists is that deflation is as bad or even worse than inflation. In reality, the economy needs deflation now more than ever.

Some economists have claimed that “transparent” monetary policy in which the Fed operates predictably will lessen the chances of the boom and bust cycles happening. It isn’t the lack of transparency that creates business cycles; it is Fed-caused malinvestments.

The boom-bust cycle is not a mystery. Understanding why requires grappling honestly with what the last fifty years produced.

A $2.3 trillion contraction met with a $2.5 trillion injection.