Doug Noland, an analyst for the Prudent Bear Mutual Fund, writes a weekly column called The Credit Buble Bulletin on the Prudent Bear’s web site. This week, he reprints a presentation he gave at an asset manager’s convention (scroll down a few pages from the top to the heading Contemplating the Evolution From the Way We Were to The Way It Is). Although Austrianism is one of his influences, his economic views are heterodox. I think that Austrians should find his analysis stimulating and provocative.
The outline of his argument is that in the erosion and breakdwon of any constraints on the expansion of credit (as would be provided by the use of gold with a 100% reserve requirement on banks) inflation has run amok, infecting all aspects of our financial system. Austrian analysis of the business cycle has focussed mainly on the role of the banking system in expanding credit. Noland has turned his investigation to other types of financial intermediation and credit creation that occur in the structured finance area.
