After more than a decade of chained stimulus packages and extremely low rates, with trillions of dollars of monetary stimulus fueling elevated asset valuations and incentivizing an enormous leveraged bet on risk, the idea of a controlled explosion or a “soft landing” is impossible.
In an interview with the Wall Street Journal, Treasury secretary Janet Yellen admitted that the chain of stimulus plans implemented by the US administration helped create the problem of inflation. “Inflation is a matter of demand and supply, and the spending that was undertaken in the American Rescue Plan did feed demand,” Yellen admitted. Of course, Yellen went on to say that the spending was appropriate due to the collapse of the economy as governments were trying to prevent a recession.
The most dangerous words in monetary policy and economics are “this time is different.” Argentine politicians’ big mistake is to believe that inflation is multicausal and that everything is solved with increasing doses of interventionism.
With “recession“ dominating economic headlines these days, many have forgotten the K-shaped versus V-shaped recovery debate of late 2020.
Still riding the high of stimulus checks and PPP loans, nearly all market pundits concurred that we were largely out of the woods of financial turmoil. Their disagreement lied in whether the rebound would take place in the real economy (V-shaped) or solely in asset prices (K-shaped), leaving Main Street behind.
In twenty-first-century America, ordinary people are at the mercy of well-paid, unelected government experts who wield vast power. That is, we live in the age of the technocrats: people who claim to have special wisdom that entitles them to control, manipulate, and manage society’s institutions using the coercive power of the state.
Our main text for the Rothbard Graduate Seminar this week is Murray Rothbard’s Power and Market: Government and the Economy, which contains a systematic treatment of one area of economic theory, interventionism. This represents a departure from past seminars in an important respect. Earlier seminars focused on texts by Mises or Rothbard that addressed a much broader scope of their thought. Previous seminar texts such as Man, Economy, and State and Human Action cover the entirety of economic theory.
