Guilty as Charged

David Henderson and Jeff Hummel have managed to ruffle quite a few Austrian feathers with their recent Cato briefing paper, and no wonder: that paper claims not only that Alan Greenspan’s Fed was innocent of any role in encouraging the housing boom but that Greenspan had actually managed to do something Austrian monetary economists have long claimed to be impossible, namely, solve the monetary-central-planning problem.

Quants forgot about the human factor

Quantitative finance analysts, or “quants” in the financial jargon, played a prominent role in the subprime crisis. Using a blend of mathematics, statistics and computing, they were the Wall Street geniuses who assessed the risks on all those exotic mortgage-backed securities and credit-default swaps. Their models were telling them that the risks were widely spread and that it was safe for the institutions employing them to pour billions of dollars into such financial instruments. This was supposed to be the most up-to-date, scientifically based way to make such calculations.

Checkernomics: The Game is Solved

A team of computer scientists at the University of Alberta announced that they had solved the game of checkers (8 x 8 draughts). Human checkers players no longer have any hope of defeating this program. So too in the world of economics, Austrians have explained that economic law is immutable and therefore unbeatable. Politicians need to relent.

Monetary Freedom and Its Opposite

As we enter the era of decline for the dollar all sorts of reforms will be used to address this decline and the economic instability it causes. However, reforms designed on Wall Street or in Washington will not work and will amount to nothing more than rear guard action by the moneyed interests that control the government. The only true path to reform is monetary freedom.

From Fascism to Socialism in a Bloodless Coup

The only redeeming feature of our political process is that we peacefully accomplished an ideological shift -- a coup of sorts -- that in almost every other instance led to blood in the streets. Of course, the shift is mere window dressing as both McCain and Obama stand for big government, big wars, and big deficits. The only difference between their respective agendas being which group of Americans loses through wealth redistribution and which Third World country watches their women and children suffer and die due to our foreign policy.

End the Central Bank

For now, what interests people is the Austrian account of the bust. And the Austrian account is the only compelling one in circulation. In fact, as compared with the past, parts of the Misesian-Rothbardian view of the cycle have fully entered the mainstream, with just about everyone agreeing that the current bust originated in a bubble fueled by easy money. That is a message that our forbearers never entirely made stick.
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