It’s been said there’s no such thing as a controlled experiment in the social sciences, including economics. But we had something close to a laboratory experiment back in 1920–21 and 1930–31.

In each of these periods there was a depression. Unemployment was high—for a while—it briefly was higher in the 1920s than in the 1930s. Prices fell in both periods. 

Investors are on the edge of their seats for any sign that Fed central planners will someday “pivot” to cutting interest rates, instead of raising them. They forget that recessions and major stock bear markets have occurred after the Fed started cutting rates and the yield curve spread shifted from negative to positive.

Austerity works. We know what it is and don’t like it, but it works. It usually means cutting your consumption and spending, paying down your debts, pawning assets, and working more hours to restore your economic situation.

You might invoke “austerity” because you lost your job, your house burned down, or you have an unexpected child on the way. You might take similar actions if the economy was in crisis. It’s essentially the same thing as cutting expenses to save for a down payment on a house, paying for a child’s education, or accumulating a fund for retirement.

In my research into Leonard Read’s writing, I recently came across his “Look to the Miracle!” in the May 1963 Notes from FEE. It struck me that what he had to say almost half a century ago about how his Foundation for Economic Education worked to advance liberty and how it resisted pigeon-holing in traditional ways is at least as relevant today.

Read first pinpoints the source of the pigeon-holing problem.

There are many mistakes in the G7 agreement to put a cap on Russian oil. The first one is that it does not hurt Russia at all. The agreed cap, at $60 a barrel, is higher than the current Urals price, above the five-year average of the quoted price and higher than Rosneft’s average netback price.

While many market participants are concerned about rate increases, they appear to be ignoring the largest risk: the potential for a massive liquidity drain in 2023.

Even though December is here, central banks’ balance sheets have hardly, if at all, decreased. Rather than real sales, a weaker currency and the price of the accumulated bonds account for the majority of the fall in the balance sheets of the major central banks.