In the Austrian view, the boom-bust cycle is caused by the Fed's maintenance of artificially low interest rates, which causes businesses to expand, hire workers, buy other resources, and so forth, even though these projects are not justified by the true supply of savings in the economy. The greater the "stimulus" the worse the malinvestments.
No doubt, the costs of a return to "sound money" — that is ending the government money-supply monopoly and returning the supply of money to free-market forces — would most likely be substantial. It would most likely entail a severe loss in output and employment, given that inflation has been allowed to have a say in the allocation of scarce resources for decades.
It was this very day that I was telling some visiting students about the silliness of the old populist silver movement of the late 19th century, ho
The Financial Times reports Fed mulls options in tacking liquidity pr
Given the wide variety of assets it can accept (in particular, non-AAA MBS), the Fed also has the potential to get itself into plenty of trouble, the sort of trouble that might require it to seek an even larger expansion of its powers.
James Hamilton (an econ professor at UCSD) recently discussed the Taylor
Granted, many of us have benefited from this era of "easy money," but that is going to change. Indeed, the party is over, the lights are out, and I don't know when they will be turned on again.
