I swear, whenever the markets are facing crisis, the mainstream chatterboxes on financial TV and radio finally see it as appropriate to listen to what the “contrarians” have to say. (Contrarian - as in someone who sees fit to think something other than the acceptable Bubblevision customs.) So, while the Bubbleheads obsess on the current market crises, they start inviting — even more so than normal — non-orthodox financial and economic types onto their shows. Bloomberg is becoming a virtual Bear Country in the last week or two.
A couple of weeks ago, Bloomberg radio invited one of my favorite Wall Street analysts, Richard Bove, to come on and talk about the current crisis for about an hour. For those not familiar, Bove is a financial institutions analyst at Punk, Ziegel & Company. Basically, Bove’s theme was that the Federal Reserve is selling out America to protect bad business practices. The interview got interesting when Bove was asked by interviewer Tom Keene, “Bohm-Bawerk? Now what did he know, along with Hayek, Menger, Mises, and Rothbard, that the others don’t know?” Bove went on to explain the core concepts of Austrian Economics, talked about the school’s great economists, and described the problems we witness in the markets today from a purely Austrian perspective. He was very pointed in his discussion of the trade cycle, and he noted the problem of malinvestment and necessary liquidation before there can be a restoration of demand and growth in the economy. He talked about the problem with the growth of debt securities and the overall, systemic debt problem, and he also touched on one thing that I think is very important to note, coming from a Wall Street analyst: the complete lack of lending and underwriting standards, and the creation of complex financial structures that are being underwritten by those who know nothing about the underlying borrowers and their credit history, ability to pay, etc.
