Richard Heinberg is not impressed by modern economists, expressing disgust with both Keynsians and Austrians alike. He prefers to ride his hobby-horse that Peak Oil means the end of modern "growth" economics. The fact that economics is the study of choice seems to have escaped him.
But Austrians still win out. We predict that when you inflate the currency, you confuse people into thinking that they have more money than they really do. They use that money to expand their business. The thing is, that money wasn't real. As everyone realizes this, they start to raise their prices. The new business that you hoped to get doesn't show up. You have to lay people off, lower salaries, and sell your business improvements for dimes on the dollar. Keynes' prescription: forcing taxpayers to borrow money to buy the unwanted things now. Exactly HOW does that help us??
I predict that none of this "stimulus" spending is going to help one whit. We're in for a good ten years of lowered employment and lessened prosperity. More if government tries to help more. Less if government does nothing.
I'd like to be wrong about this, but I'm not.
Oh, and if you think that recent deregulation got us into this mess, I'd point to things like Sarbanes-Oxley, or Fannie Mae / Freddie Mac, or anti-redlining regulations for banks. There's still plenty of harmful regulation: the Fed, to make our money worthless (by printing up new diluted money), the FDIC, to create a moral hazard for banking (why bother selecting a bank when no matter what they do you can't lose your money?), the farm subsidies (the corn lobby ensures that corn is cheap enough to put into all food products), the Sherman Antitrust act (where you can be charged with anti-trust if your prices are lower, equal to, or higher than your competitors).
posted at: 19:12 | path: /economics | permanent link to this entry