The court economists of the state ridicule genuine free-market economists as cranks and ideologues, throughly discredited by the current economics crisis. However, if these Keynesians and phony capitalists would step away from the ideological homogenity of the establishment bubble for a second, they would find that those economists whose methodologies most stringently uphold individualism and radical capitalism alone predicted the current crisis.
Specificially, The Austrian School of economics and its most public advocate were warning that the Fed’s “easy,” policies on interest rates would lead to crisis long before such a crisis ever occured. Though to the layman their remarkable foresight may seem like dumb luck, we know better. Consider Ludwig von Mises’ condemnation of Bernankeite monetary policies in his 1950 essay “Middle of Road leads to Socialism:”
…the attempt to lower interest rate by credit expansion generate, it is true, a period of booming business. But the propserity thus created is only an artificial hot-house product and must inexorably lead to the lump and to the depression. People must pay heavily for the easy-money orgy of a few years of credit expansion and inflation.
Even for a believer in the Austrian School, it’s downright creepy to consider the spot-on application of Mises’ predicction to the current crisis. However, it is also comforting to know that the advocates of liberty we seek counsel from today learned from intellectuals — like Mises — that proved so prescient yesterday.Published in